GOVERNMENT is fine-tuning a policy that will allow pension funds to invest offshore, according to Finance and Economic Development deputy minister, Clemence Chiduwa.
The policy, which has been approved by Cabinet, would be key in giving pension fund members assurance that risks on investments made by fund managers from their savings are mitigated through balancing portfolios in different markets.
Diversifying investment portfolios in a single market proved disastrous in the past decade when a ruthless inflationary charge wiped billions in investments made by pension funds, relegating many members into destitution.
The country’s regulations forbid pension funds from investing offshore.
But there has been growing disquiet over the policy since 2009.
Funds managers are saying Zimbabwe should avoid mistakes of the past decade.
But red lights are flickering again, with threats of a fresh currency crisis that could precipitate another inflationary rage.
Having experienced the effects of maintaining the present policy, both authorities and pension fund managers have been unsettled, and want immediate action.
Chiduwa shared the progress on the new plan during a pension funds conference in Nyanga last week.
“I wish to underscore that prudent investment management is critical for the protection of pension fund members,” he said, while delivering the keynote address.
“This becomes particularly important when over 95% of the registered pension funds are defined contribution schemes where the risk of non-performance is borne by the members.
“As part of investment regulation, both the Executive and Parliament have approved the proposal to allow offshore investment by pension funds.
“The limit on investments will be prescribed in regulations. We believe the measure will assist in having a diversified investment portfolio for the benefit of fund members,” Chiduwa added.
Pension funds, holding about US$2,3 billion in Zimbabwe, and insurance firms represent some of the biggest investors in every economy.
Their inventions span across sectors including property, roads and dam construction.
Governments generally restrict the extent to which they can invest in destinations other than their local environments.
Experts have also said prudent investments by pension funds bolsters developing economies’ capacity to attain sustainable development goals.
“Ipec has drafted investment guidelines covering both domestic and offshore investments. We are considering the proposed investment limits in liaison with exchange control authorities,” Chiduwa said.
“The final approved limits will be shared as soon as we finalise the consultations.”
Economist John Robertson said investing offshore will slow Zimbabwe’s economic growth.
“Most pension fund investments used to be in city centre high rise buildings and shopping malls, but property developments have become far less certain to yield good returns,” he said.
“Going abroad will also present difficulty, but the local contributors will have to put in hard currency to get pensions in hard currency.
“Many will be hoping that Zimbabwe will become a better investment option one day, but permission to invest local pension funds in other countries will slow down Zimbabwe’s recovery,” Robertson said.
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