Pension funds get paltry contributions from employers

THE Zimbabwe Association of Pension (ZAPF) has revealed that pension funds are getting between 3,5% and 4% contributions from employers, hampering their ability to support economic growth, NewsDay Business can reveal.

According to national statistics, the gross domestic product (GDP) was estimated at US$28 billion as of December 2022 with the pension funds’ assets contributing about 6%.

However, considering that pension funds have spent billions in equity investments, the GDP contribution of 6% remains very low and paltry.

Speaking on strategies for building wealth during the Chartered Governance and Accountancy Institute in Zimbabwe annual conference last week, ZAPF director Sandra Musevenzo said global collaboration and knowledge sharing could save the industry.

She added that the pension industry had about US$1,7 billion worth of assets, with properties constituting 41%.

“This has always been our safe haven. Even in the conversion period, everyone could live in brick and mortar, and this is what has been standing since globalisation. And then, we’ve got equities, which are sitting at 31%,” Musevenzo said.

“We’ve got perspective assets. This is mandatory in brick and mortar, which are currently sitting at 10%. This is not enough and these mostly are in long-term. I don’t know if you’re still speaking of long-term investments, long-term bonds that we have.

“The balance sits in money markets and alternative investments. You’ll find that in alternative investments, this is the space that, as pension funds, we’ve been growing badly in lately.”

She continued: “And you also mentioned, how come we’re only contributing 6%? We all have to appreciate that our contribution base has significantly come down. Back then, in the days before we even globalised, we used to contribute up to a maximum of 35%.”

Musevenzo said on average, occupational pension funds, were contributing between 3,5% and 4%.

“So, surely speaking, from 3,5% to 4%, how much are we contributing? It’s new money, new pension. You see, this is where our greatest problem is that we’re facing right now. So, the question is: How then should we build value or create value in this 3% that we’re putting in?” she asked.

“Because remember, the 3% or the 4% that we’re putting in then goes towards paying the rent and then goes towards an investment.”

Musevenzo said meaningful strategic partnerships were needed to improve the situation.

She added that it was also important that the industry concentrated on enhancing governance and investor education.-newsda