MagazineTheme: RECALIBERATINGTHE PENSIONS’COMPASS
MAGICBUTTONS HOWTOUSE
Wheneveryouseeahotbutton,thatisabutton witha ,itshowsthatitsaspecialmagic buttonthatcantakeyoutothedirectmessaging boxoftheserviceproviderliketheonebelow!
Awarmwelcometoourdearreadersand stakeholdersinthisissueoftheZimbabwe AssociationofPensionFunds(ZAPF)Pension Magazine,IhopeIfindyouaregoodinthiswinter season.Thiseditioncomesinthebackgroundoftwo chillingeffectsofourwinterseason,onebeingthe coldweatherconditionsmostlyinthemorningand atnight,aswellasthechillingeffectsofthemacroeconomicchallengesaffectingalotofourpension stakeholders.Thedepreciatinglocalcurrency againstotherforeigncurrencies,hyper-inflation,low disposableincomesandaplethoraofchallenges besettingoureconomy,havenotsparedthe pensions’sectoroftroublesbeingexperiencedby othereconomicplayers.Itcertainlyhasbeena stressfulfirsthalfoftheyearformanystakeholders. Allthesechallengesarethereasonswhywechose thethemeforthismagazine’seditiontobe; “RecalibratingThePensions’Compass”,asa ‘business-as-usual’approachwillnotaugurwellfor theutilityofpensionstomanystakeholders. Granted,itwillnotbeastrollintheparktonavigate thenexthalfof2023,however,stakeholdersshould notsurrenderordespairbutendeavortoexplore varioussolutionsthatcangivebetterpension outcomes.Whilsttheshort-termprognosisfor manybusinessesandotherorganizationsis convoluted,thereisstillroomforoptimisticefforts toimprovethestateofaffairsforvariouspensions’ stakeholders.Inthisissue,wehavepackagedsome
insightfularticlesfromapoolofexpertauthorswho haveweavedenlighteningarticlesforourreaders. Thehighlythought-provokingarticlesshould provideactionpointsforpracticalimplementation byallpensionstakeholders.Asabonustoour readers,Iampleasedtohighlightthatwewillbe givingprizestoreadersofourmagazine.Those prizeswillbegiventoreaderswhowouldhave answeredspecificquestionsderivedfromthe articlesandadvertsinthismagazine’sedition. Readerswhowouldhavegiventhecorrectanswers willbegivenopportunitiestohavetheirnames enteredintoaluckydrawfromwhichseveral winnerswillbepickedandgivensomeprizes.The questionsfromthiseditionwillbepublicizedinthe Augusteditionofthismagazineandreaderswillbe requiredtosubmittheiranswerswithinaweekfrom thedateofpublication.Ihaveconfidencethatthe articlesinthisJuly2023editionwillhelpyoutoplay yourpartincreatingbetterpensionbenefits.
HappyReading!
SandraTinotendaMusevenzo
Extraordinarytimescallfor extraordinarymeasures.The Zimbabweaneconomyisunder strainwithasouringinflation ratesofover1220%.Therehas alsobeensevereexchangerate depreciationfromUSD1.00: ZW671.45asat1January 2023toUSD1.00:ZWL6326.59 whichis842%exchangerate depreciation.Theexchangerate developmentsinthepastfew weekshavedramaticallyledto instabilityinthemarketswith pricesshootingup unapologetically.
Whilstthissagaistaking
precedenceinthemarket, pensionfundmembersare constantlyquestioning themselvesabouttheirfuture outlook. The2017JusticeSmith CommissionofInquiryreport inattributing36%ofthelossto microfactors,citedfailureto indexcontributions,premiums andbenefitstoinflation.
Somanyquestionsarise especiallyaswearealsogoing throughadifficultpatch.What isindexation,howdoesitwork, canitworkinourenvironment?
