Treasury, pension funds in talks

TREASURY is in talks with pension funds over the possibility of raising capital for infrastructure development projects across the country. With pension funds boasting of huge capital outlay, Treasury has therefore seen it necessary to tap into the funds for infrastructure development projects. “We have seen it necessary that the issue needs engagements on how the pension funds can be incorporated into the floating of infrastructure bonds as well as explore possibilities of ensuring the funds are floated for completion of projects,” said Professor Mthuli Ncube, the Minister of Finance and Economic Development.

For the pension funds, the focus is centred on viable returns accruing from infrastructure financing. “It is the need to ensure that infrastructure financing models are viable in terms of returns and sustain our operations. Remember the funds are from our clients and the need to ensure that the money is used efficiently is a key priority,” he said. Insurance and pensions funds regulatory authorities are optimistic the sector will positively contribute to economic development.

“The sector has not been spared from the effects of the Covid- 19 pandemic, but as the economy reopens, there are possibilities of further growth and sustained strong balance sheets for the entire sector,” said Dr Grace Muradzikwa, Commissioner with the Insurance and Pension Commission (IPEC).

Developmental Economist, Dr Zachary Tambudzai said; “With the provision of muchneeded infrastructure Zimbabwe's prospects for economic growth and social development are also boosted. Things are more likely to work as traffic can flow, students can be educated, the lights can remain on, and business will be done.”

The money is there in the system but the question is on how the funds can unlock the potential that lies in infrastructure development. The answer lies in collaborative action, involving pension funds, asset consultants and international players. “Infrastructure development makes up a big part of pension funds' investment strategies but it is the diversity in the type of infrastructure that needs to be looked at if we are to move forward as a nation. Another problem is that smaller funds face greater barriers to entry than larger ones,” said Economist Tinevimbo Shava.

With the country in electricity generation and on a solar power station tender awarding spree, the pension funds can look to tap into the renewable energy space and get better returns.

“A feasible return on infrastructure equity investment will be about 10 percent-14 percent in USD terms, depending on factors such as gearing and risk. What's especially attractive about such returns is that they tend to be dependable and predictable over the long term in annuity income that can be relied upon to materialise. The cash flows from these investments are also a better match for the liabilities of a pension fund, because they are long-dated and inflation sensitive,” Shava added. In a related development, Treasury met players in the insurance and pension funds to assess recovery, growth trends, identify opportunities, outlook trends, current challenges and possible solutions.