PENSION funds in Zimbabwe have traditionally used real estate to hedge against inflation and currency risk.
However, a rising vacancy rate and tenant instability, including financial distress among key tenants such as OK Zimbabwe, reveal cracks in this strategy.
This article explores ripple effects and practical solutions that can be implemented to safeguard long-term value.
The hidden risk in “real assets”
While malls and commercial properties offer attractive yields, they are only as strong as their tenants.
When a major retailer closes its doors, the impact is not limited to lost rental income.
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It triggers a ripple effect — affecting occupancy rates, cash flows and ultimately, the returns pensioners depend on.
Stress-testing tenant risk
To stay ahead of risk, pension fund managers should stress-test their portfolios by simulating scenarios like anchor tenant exits, sector slowdowns or rent defaults.
These tests help to quantify cash flow impacts, guide contingency planning and improve tenant profiling — ensuring leases go to financially sound, resilient businesses.
Beyond rentals: Navigating property value chains and market dynamics
Pension funds should adopt a holistic approach to real estate by evaluating the entire property value chain, from land acquisition and development to leasing and asset management — recognising that each stage carries distinct risks and return implications.
To safeguard long-term value, it’s essential to analyse supply dynamics, avoiding over-saturated sectors and prioritising resilient segments such as healthcare, education and logistics.
Additionally, diversification across tenant types and proactive asset management — through monitoring tenant performance, market trends and occupancy — can mitigate sector-specific risks and enhance portfolio resilience.
The role of the financial sector in risk management
Pension funds rely on collaboration across the financial sector.
Banks, insurers and regulators like the Insurance and Pensions Commission (Ipec) can support risk management across the property investment landscape through credit tools, tenant rating and structured products like Real Estate Investment Trusts (REITs).
A coordinated approach improves decision-making, liquidity and reduces systemic risk.
Lessons from global best practices
Pension funds in South Africa, Kenya and Nigeria are diversifying to regional and offshore property investments.
Kenya’s KEPFIC has mobilised over US$113 million into housing and infrastructure, while South African and Nigerian funds are expanding into alternative sectors, signalling a shift towards resilient, diversified portfolios.
Coming back home, Zimbabwean pension funds now have a chance to align with regional peers by leveraging on Ipec’s policy allowing up to 15% of assets to be invested offshore.
This regulatory shift offers a structured path for geographic diversification, helping funds to reduce exposure to local economic volatility while pursuing more stable, hard currency returns.
Though the framework exists, uptake is limited — revealing untapped potential.
Strategic allocation to resilient offshore property sectors like logistics and residential can boost portfolio stability and reflect diversification seen in Kenya, South Africa and Nigeria.
Shift towards resilient sectors
Globally, pension funds are moving from traditional retail malls to logistics hubs, data centres, healthcare facilities and affordable housing — all sectors with more predictable cash flows.
Zimbabwe can adapt this by focusing on warehousing, medical centres and education-related developments that tap into essential services demand.
Better risk tools
In mature markets, pension funds model risks like interest rate hikes, policy shifts and climate impacts.
For Zimbabwe, stress-testing should include hyperinflation, exchange rate swings and rent control changes.
Adopting tenant credit scoring — similar to South African REITs — helps to select financially resilient tenants.
Financial innovations
REITs: Globally, pension funds use REITs for liquidity and transparency.
Zimbabwe could strengthen its REIT framework (currently underutilised) to allow funds to pool assets, diversify exposure and offer easier entry/exit options.
Green and sustainable investments: Many global funds now tie returns to Environmental, Social and Governance (ESG-linked assets).
In Zimbabwe, energy-efficient buildings, solar-powered malls or sustainable housing could attract both tenants and external capital.
Technology adoption
Globally, pension funds are adopting property technology (proptech) tools to manage real estate portfolios more efficiently.
These platforms track rent collection, vacancies and maintenance in real time, enabling faster decisions and reducing risk.
Digital apps also improve tenant engagement, boosting retention and reducing defaults — practical even in local malls like those in Harare or Bulawayo.
Linking with national priorities Pension funds can align with national priorities by investing in affordable housing and infrastructure.
In Latin America, housing schemes have delivered both returns and social impact. Canada’s funds co-invest in roads, energy and telecoms.
Zimbabwe can adopt similar public-private partnership models, with some funds already investing in solar projects classified as prescribed assets — regulator-approved investments that support development while offering steady returns.
Zim’s urgency for reform
The warning signs are already here, according to IPEC Q2-2025 report, 44,09% of pension fund assets are in property — the largest asset class.
Rental income is concentrated among few tenants, with arrears reaching ZiG285,2 million (approx US$8,39 million), indicating delayed payment and cash flow pressure.
Conclusion: A call for strategic leadership
Real estate remains vital, but passive reliance is risky.
Pension fund managers must adopt active strategies — stress-testing, diversification and global best practices — to protect pensioners’ savings.
The ripple effect of tenant exits is a warning Zimbabweans cannot afford to ignore.