Pensionindexationisthe calculationofpension paymentsbasedonametricthat affectsthevalueofthepension. AccordingtothePensionand ProvidentFundAct,itisthe responsibilityoftheboardof trusteestodeterminethe indexationrulesofafund. Dependingonthepension promise,pensionindexation rulescanpursuevariousgoals. Thefirstmajorobjectiveisto preventlossesinpurchasing powerovertimewhichis
normallyachievedthrough priceindexing.Asecond objectiveistoallowpensioners toparticipateintherisingliving standardsoftheactive population,normallyachieved throughwageindexing.
Aswagestendtoincreasefaster thanconsumerprices(exceptin periodsofmassiveeconomic downturn),wageindexingwill alsomaintainpurchasingpower ofretirees.Bothindexing mechanismsservetomaintain incomesecurityinoldage, albeittoadifferentextent,and helptoreducepovertyrisks amongtheveryold.An indexationrulethatislower thanwageindexationreduces thepensionbenefitinrelation toaverageearnings.
Bycontrast,ifaverageearnings shrinkwhileinflationisonthe rise,wageindexationwouldbe insufficienttomaintain purchasingpowerovertime.
Whataretherequirements ofindexation.
Areliableinflationindex: In ordertoaccuratelyadjust pensionpaymentsforinflation, areliableandaccurateinflation indexisneeded.Thisindex shouldbewidelyrecognized andacceptedasameasureof inflationintherelevantmarket oreconomy.
InourcaseZIMSTATS calculatesinflationindices, suchasConsumerPrice Inflation,PovertyDatumLine, TotalConsumptionLineetc. Thisprovidesausefulstarting point.However,asituation whereweendupwithblended inflationindex,withoutan indexintheprimarycurrencies createsaproblemwhen indexationisbeingusedfor pensionbenefits.
Regularupdates:Theinflation indexusedforindexation shouldbeupdatedonaregular basistoreflectchangesinthe costofliving.Thisensuresthat theadjustmentaccurately reflectstheimpact
ofinflationonthevalueofthe assetorpayment.
“Variousviewshavebeen expressedontheCPIas calculatedby but thejuryisstillout.Certain quotasbelievethatit understatesthelevelofinflation inthecountry.Other alternativeslikeProfHankeare moreontheextremeend.”
Clearrulesandprocedures:
Therulesandproceduresfor indexationshouldbeclearly definedandcommunicatedto allrelevantpartiesi.e. contributingmembers,deferred pensioners,andpensioners includingdependents.This includesthecalculationmethod fordeterminingtheadjustment, thefrequencyofupdates,and anylimitationsorrestrictions thatmayapply.Thiswould buildconfidenceinthe indexationmethodandensure transparencywhichisusefulfor planningpurposes.
Consistency: Theapplication ofindexationshouldbe consistentovertime,toensure
thattheadjustmentaccurately reflectstheimpactofinflation onthevalueoftheassetor payment.Inconsistenciesor changesintheapplicationof indexationcanleadto uncertaintyandconfusionfor stakeholders.
Appropriateinvestment strategies: Inordertoachieve indexation,appropriate investmentstrategiesare needed,suchasinvestingin assetsthatareexpectedto appreciateinvalueovertime.
Thiscanincludestocks,bonds, realestate,andotherassetsthat arelikelytoprovidereturnsthat keeppacewithorexceed inflation.Theinvestmentpiece iscrucialtothesuccessofan indexationmethod.
Zimbabweoperatesa3pillar pensionsystemmadeupofa NationalPensionScheme, OccupationalPensionScheme andPersonalPensionPlans.
TheNationalPensionScheme administeredbyNSSA
hascompulsoryenrolmentfor allemployerswithatleast5 membersofstaff.Occupational schemesarevoluntaryand personalpensionplansdepend onthefinancialknowledgeof theindividual.Thearticlewill discusshowindexationwould workineachofthesepillars.
