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Tawanda Musarurwa

CHECK POINT DESK

IT is rare for pensioners’ voices to be heard at gatherings of pension fund managers.

However, when an economist and former parliamentarian, now in his 80s, took to the podium at a recent symposium, he might as well have been speaking for thousands of pensioners.

His voice broke, twice.

First, as he revealed, he now receives just US$8 a month in pension payments — despite having contributed around US$1,3 million over his career.

He also recounted how a fellow pensioner and church member took his own life after receiving his first pension payout, including how the tragedy pushed the church to set up a fund to assist its pensioners.

A successful, hastily formed church-run fund may be the most damning indictment of the country’s pension system.

And pensioners are naturally disappointed. Between October and December 2024, the Insurance and Pensions Commission (IPEC) received 56 complaints.

Of this total, 57 percent were on unpaid benefits, 39 percent complained of meagre payouts and 4 percent were concerned with unresolved pre-2009 losses — a trauma still fresh in many people’s minds.

The pattern reveals more than poor administration. These failures are likely the result of investment strategies that are not delivering.

“In 2024, the average benefits paid to pensioners were US$30 per month, translating to 30 loaves of bread,” said IPEC commissioner Dr Grace Muradzikwa.

According to the Actuarial Society of Zimbabwe, the average contribution from active members was US$47 per month last year, meaning that retirees are, in real terms, losing money.

By the end of 2024, 47 percent of pension fund assets were in property and 21 percent in listed equities, according to IPEC’s fourth-quarter report.

When these investments underperform or cannot be sold quickly, pension funds run out of cash and retirees run out of options.

It is little surprise then that 96 percent of complaints in the last quarter of 2024 were on unpaid or insufficient benefits.

“Some pension funds have already struggled to meet redemption requests and benefit payouts — not due to a shortage of assets, but because those assets are tied up in instruments that can’t be liquidated without significant losses,” said Mrs Sandra Musevenzo, director-general of the Zimbabwe Association of Pension Funds.

Sixty-six-year-old Tichaona Tafirenyika (not his real name) has waited for six months for his pension, but all he receives are polite emails saying his fund is “rebalancing its portfolio”.

Where pension assets sit

By the end of March this year, the country’s pension industry controlled total assets worth US$2,48 billion.

However, a closer look reveals a portfolio heavily skewed towards illiquid investments: 47 percent of assets — about US$1,06 billion — are tied up in property, which is notoriously difficult to exit quickly.

While pension funds in the region aim to keep property exposure between 20 percent and 30 percent, Zimbabwe’s pension funds have gone all in.

South Africa caps property investments at 25 percent, while Kenya allows up to 30 percent.

In a country that has experienced bouts of inflation in the past, these property-heavy portfolios may appear solid on paper, but this is not the case.

Some fund managers still defend the strategy.

“After the hyperinflation of 2007 and 2008, our other investments were nearly wiped out,” said one trustee, who requested anonymity.

“Property gives us predictable rental income and capital gains over time.”

Meanwhile, 21 percent of assets (US$463,7 million) are in listed equities on the Zimbabwe Stock Exchange (ZSE) — a slight 0,51 percent year-on-year decline.

Only 12 percent is allocated to prescribed assets, including some ZSE and Victoria Falls Stock Exchange (VFEX) holdings — well below the 20 percent regulatory requirement.

This composition raises serious questions about liquidity, regulatory compliance and long-term sustainability.

The liquidity trap

Liquidity remains a pressing concern, especially on the ZSE.

While ZSE turnover grew by 1 258 percent year-on-year in ZiG terms, reaching ZiG225,4 million (US$8,7 million) last year, this growth is largely optical, inflated by currency effects.

In contrast, the VFEX, which exclusively trades in US dollars, showed more meaningful progress. Turnover reached US$19,7 million in 2024, up from US$4,8 million in 2023, a 308 percent increase. But scale matters.

For perspective, the Johannesburg Stock Exchange (JSE) averages over US$1 billion in daily turnover — more than the VFEX handles in a year. That gap has consequences.

Large pension funds trying to sell quickly may have to settle for lower prices due to poor demand or long wait times on local capital markets. The ZSE All-Share Index has also shown volatility.

According to the Securities and Exchange Commission of Zimbabwe (SecZim), ZSE turnover in the fourth quarter (October-December period) of 2024 totalled ZiG1,01 billion, or US$37,5 million, a 15,6 percent drop in US dollar terms from the previous quarter, reflecting the local currency’s depreciation.

VFEX, by contrast, offers US dollar-denominated assets and better protection against exchange rate shocks, which is a key advantage in a year when ZiG slid from US$1:ZiG13,4 in April to US$1:ZiG26,7 by October 2024.

Still, signs of growing institutional interest are emerging.

New listings, like Caledonia Mining’s Blanket Mine, are helping deepen VFEX’s asset base.

But it remains thinly traded and narrow in scope.

VFEX currently has 15 listings compared to the JSE, which has about 269 listings.

