The upcoming Pensions and Provident Fund Bill will allow pension funds to invest up to 20% of their assets in offshore markets, but the regulator says this is subject to the fulfilment of local obligations by players as the need to preserve value gathers traction in the market.
This comes at a time the pension industry is saddled with various issues ranging from high contribution arrears, failure to meet prescribed asset requirements as well as policy inconsistencies on the part of government.
The industry has also been suffering heavy losses due to an economic crisis.Pensions globally have directly fuelled economic growth by providing more funds for investment while also deepening private capital markets, leading to better allocation of capital, thus improving overall efficiency.
The Bill is the latest effort by the Insurance and Pensions Commission (Ipec) in its attempt to foster better corporate governance practices within the industry while adequately providing the legal basis for a troubled entities' resolution framework as well as increasing the commission's enforcement powers.
The Bill, which is yet to be passed, has gone through parliament and will be gazetted soon. The director of Ipec's pensions department, Josphat Kakwere, said pension funds should invest in assets that do not lose value to safeguard the future of pension contributors in the face of a volatile economy.
Investing offshore is expected to see pension funds generating foreign currency, while safeguarding their assets against value erosion.
Kakwere was addressing a Zimbabwe Association of Pension Funds (ZAPF) Principal Officer and Chairperson Convention in Nyanga last week.
"The Bill has provision for offshore investments up to a certain percentage, but it's subject to one meeting their local obligations. Most countries have developed against pension funds' investments to stimulate economic development," he said.
"You can take the example of Singapore. It grew on that. I won't say what exactly are the conditions but it's worth noting that it will be subject to certain conditions with one of them being fulfilment of local obligations. The Bill has gone through parliament and next is gazetting it."
While Kakwere would not be drawn into commenting on the thresholds, sources in the industry told businessdigest that the Bill would kick off at 20% investment and would possibly be reviewed to around 30%.
Delegates at the convention however said Ipec ought to look at its prescribed asset requirements, saying it was pointless for pension funds to be forced to comply with a 10% requirement against prescribed asset that were not performing.
One delegate said it was difficult to separate economic performance and that of pension funds, adding that it was problematic to find performing assets in this environment.
While the sector is reeling from these issues, founder and CE of MHMK Group Limited George Manyere told the same convention that there was no law prohibiting pensions funds just like banks to get into syndication, saying there was a huge gap in terms of investments in crucial sectors of the economy by pension funds.
"It is not a legislative issue for pension funds industry in Zimbabwe to collaborate, particularly when it comes to how you invest your capital. In banking, we call it syndication. No one pension fund or bank can do one transaction. We need to have a culture of syndication on transactions to making sure that you are able to participate and come to an understanding that we have key issues that we need to tackle in the industry," he said.
At the moment players in the insurance and pensions sector across the country own 80% of buildings found in cities and towns as they undertake infrastructure financing to support other sectors of the economy and preserve the value of contributions made by policyholders.
Should the players be aggressive in investments, they can overcome their current challenges and comply with regulatory requirements while also contributing to economic growth.