InZimbabwe,socialsecurity schemesareadministered undertheNationalSocial SecurityAuthority(NSSA). NSSAwasconstitutedand establishedundertheNSSAact of1989andisastatutorybody taskedbythegovernmentto providesocialsecurity.NSSA startedoperatingin1994by administeringtwoschemes: NationalPensionandother benefitsSchemes(NPS)and AccidentPreventionand WorkersCompensation Scheme(APWCS).Thestate pensionschemeisapayasyou goschemewhereallliabilities fallingdueingivenyearsare metfromthecontributionsthe scheme
receivesfromactivemembers andtheparticipatingemployers duringthatyear.Thestate pensionismucheasiertoindex thantheoccupationalpension schemeandpersonalpension schemebecauseofthe flexibilityithasintermsof funding.NSSApegsits minimumpensionpayment usingthepovertydatumline (PDL)calculatedbyZIMSTAT.
Theminimumpensionpayment changesinlinewiththePDL andthisisaformofindexation.
NSSAalsodoespartialUS$ pensionpaymentsfromtimeto timetocushionitsmembers fromhighinflation.Theonly problemcomeswiththePDL valuesproducedbyZIMSTAT asthesearesometimes divorcedwiththeactual experienceofconsumersinthe shops.Therecentlyreported
TotalConsumptionPoverty Line(TCPL)forZimbabwe stoodatZW$33044.46per personwhichiscurrentlyless thanUS$5atthecurrentofficial andblack-marketexchange rate.
Therecalibrationofthismetric willimprovetheefficiencyof theirindexationmodelwhichin turnwilladdvaluetopension paymentsfortheretired.
Tosupportindexationof benefitsNSSAwould needtocollectenoughto fundthebenefits.
Wageincreasesareatthe discretionofemployersand dependonbusinessviability, andwherethesewageincreases laginflationortheindexof choicethentherewillbea fundinggap.
Iftherecoveryinwagestakes toolong,tobridgethefunding gapthefundwouldneedto increasethecontributions cominginbyreviewingthe salarycapsupwardsor increasingthecontribution rates.
Thiswillbeacosttoboth employersandemployeesand suchcostscannotbeabsorbed withoutcompromising economicviabilityofsomeof thesponsoringcompanies.
Private-OccupationalPension schemesaresetupby employerstoprovideincomein retirementfortheiremployees whentheyretire.Thereareover 981pensionfundsin Zimbabwewith937ofthem underthedefinedcontribution schemearrangement.The pensionbenefitthatan employeewillreceiveismainly dependentonthesizeofthe contributionandthe performanceofinvestments, thisisbecausedefined contributionarrangementsfix thecontributionrate.This meansthepensionoutcomeis notdefinedandwilldependon thestateoftheeconomyand investmentoutcomesatpointof retirement.Bothcontributions andbenefitpayoutswouldhave tobeindexedinordertoto preservepensionvaluefor retiredmembers.Indexation wouldthereforebedifficult underdefinedcontribution schemesasitimposesacost
thattheemployerwasrunning awayfrombychoosingthis schemearrangementandopting forcertaintyofcostsratherthan certaintyofbenefits.It’sworth notingthatindexationof benefitsisnotguaranteedin definedcontributionplans,as thevalueofinvestmentscan fluctuatewithmarket conditions. However,byinvestinginassets thatareexpectedtoappreciate invalueovertime,andby periodicallyrebalancingtheir portfolios,participantscan increasethelikelihoodof achievinginflation-adjusted returnsandmaintainingtheir purchasingpowerinretirement.
SponsoringEmployer
Thebiggerthecontribution,the betterthepensionbenefit.The sponsoringemployerplaysa greatroleindeterminingthe pensiontheiremployeeswill receivewhentheyretire.For pensionindexationtowork, contributionsaresupposedto increaseinlinewithincreases inCPItopreserve
value.Ifsponsoringemployers increasemoreofallowances andnotpensionablesalaryas currentlythecasethentheir employeeswillfindithardto surviveafterretirementbecause justasmallinsignificant proportionoftheirincomeis beingusedtobuildtheir portfolio.