Betting on local capital markets

Zimbabwe’s pension fund assets have significantly fluctuated over the past decade.

According to IPEC, assets grew from US$1,6 billion in 2010 to a peak of US$5,95 billion in 2018, before plunging to US$1,58 billion in 2019.

They rebounded to US$4,08 billion in 2021, fell to US$2,26 billion in 2024 and now stand at US$2,48 billion.

Although there has been some co-movement with gross domestic product (GDP) growth since 2020, pension fund asset growth has increasingly diverged, likely due to inflation, exchange rate risks and underperformance in key asset classes.

While ZSE investments are vulnerable to inflation and currency depreciation, VFEX provides some insulation.

Yet most pension fund liabilities, such as future payouts, are still linked to local purchasing power, making a full transition to dollar-based assets complex.

Moreover, IPEC regulations cap offshore investments at 15 percent of total assets, a figure industry players describe as “conservative- to moderate” compared to South Africa’s 45 percent, for example.

Still, the case for local equities goes beyond compliance; it is about contributing to domestic economic growth.

Despite constraints, local markets remain essential for supporting productive enterprises.

But foreign investor participation on the ZSE has sharply declined, from 30 percent in 2017 to just 7 percent in 2023, according to SecZim.

This retreat underscores the growing importance of local institutional capital, particularly pension funds, in maintaining market stability and liquidity.

Yet behind this technical balancing act lies a deeper question: What role should pension funds play in Zimbabwe’s economic story?

Are they stewards of retirement savings or reluctant underwriters of national risk?

Right now, they are being asked to be both — to support domestic markets while also delivering secure, timely payouts to retirees.

It is a difficult balancing act.

Prescribed assets

As part of their investment strategy, pension fund managers are required to hold 20

percent of their assets in prescribed instruments. Currently, they are at 12 percent — well below target.

Investing in prescribed assets could improve returns, while supporting the local economy. Between 2017 and now, the Government granted prescribed asset status to 128 projects, valued at a combined US$4,2 billion.

Yet pension fund uptake has only reached 35 percent.

“Alternative investments”, mostly private equity, have also been promoted as a solution to pension funds’ performance challenges, but actuary Mr Gandy Gandidzanwa warns that they require “a robust and well-oiled ecosystem before we can start to make them count”.

“As things stand, pension funds might not be getting the best deals,” he added.

Foreign investments

In 2022, IPEC allowed foreign investments at 15 percent of total assets.

The cap allows pension funds to tap into offshore opportunities.

For example, through the JSE, local funds can access Pan-African equities.

And with exchange-traded funds (ETFs), they can gain diversified exposure to global sectors without leaving the region.

“You want to have as much global (investments) in your investment portfolio as possible to counteract the cyclicality of the local economy,” says Mr David Lerche, chief investment officer at Sanlam Private Wealth.

Mrs Musevenzo agrees: “Redirecting a portion of pension fund assets into mature markets enhances liquidity. Yes, regulatory constraints on offshore investments remain. But compliant structures such as ETFs, regional platforms and pooled investment models can provide meaningful offshore exposure, while staying within regulatory bounds.”

Contribution arrears: A silent drain on liquidity

Beyond market challenges, pension funds are also battling rising contribution arrears.

As of the end of 2024, employers owed funds US$268 million.

The effects are clear: Already burdened by illiquid assets and regulatory caps, many funds now face cash flow crises, making it harder to meet pension obligations, let alone rebalance their portfolios.

IPEC has threatened enforcement.

“If these defaulting sponsoring employers continue deducting money from employees but not remitting to pension funds, we are going to start garnishing,” said Dr Muradzikwa.

The regulator has also flagged funds whose costs entirely consume incoming contributions.

The situation is worsened by a shrinking pension ecosystem.

Out of 967 registered occupational pension funds, only 489 (50,6 percent) are active.

The remaining 478 are inactive — 372 of them awaiting dissolution, pending pre-2009 compensation finalisation.

There is a wider economic lesson buried in the 56 pension-related complaints received in the fourth quarter of 2024.

Delayed and small payouts are not isolated glitches — they reflect systemic strain from years of poor investment decisions.

While the need for serious rethinking is clear, meaningful reform has yet to take hold.

As of March 31, 2025, the asset mix remains largely unchanged.

Property holdings dipped slightly from 47 percent to 46 percent, while quoted equities rose marginally by 0,4 percent, from US$463,7 million to US$465,5 million.

All things being equal, pension funds should maintain exposure to the ZSE and VFEX, but cap allocations and prioritise liquid, US dollar-based assets.

At the same time, diversification into regional markets like the JSE could safeguard returns and offer more flexible exit options.

Yes, pension funds can support national development, but not at the cost of abandoning the very people they exist to serve.

ORIGINALLY PUBLISHED IN THE SUNDAY MAIL – https://www.heraldonline.co.zw/pensioners-struggle-as-funds-lock-up-billions/

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