Pension funds stimulate development


Lazarus Sauti




NATIONAL Social Security Authority (NSSA) Chief Investments Officer, Isaac Isaki said pension funds are driving investments and stimulating sustainable socio-economic development in Zimbabwe.

He added that his organisation’s investment portfolio is valued at ZWL$30.48 billion and spread across a wide spectrum of asset classes and industries shares, including equities, properties, offshore investments, and fixed income.

“The Authority has a diverse property portfolio comprising industrial, commercial (retail, offices, and mixed-use), residential, medical facilities and land banks earmarked for future development,” Isaki said.

He further said these properties are 110 in total and they include NSSA House, Celestial Park, Social Security Centre, Pomona Shopping Centre, Bindura Shopping Centre, Chipinge Shopping Centre, Ekusileni Hospital, Beitbridge Hotel, and Compensation houses across the country.

“NSSA is one of the largest portfolios investing on the Zimbabwe Stock Exchange (ZSE) controlling up to 10 percent of the ZSE’s market capitalisation.

“In USD terms, the Authority’s portfolio is valued at US$449.6 million,” Isaki said.

He continued: “Notwithstanding the harsh economic climate in the country, the Authority’s investments have performed remarkably well.

“Key achievements include generated $18 billion in unrealised capital gains through adept stock selection, generated USD1.18 million in NOSTRO dividend from offshore investment in Afreximbank, and growth of investment income from $47.5 million in 2019 to a massive $375 million boosted by dividend income arising from active investor company engagements.”

Isaki added that NSSA successfully restructured its fixed-income portfolio to reduce exposure to monetary assets that were yielding negative returns.

“We diversified our foreign holdings through an additional US$1.7 million into a regional reinsurance company, and also achieved a 7-fold growth or 711 percent growth in investment performance from ZWL$2.7 billion in January 2020 to ZWL$21.77 billion by October 2020, bettering inflation and exchange rate movements,” he said.

“NSSA also achieved 75 percent general occupancy for the entire portfolio outperforming the property industry average.”

The strategic mandate of NSSA’s investment function is simply to invest the excess of contributions over pay-outs in investments which provide real returns to grow the reserves of the scheme sustainably.

The Authority’s investment values are focused on four strategic themes, namely Income, Growth, Impact, and Sustainability (‘IGIS’).

“NSSA’s investment must generate sustainable income streams to cover benefit obligations and fund operating costs in the ordinary course of business,” Isaki said.

“The Authority also targets assets that preserve value through providing for real growth that surpasses the inflation and growth in benefit obligations.”

NSSA Acting General Manager, Arthur Manase added that the Authority’s investment generates substantial socio-economic impact within a fiduciary and market-return context, and also contribute to the sustainability of the schemes and NSSA as a whole.

“The new NSSA is guided by accountability, transparency, and good governance. Thanks to these three pillars, NSSA’s investment portfolio grew by over 1 000 percent during the first half of this year,” he said.

Manase added: “NSSA’s investment activities are governed by the National Social Security Act [17:04], especially Sections 28 and 19; Public Finance Management Act [22:19], particularly Section 48; and Investment Policy Statement and procedure manuals.

“International Social Security Guidelines (‘ISSA Guidelines’) on investments, Actuarial Valuation Guidelines, Public Entities Corporate Governance Act [10:31], and other Government Policies as pronounced from time to time also govern the Authority’s investment activities.”

For Zimbabwe Association of Pension Funds (ZAPF) Director-General Sandra Musevenzo, while the pension funds sector controls a significant portion of the country’s commercial real estate, it should not stop investing but should seek new opportunities.

She said pension funds companies should diversify their investments choices in infrastructure developments and other projects of national importance, including sufficiently partaking in prescribed assets.

“Pension funds need to diversify from owning large office buildings and shopping malls and perhaps go more into warehouses as electronic commerce (e-commerce) is the new norm,” Musevenzo said.

She added that the other opportunity for pension funds is to plough into other property sectors like health facilities (hospitals and clinics).

Insurance and Pensions Commission (IPEC) Director for Pension Supervision, Cuthbert Munjoma added that pensions funds companies should modernise and embrace new investments outside the traditional asset classes to ensure the security of invested funds.

“They can also revise their investment policies to ensure their investment philosophies are informed by prevailing economic trends,” he said.

Investing in infrastructure is essential in rebooting Zimbabwean economies and pension funds should invest locally to improve infrastructure development, said African Development Bank (AfDB) president, Akinwumi Adesina.

“There are sovereign wealth and pension funds that invest in money market instruments outside of the African continent. That money should be invested locally to improve infrastructure on the continent,” he added.

Adesina also said any investments, such as those made in infrastructure, should be done to create sustainable jobs.

While delivering his opening address at the Infrastructure South Africa (ISA) Project Preparation Round-Table and Market Place at Gallagher Convention Centre recently, South African president Cyril Ramaphosa also said pension funds play a significant role in stimulating sustainable socio-economic development.

“Pension funds, banks, businesses, and social partners play an essential role to unlock investment and growth, drive industrialisation and create employment opportunities,” he said.

“Pension funds should focus on bankable projects such as water and sanitation, energy, transport, agriculture, agro-processing, human settlement, and digital infrastructure.”

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