Tawanda Musarurwa Senior Business Reporter
Zimbabwe’s pension funds are increasingly spreading the risk of their investments by moving from a focus on institutional markets to more dynamic investment strategies.
With the country having experienced significant value erosion during the hyperinflationary era a decade ago, and concerns abound about present rising inflation, pension funds’ investments have become more proactive as they seek to ensure that they have sufficient assets available to meet members’ benefit payments as they fall due.
Old Mutual Life Assurance Company (OLAC) managing director Tassius Chigariro, said pension funds have drawn important lessons from rounds of value losses in the past.
“This lesson (value erosion) came when the other one was very fresh, and there has been a lot of learning.
“One of the mistakes we did is that the pension funds industry concentrated on money markets, properties and equity . . . It might have looked like three baskets, but it was just one basket.
“And when the economy struggled the institutional system collapsed. The property market struggled with voids and the stock exchange could not hold,” he said while was presenting on pensions at the ZimSelector-Insurance and Pensions Commission Journalists Mentorship Programme recently.
“Today we are thinking differently as an industry. If your pension was linked to toll gate, for example, would you even mind about hyper-inflation? Absolutely not. Imagine if a fund was invested in a world-class hospital and your pension was linked to the hospital bill, would you mind about hyper-inflation? Absolutely not.
“It’s critical to really diversify. We had a wrong focus, because we focused on the institutional markets.”
IPEC pensions director Joshpat Kakwere said it is critical for pension funds to always take cognisance of the economic climate.
“There can be no discussion about pensions without talk of the economy or the operating environment,” he said.
Latest figures from IPEC’s 2019 First Quarter Life Assurance Report show weakening equity investments for the Life Assurance sector. According to the report, total assets for the Life Assurance industry decreased by 2 percent from $3,6 billion as at December 31, 2018 to $3,5 billion as at March 31, 2019.
“This decrease was mainly driven by a decrease in the value of equities from $2,2 billion as at December 31, 2018 to $1,8 billion as at March 31, 2019, which was attributable to the bears market on the Zimbabwe Stock Exchange.
“Fixed properties and equities constituted 73,83 percent of the total insurance industry assets, which is a reflection of the general nature of the liabilities for the sector, which are also long-term in nature,” reads part of the report.
It is to this extent that the Old Mutual pension fund, for example, has invested in a hydropower station in Chipinge as well as clinics in Lupane and Ngezi.
First Mutual Holdings CEO Douglas Hoto recently said the company had made a proposal to receive land from Government in place of Government-issued Treasury Bills.
Experts say the move by local pension funds to invest proactively will ensure that their members are adequately compensated when their pensions are due.