Pensionsadministratorscannot domagic,whatisputinthepot iswhatapensionereats,oreven lessinthecaseofZimbabwe wherehyperinflationiseroding pensions.Insettingupafundit
maybeimportanttothinkabout theoutcomesandnotjustthe costofpensionfunds. Indexationgivesthatview aroundwhattheoutcomes soughtareandhowthesecanbe achieved.
Oncetheindexofchoicehas beenchosen,theboardof trusteesworkingwiththeir insurerorassetmanagermust createaninvestmentportfolio thatcancreatereturnsthattrack theinflationindexofchoice.In Zimbabwewehaveadearthof appropriateinvestmentsinthis
Oneofthekeymainsuggestionswhichcame fromtheJusticeSmithCommissionof InquiryisthatIPECshouldguidetheindustry onhowtoadoptpensionindexationmodelsin periodsofeconomicinstability.The commissiondidjusticebyproducingapaper toguidetheindustryoncurrencyconversions butneglectedindexationguidanceforprivate occupationalschemes.
Thecommissionexcuseditselffromthis issuewhenitgavefreedomtotheboard membersofafundthroughthe
regard.Wedonothaveindex linkedsecurities,orindex trackerfunds,theclosestto indexedfundsaretheGold Tokenswhichfollowtheprice ofGold. Moreisthereforerequiredin thisspaceandtheGovernment asthelargestborrowercould leadthewaybyissuing inflationlinkedbondswhich couldbepurchasedbypension funds.Thesewouldtickmostof theboxestoanypensionfund investor,prescribedassetstatus, andindexedreturns.
PensionsandProvidentFundActwhich statesthatindexationrulesarepartofthe fundrulessetbytheboard.Withoutguidance, theboardoftrusteesfinditdifficulttoset indexationrulesfortheirfundsbecauseofthe absenceoftherelevantskillsetandbecause theyarejust1partofthewholemechanism.
Ifthereisno guidancechaoswillbreakoutonceagainand itwillbecomehardertoregainconfidence fromtheindustry.
Thisschemeisusuallyestablishedandmanagedbylifeinsurancecompaniesorriskmanagementand employeebenefitsconsultancyfirmsonbehalfofthemember,e.g.,FidelitylifeAssuranceCompany, OldMutual,Comarton,Minervaallmanagetheseschemes.Theschemeisfundedbythemember directlywhocanmaintain,increaseorreducethelevelofcontributionsdependingonthetermsand conditionsunderlyingeachschemearrangement.Totheextentthatthememberisabletoincrease theirlevelofcontributionwithinflationandinvestmentmarketscanproduceinflationlinkedreturns thenitsshouldbepossibletohavebenefitsthatfollowanindex.
Itisimportantunlessthereareguaranteesofferedonthelevelofcontributionandthelevelofreturn beingequaloraboveinflationthenitisnotafullyindexedfund.Itwillbeafundwhoseaimisto maintaintherealvalueofthepensionwithsuccessdependingonabilityofinvestmentmanagers,as wellasthemembersabilitytokeepcontributionsatthesameorhigherlevelinrealterms.
Canpensionindexingthrivein Zimbabwe?Yes,itcan,itis difficultgiventhe circumstances,butifan enablingenvironmentwas createditcouldthriveand perhapsbethepanaceatoour pensionwoes.Fullindexation canbeexpensiveforthe industryespeciallyforprivate occupationalschemeswhere fundingIslimitedtofew sponsorsandrepresentsahuge costtothem.Partialindexation canbeemployedwherea
percentageofthepension benefitisindexedagainstthe appropriatemetricsas determinedbythefund.This meanspensionfund arrangementsmayneedtoshift frompurelydefinedcontribution arrangementstohybridschemes thatprovideforpartial indexationonbenefitsand contributionswiththebalance onadefinedcontribution arrangement.Thiscanbemade easierifcapitalmarketscreate indexlinkedinvestment
vehicles,whichcouldhelpwith assetliabilitymatchingonthe partiallyindexedpartofthe fund.Indexlinkedinvestments, indextrackerfundsorinflation linkedbondswouldbevery attractivetopensionfunds.For successfulindexationweneedto havetherightinvestment instruments,anindexthatis representative,processesand procedure,andafundingmodel thatcanabsorbthecostof indexation.Thecostof indexationariseswherebenefit
increasescannotbefundedviainvestmentincomebutrequire adjustmentstolevelofcontributionsfromthecontributing members.Thisiswhyahybridschemewithpartialindexation wouldworkbetter.Thewholeindustryneedstocollaborateto comeupwithindexationmodelsthatfitourenvironmentas Zimbabwe.Valuablelong-termsavingsdrivetheeconomyand improvequalityoflife.
