US$385 million projects granted prescribed asset status

Business Reporter

THE Government in 2024 accorded prescribed asset status to 22 applications with projects valued at US$385 million, and the bulk of them are aligned towards infrastructure development.

Under prescribed assets, investors, such as pension funds, are required to hold a certain number of investments in Government-specified assets. These are supposed to be in the form of Government or State-owned entities’ bonds.

At law, pension funds and insurance firms are required to have at least 20 percent of their investment portfolio in prescribed assets and the sector has been struggling to meet specified thresholds.

According to the Insurance and Pensions Commission (Ipec) 2024 pensions report, the approved prescribed assets provide an investment opportunity for portfolio diversification, while promoting investments in projects that drive national growth and align with the National Development Strategy 1.

“Consequently, the commission continues to encourage investment in either projects or products that bear prescribed asset status to meet the regulatory minimum requirement of 20 per cent of total assets,” reads part of the pensions report.

The commission noted that it is the ultimate responsibility of the pension fund to conduct proper due diligence before investing pensioners’ funds in prescribed asset projects.

“Regular project performance monitoring by the fund in line with agreed investment terms remains crucial,” the commission said.

According to the Ipec report, during the year under review, the listed insurance firm Fidelity Life Assurance Group had the highest prescribed asset status of US$60 million for the launch of the Eagle Real Estate Investment Trust (REIT).

This development, according to the group, provides a profitable avenue for it to deploy investments that support regulatory compliance.

The US$60 million was to be invested in the development of medical, hospitality and residential facilities in Victoria Falls and Mazowe, among other areas.

The Dabuka Village housing project, at US$45 million, was the second highest approved instrument.

Private equity firm Lamcent, at US$41 million, became the third highest approved instrument. The firm intended to build a 200-room hotel in Victoria Falls, Zimbabwe.

The project will be financed through a combination of debt and equity, with US$16 million coming from the latter and US$24 million from the former.

The debt component will have a 10-year tenure, at 8 per cent interest per annum, and the hotel is projected to have a terminal value of US$55 million in 10 years.

AFC Insurance was granted a prescribed asset status of US$35 million targeted for winter cropping.

Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube, in the 2025 National Budget, made reference to the conferment of prescribed assets status to infrastructure projects that are aligned to the National Development Strategy 1 agenda of resource mobilisation.

He said the Government would come up with revised asset-status granting criteria to guide the industry.

Imara Asset Management, in its Zimbabwe Strategy Notes for the second quarter of 2025, said with regard to prescribed assets, there has been an overall increase in the industry’s compliance ratio due to an increase in the number of papers in the market, with a relatively better value proposition.

“Commendably, there also has been a move from traditional fixed-income instruments to tradable equity-linked papers, some listed locally and others offshore. This has evidently resulted in a notable improvement in compliance ratios across the industry, further helping to buttress our view that compliance will be a non-issue once quality, value-preserving assets are available in the market,” Imara said.

“For our clients, we have seen our overall prescribed asset position increasing significantly, in some cases breaching the 20 per cent target threshold, as a result of investments into hard currency-denominated assets and/or those that reprice frequently.”

Economist Mr Victor Bhoroma said the development of most countries has been supported by pension funds, especially on infrastructure.

“Pension funds can be able to do it given a situation where public-private partnership facilities are designed to have a win-win scenario,” he said.

Financial analyst Mr Kudakwashe Mundowozi said infrastructure development and solar energy projects in Zimbabwe offer promising opportunities for pension fund investments.

He said pension funds can benefit from portfolio diversification and stable returns by investing in these sectors, contributing to the nation’s sustainable development.

“Zimbabwe’s infrastructure development projects encompass a wide range of sectors, including transport, water and sanitation, housing and energy. These projects are crucial for the country’s economic growth and can offer stable returns due to their long-term nature and government backing,” he said.

According to the 2024 Q4 pensions report, prescribed asset investments increased by 47 percent, from US$180,19 million in 2023 to US$264,4 million in 2024, with the growth driven by revaluation gains and new acquisitions, indicating a strong Government commitment to infrastructure projects.

Apart from prescribed asset investments, pension funds are now heavily invested in properties. This is a shift from equity investments, where, traditionally, the funds had the highest concentration.

In the 4th quarter 2024 pension report, the pension industry’s assets were concentrated in investment properties and quoted equities, which, together, made up 68 per cent of the total asset portfolio.

Zimbabwe’s property market is viewed as a safe haven for investors seeking long-term value and a hedge against inflation, and preserve wealth in a dynamic economic environment.

Analysts believe the increase in property investment by pension funds can be attributed to convincing returns, but at the same time, equities will always be a key asset class.

Economists are also content that the insurance and pensions industry in Zimbabwe stands as a critical yet underutilised pillar of economic development.

They say while the sector holds substantial financial assets and has the potential to play a crucial role in providing security, mobilising savings and investing in critical infrastructure, its true potential remains largely untapped.