Pension funds to invest offshore

BY TATIRA ZWINOIRA

THE Pensions and Provident Fund Bill, to be presented to Parliament before June, will allow pension funds to invest 20% of their assets offshore as the industry pushes for protection against recurrent inflation.

During an inaugural insurance and pensions industry breakfast meeting yesterday, Finance minister Mthuli Ncube (pictured) said Parliament would receive the Pensions and Provident Fund Bill, the Insurance Act and the amendments of the Insurance Commission Act soon.

“In the first half of the year, all three Bills will come before Parliament . . . It is going to be contained in one of the Bills (Pensions and Provident) that eventually what we are saying is that for now we are transacting in the domestic currency, but we’re allowing a window into foreign-denominated investment assets,” he said.

“The ministry is seized with legal reforms targeted at the legislation governing insurance and pensions. I understand the Bills took long at drafting stage”
He said this window was one way of dealing with the inflationary environment and encouraged the industry to come up with products that were long term in terms of inflation.

“For me, it should not be about ‘let us invest in US dollars’, it should be about diversification of your portfolio through foreign currency exposure or acquisition of foreign assets,” Ncube said.

With inflationary pressure eroding assets, the pension funds are seeking for protection against the current climate by turning mainly to properties and equities.

However, of late, pension funds have been pushing to invest into the offshore market to allow them to access foreign currency and prevent the continued loss in asset value.

Some of the offshore investments being discussed includes the Afreximbank’s Depositary Receipts, financial instruments for the equities market that offer investors on the continent a chance to get shares into the bank.

As at September 2019, the pension industry had an asset base of ZWL$9,45 billion.

Zimbabwe Insurance and Pensions Apex Council chairperson, Tassius Chigariro said when Statutory Instrument 142 of 2019 was announced, they thought they were protected, but later realised that they were not, which is why they needed access to foreign currency.

“Even though we all want our local currency, we understand the benefits of our own local currency, we must support it until it stabilises, we are committed to supporting it, but we are also not oblivious to the fact that even a 90-year-old in Guruve, still thinks in US dollar terms. We do not believe we must fight the thinking with directives,” he said
“The greatest fear of our industry is that the informal market, which is growing at incredible speed, will completely dollarise, while the financial institutions that we so need to help recovery of our nation, are formally de-dollarised, but completely taken out of the financial system. We are your joint partner in attracting FDI (foreign direct investment), please honourable minister (Ncube) do not watch us dying.”

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