eBusiness Weekly
Nelson Gahadza
Zimbabwe has for the past few years shown a desire to issue a US$100 million bond, and the pensions industry believes it is long overdue as the industry longs for alternative investment options.
In the 2022 National Budget, Finance and Economic Development Minister Mthuli Ncube said the Treasury would float the bond to reduce the cost of borrowing and deepen the capital markets, with a particular objective of developing the Victoria Falls Offshore Financial Services Centre aimed at attracting foreign capital.
First Mutual Holdings (FMHL) chief executive Doug Hoto said the pensions industry is deliberately avoiding monetary investments, but should the government issue a USD bond, the industry will not hesitate to invest.
“If Zimbabwe issues a USD bond today, we will buy it or even run out of stock as the industry seeks to protect its members,” he said during an appearance on an online show.
Hoto said pension funds, through the required 15 percent offshore investments, are invested in the deposit receipts of the AfreximBank and the TDB depository receipts of the PTA Bank as a way of protecting policyholders and managing country risk.
He said the industry needs to hold on to investments that protect policyholder funds and avoid scenarios like 2008, where pensions, deposits, and investments were wiped off.
Hoto said it will take a long time for people to regain confidence in the financial service sector and the local currency at large. He said what is required is a political and technical solution with demonstrable stability that will last at least 4 to 5 years.”
During this period, people can see the stability through their funds, even on a small level, whereby one’s deposit today will be able to buy the same quantities by the end of the year.
“The demonstrable period is a function of policies and maintaining the same level of thinking over a certain period of time,” he said.
Hoto said in recent weeks, the Zimbabwe dollar has appreciated against the US dollar simply because the Government has said two things.
“If this is done consistently, it will take a short period of time between 4 and 5 years before people start believing in the policies,” he said.
Hoto said the industry should also be able to deliver other forms of value and benefits to members, such as creating prescribed assets that will create employment or a benefit on assets such as a stand, and this will culminate in confidence building.
He noted that the industry regulator, the Insurance and Pensions Commission (Ipec), also contributed to the loss of value as it required members of the pension funds to invest almost 50 percent of their assets in monetary assets such as Government bonds.
“It vigorously enforced prescribed asset rules, and value was lost when people complied with them,” he said.
Hoto said what happened was a massive wealthy transfer from people who had savings in pensions to the state, and it is shocking that people want to point the finger at the insurance companies when it is clear who destroyed value.
The pre-2009 loss of value issue remains outstanding even after recommendations by the Justice George Smith-led Commission of Inquiry.
Pensioners and policyholders lost their savings when the country switched from the Zimbabwe dollar to the multi-currency system in 2009.
A commission of inquiry led by retired High Court Judge Justice George Smith, which was set up by the government in 2015 to investigate the possible losses during the 18-year period to 2014, discovered that there was indeed a “huge loss of value to insurance policyholders and pensioners, and recommended, among other things, compensation.
