For some time now, pension funds in Zimbabwe have struggled to find investment assets that consistently and steadily increase their members’ mutual funds.
But maybe the assets these funds were looking for were hiding in plain sight.
A 2013 World Bank report titled “Zimbabwe’s Infrastructure: A Continental Perspective” predicted that increasing the country’s infrastructure endowment to that of middle-income countries in the region could boost annual growth of about 2.4 percentage points.
The importance of infrastructure is also confirmed by calculations by the International Monetary Fund (IMF), which predict that an increase in public investment of 1% of gross domestic product (GDP) stimulates growth by 2.7%, l private investment of 10% and employment of 1%. , 2 percent after two years.
And it is this framework that guides the government’s current infrastructure efforts, as outlined in the five-year National Development Strategy 1 (NDS1).
Although the government is a major financier of public works through the Treasury, there are still funding gaps that can be filled by institutional investors such as pension funds.
Given the huge pools of funds on which many pension funds sit, observers argue that pension funds can help promote a country’s financial development and economic growth through strategic investments.
Actuaries Gandy Gandidzanwa and Itai Mukadira say investing in pension fund infrastructure can meet their need for positive returns and a hedge against inflation.
“Infrastructure, as an asset class, has both the attributes of capital growth and income generation – the right combination for long-term investing.
“Only very few other asset classes have these combined characteristics – certainly not listed equities or conventional bonds. Growth is also in real terms.
“In the absence of inflation-linked bonds and with a listed equity space struggling to beat inflation, this is an indispensable quality,” they say.
Zimbabwe has many infrastructure projects underway and in preparation.
Under NDS1, key infrastructure goals for the period up to 2025 include: increasing power generation capacity from 2317 megawatts (MW) to 3467 MW; the construction of an additional 280 km of transmission and distribution infrastructure, and the increase in access to drinking water from 77.3% to at least 78.3% and the water storage capacity of 15 423X10⁶ current megaliters to 16 979X10⁶ megalitres.
The government also aims to expand access to improved sanitation facilities from 70.22 percent to 77.32 percent in urban and rural areas; increase the number of kilometers of road network meeting the standards of the Southern African Transport and Communications Commission (SATCC) from 5% to 10% and the number of kilometers in good condition from 14,702 km to 24,500 km, and increase Internet penetration rate from 59.1 percent to 75.42 percent and mobile penetration rate to 100 percent.
From another point of view, to the extent that pension funds invest in public infrastructure, they will also guarantee a better quality of life for retirees as the quality of the infrastructure can be used as a measure of the quality of life. of a country’s citizens, while the amount of a country’s infrastructure has a significant bearing on long-term sustainable economic growth.
Currently, most pension fund investments (around $ 177.1 billion according to the latest data from the Insurance and Pensions Commission at the end of the first quarter) are geared towards stocks and rental properties.
However, pressure from the authorities for pension funds to invest in development projects through prescribed assets has resulted in a gradual reorientation of investments towards key public infrastructure.
“We have also received a lot of requests for roadblocks. The Kunzvi project, for example, if it could be funded, the water problems in Harare would be a thing of the past, ”said Grace Muradzikwa, IPEC commissioner recently.
“So the industry is expected to look into these areas as well and contribute to economic development, affordable and clean energy. “
But for pension funds, it’s not just about investing in important development infrastructure. Pension fund trustees have a fiduciary duty to ensure that any assets acquired earn money.
This requires the government to put in place an effectively structured public-private partnership (PPP) framework that attracts institutional investors.