adminMartin Kadzere Senior Business Reporter
MOST pension funds are yet to comply with the prescribed asset ratios of 10 percent of their portfolios, six weeks before the December 31 deadline issued by the Government. The Zimbabwe Pension Funds Association said the average prescribed level was six percent and has urged companies to subscribe the available asset instruments to comply.
In July 2014, the Ministry of Finance and Economic Development directed the industry to comply with the prescribed asset ratio of 10 percent of the total fund portfolios. But the industry made representations to the regulator, the Insurance and Pensions Commission for phased compliance in view of challenges being faced by pension funds.
“The compliance date was then moved to December 31 2015. In our consultations with IPEC, we have been informed that the average compliance level is now six percent.
“Members are urged to continue subscribing to prescribed asset instruments as and when they are available on the market in order to attain the 10 percent compliance ratio by December 31 2015,” said the ZPFA in a note to members this week.
One of the available paper on the market is the Infrastructure Development Bank of Zimbabwe’s five year energy bond worth $50 million, which was re-floated last week. The ZPFA said companies that were yet to comply, and have challenges that may hinder them from meeting the deadline, should engage the regulator and “explain their positions.”
World over, pension funds are increasingly playing an important role and if properly invested, they provide mechanism for economic development. In addition, pension funds across the globe are increasingly looking at infrastructure investment. As such, Finance and Economic Development Patrick Chinamasa said pension funds should consider coming up with long term financial instruments to fund infrastructure development.
He said pension funds should adopt a long term view by playing an instrumental role in reviving the economy given the industry’s potential in promoting the country’s sustainable economic development.
The minister said pro-development investments were lacking in the economy as pension funds continue focusing largely on real estate and equities. He said the funding of infrastructure projects and the industry would have significant multiplier effect. In that same vein, there was need for pension funds to revisit their investment allocations.
Minister Chinamasa urged the industry to be innovative and come up with financial instruments that suit the current situation of the economy.
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