ZIMBABWE’S pension funds have whittled down their exposure in equities to $150 million from $171 million, while property portfolio registered strong growth in a bid to hedge pensioners from a faltering the economy, the sector’s report has shown.
BY BERNARD MPOFU
This comes after the insurance regulator has raised the red flag over a sharp rise in arrears accrued by self-administered funds and the low uptake of government paper by insurance companies as the economy falters.
An unprecedented wave of company closures and subsequent job cuts in the first half of the year, saw most companies and employers defaulting on their pension contributions.
According to the latest Insurance and Pension Commission (IPEC) report for the six months ending June arrears contributed three quarters of contributions, reflecting biting liquidity constraints besetting the economy.
The report is centred on 14 standalone funds, four fund administrators and three life assurers for the current review period.
Chronic liquidity constraints, on the back of continued economic implosion, saw the Zimbabwe Stock Exchange turnover for October at $12,8 million, reaching the lowest figure in six years.
“As at 30 June 2015, standalone funds invested $601m or 47% in properties (June 2014: $578 million or 48%), $150m or 12% in capital market securities (June 2014: $171m or 14%), $34m or 3% in money market investments (June 2014:$54m or 4%), $451 or 36% in other securities (June 2014: $386m or 32%) whilst prescribed assets increased from 1% in the same period last year to 3%,” the report read.
The underperformance of the local bourse — a key economic performance barometer — continues to reflect a slowdown in economic growth after total market capitalisation eased by 0,8% to $3,6 billion from $3,63bn, marking a persistent bearish run for eight consecutive months.
“For the quarter ended June 30, 2015, self-administered funds realised contributions amounting to $403m yet $299m or 74% were in arrears (June 2014:$215m or 64%).
“IPEC continues to engage key stakeholders in an effort to arrest the arrear contributions challenge. Further, another major challenge was high expense ratios,” Ipec said.
Short-term insurance companies are required to invest 5% of their funds in prescribed assets, while life assurance companies and pension funds are required to put up 7,5% and 10%, respectively.
“However, prescribed assets uptake rate grew to 3% partly due to supply side improvements in approved instruments. In line with Finance and Economic Development’s ministry directive, players are required to continue to up their prescribed assets to prescribed regulations by December 30, 2015,” the report read.
The report further stated that fund membership was composed of 208 000 actives or 56 % (June 2014:184 000 or 62%), 124 000 or 33% — deferred members (June 2014:68 000 or 23%), 22 000 or 6% being pensioners (June 2014:21 000 or 7%) and 20 000 or 5% were beneficiaries (June 2014: 22 000 or 7%).
Exits, according to IPEC, declined by 9% from 3 000 to 2 900, while total fund membership increased to 371 000 from 295 000 reported in the same period last year, owing to the submission of returns by most of the funds during the period under review.