November 24, 2022
  • November 24, 2022

Investing to deepen financial markets, pension funds challenged

By on May 24, 2022 0

the herald

business journalist

The government says the pension fund industry should direct more resources from the inflows it receives to investments that deepen the financial sector, such as venture capital, asset finance/leasing as well as investment bank.

Zimbabwe’s pension industry, which has assets worth over $300 billion, is known to mobilize significant amounts of financial resources through long-term contractual savings, which become readily available for investments in the economy.

Senior Director of Communications at the Department of Finance and Economic Development Clive Mphambela told a recent Annual Conference of the Association of Zimbabwe Pension Funds (ZAPF) that pension fund resources are an essential and essential component of the national savings pool, which is essential to support long-term capital formation in the economy, which supplements government equity. infrastructure efforts.

“There are opportunities in agriculture, mining, infrastructure and even in the innovation space and I urge pension funds and insurers to take advantage of these opportunities, including projects that support exports for the currency generation.

“We are particularly keen to see the pension fund industry in Zimbabwe begin to direct resources towards investments that also deepen the financial sector, such as the venture capital industry, finance/leasing industry asset management, investment banking and the ICT sector,” he said.

Venture capital (VC) is a form of private equity and a type of financing that investors provide to start-ups and small businesses that are believed to have long-term growth potential.

The government, through the 2020 National Budget, established the National Venture Capital Fund (NVCF), which has been capitalized to the tune of $500 million with the aim of helping start-ups and other small businesses to access working capital and financing for technological improvement among others.

In May 2021, the Treasury successfully operationalized the NVCF, which saw around $300 million disbursed to different start-up entrepreneurs and innovators.

In establishing the NVCF, which is a key intervention under the five-year National Development Strategy 1 (NDS1: 2021-2025), the government has highlighted the need to encourage entrepreneurship among youth and women , and in particular to help start-ups to develop. and generate new job opportunities.

Start-up financing is crucial for Zimbabwe, which has over three million SMEs, 15% of which are officially registered, contributing around 50% to the country’s Gross Domestic Product (GDP).

Mr Mphambala said the government was also keen to see the pension industry increase the uptake of prescribed assets.

Prescribed assets are bonds or securities issued by government, local government, quasi-governmental organizations or any other obligation that can be accorded prescribed asset status.

Mr Mphambala said the sector should not view prescribed assets as an erosion of value; rather, they should exploit the many opportunities in the various sectors of the economy.

“In addition to traditional governmental and quasi-governmental instruments, the Treasury approves prescribed assets in instruments issued by the private sector for projects that align with our development aspirations under NDS1,” he said.

Mr Mphambala noted that pension funds were under the impression that prescribed assets were a form of value erosion.

However, he said the legal requirement for prescribed assets was based on a number of key pillars, including the fact that Throughout the world, insurance companies and pension funds are mobilizing long-term savings to deploy them in various sectors of the economy through financial intermediation.

He added that the funds were arguably the largest source of after-tax domestic savings and that policyholders and members of pension schemes stood to benefit directly and indirectly from investments of a developmental nature.