Zimbabwe: Zim to Relax Offshore Investment Rules
ZIMBABWE intends to relax rules around offshore investments by local pension funds by allowing them to invest in foreign markets –subject to regulatory approvals.
Currently, pension funds are prohibited from investing offshore, but the amendments to the Pension and Provident Fund Bill of 2015 seeks to allow them to invest abroad.
Most investments by pension funds are made into assets such as equities and real estate.
“A registered fund shall at all times hold its assets in Zimbabwe in investments which are realisable in Zimbabwe,” reads part of the Bill, but may “invest part of its assets in foreign markets, subject to such terms and conditions as may be prescribed.” The pension funds are regulated by Insurance and Pension Commission.
Some analysts said allowing pension funds to invest abroad would broaden their investments options while others contend the country should come up with profitable investment instruments on the local market for the institutions can invest in.
A paper by Zimbabwe Association of Pension Funds says allowing offshore investment would enable them to play their role of rebuilding the economy and restoring relevance of retirement savings in delivering meaningful benefits to members, as returns and capital on the investments would eventually be remitted to Zimbabwe.
It also says offshore investments would allow pension funds to invest in a broad spectrum of industries such as airways and information technology, which would enable them to get a full and balanced exposure in sectors with their accompanying levels of risk, returns and business cycles providing optimal portfolio diversification.
In addition, offshore investment would allow pension funds to take advantage of tax havens in jurisdictions where the investments and their returns are not subject to tax. Pension funds would also be able to take advantage of the economic growth potential in emerging markets and maximise returns for the members of the funds.
ZAPF recommended that “Zimbabwean pension funds be allowed to access alternative investment classes in regional and foreign markets to diversify away from the risk associated with over concentration in one geographical market. We believe that this is consistent with the basic retirement income objective of a pension fund.
“The country’s regulatory framework should ensure that pension fund investment especially offshore is undertaken in accordance with the principles of security, profitability, and liquidity using risk management concepts such as asset-liability matching.”
Last month, Finance and Economic Development Minister Patrick Chinamasa said pension funds should consider coming up with long-term financial instruments to fund infrastructure development and support industry as well as small to medium enterprises.
He said pension funds should adopt a long- term view by playing an instrumental role in reviving the economy given the industry’s potential in promoting economic development.
The minister contends that domestic resource mobilisation was critical for economic development and a robust local industry was vital in attracting foreign investment.
“I am humbly urging you to have a re-look at your investment philosophies, because they may be out of sync with reality. There are structural shifts in our economy; the small to medium enterprises have emerged as an important sector while big institutions continue to struggle.
What are we doing as an industry to support these emerging institutions so that they can graduate into reputable institutions?”
