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US$100m earmarked for pension funds

BY FIDELITY MHLANGA

TREASURY is set to roll out US$100 million financial instruments for pension funds to invest into and preserve value, Finance and Economic Development deputy minister Clemence Chiduwa has said.

The instruments are being issued via the Infrastructure Development Bank of Zimbabwe (IDBZ).

Pursuant to the gazetting of Statutory Instrument 280 of 2020, which allowed the insurance industry to write business in foreign currency, there has been significant business being written in United States dollars.

Such investments include equity investments on the Victoria Falls Stock Exchange (VFEX) and some private equity facilities.

“To ensure availability of bankable projects in foreign currency, we have come up with US$100 million instruments that will be issued through IDBZ and secured by carbon tax receipts by the Zimbabwe Revenue Authority (Zimra). We urge you to invest in these instruments so that we achieve two objectives through such investments. These are creating value for pension scheme members and policyholders rather than keeping such long-term savings as nostro balances,” said Chiduwa, who gave a key note address to the Zimbabwe Pension Funds Association conference.

Financial instruments are assets that can be traded.

These assets can be cash, a contractual right to deliver or receive cash or another type of financial instrument, or evidence of one’s ownership of an entity.

Chiduwa said undertaking these projects will help the country meet its development needs, such as infrastructure, which will have a multiplier effect on the growth of other sectors.

He said treasury was also approving many US dollar and inflation-linked prescribed asset instruments, earmarked to support the agricultural sector, housing, and renewable energy.

“As you are aware, this industry is required to invest in prescribed assets, which traditionally are developmental projects of national importance, government securities and quasi-government paper.

“I wish to express our displeasure over the industry’s non-compliance with prescribed assets.

“This is notwithstanding our latest policy position to accord prescribed asset status on private sector issued instruments provided they align with national developmental aspirations.

“We have also seen reluctance to participate at the Treasury Bills (TBs) auction, despite it providing a good opportunity to inform pricing of instruments and determination of a yield curve.

“As such, you are urged to participate on the TB auction, which is in line with the sector’s role of promoting the broadening and deepening of capital markets,” he added.

Prescribed assets are bonds or securities issued by the government, local government, quasi-government organisations or any other bond that may be accorded the prescribed asset status.

Pension funds are obliged by law to invest 20% of their portfolio in prescribed assets.

Financial markets experts, Itai Chirume said there was an opportunity to invest in infrastructure in Zimbabwe.

He said assets that lost value during the 2008 hyperinflation era were mostly in form of bonds and stocks, but infrastructure retained its values.

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