TauraiJamuProfile
TauraiJamuisanAssociateActuaryandistheActuarialExecutiveforOld MutualLifeAssuranceCompany.Hehasextensiveexperiencewithinthe ZimbabweLifeandPensionsIndustry.Heisaspeaker,pastcouncilmemberof ActuarialSocietyofZimbabweandstillactivelyvolunteerswithinthe ActuarialSociety.Hecontributestothisarticleinhispersonalcapacityandthe viewsexpressedhereinareentirelyhisown.
Thisarticleispartofaseriesofarticleson PensionsLawinZimbabwe.Theseriesis aimedathighlightingthechangesbrought aboutbyvariousnewlegislativeframeworks withinwhichpensionfundsmustoperate.This articlelooksatthedifferenttypesofmarital regimesandtheirimpactonpensionbenefitsas itrelatestoaspouse’spensionandthedeathof amember.Themaritalstatusofamemberisa veryimportantfactortobetakenintoaccountin theadministrationofapensionfund.Onthe27 thofMay2022,theMarriagesAct(Chapter 5:17)waspassedintolaw.Thisnewmarriages lawcameintooperationonthe16thof September20221.Thislawhasbroughta changetothemarriagelawsinZimbabwe.The newlawseekstointroducevariousnewtypes of‘marriages’andmodifiesexistingconcepts withinthemarriageslawframework.The cominginofthemarriageslawalsobrings retrospectiveeffecttoSI323of1991asregards unregisteredcustomarylawunions.Toproperly administerbenefits,pensionfunds,board members,principalofficersandemployersneed tobeclearontherightsandresponsibilitiesof spousesandotherdependents.Misconceptions andcomplicationsrelatedtomarriageslaw oftenleaveemployersandpensionfunds bewilderedaboutemployeebenefitsforspouses andotherdependents.Toproperlyadminister memberbenefits,pensionfundsneedtobeclear ontherightsandresponsibilitiesofspouses. Forpensionfunds,theneedtoverifyamarriage ismostlikelytoarisewhenamemberdies,and asurvivingspouseclaimsthebenefits.The maritalstatusofamemberisaveryimportant factortobetakenintoaccountinthepayment
ofapensionbenefit.Itisimportanttodetermine whetheradeceasedmemberwasmarriedand hadaspouseforthedisbursementofbenefits. Onthe2ndofSeptember2022,anewpensions law,thePensionandProvidentFunds Act(Chapter24:32)wasgazzetted.Thisnew lawcameintooperationonthesamedateand repealedtheexistingPensionandProvident FundsAct(Chapter24:09).ThenewPension andProvidentFundsAct(Chapter24:32)does notdefineamarriage,aspouseoradependent. StatutoryInstrument323of1991Pensionand ProvidentFundsRegulations,1991provided thedefinitionofamarriage,spouseanda dependent.Statutoryinstrument323of1991 beingaregulationthatwaspromulgatedin termsofthenowrepealedPensionand ProvidentFundAct(Chapter24:09)fellaway onthe2ndofSeptember2022.ThePensionand ProvidentFundsAct(Chapter24:32)insection 62providesforthepromulgationofregulations bytheCommission(IPEC).Todateno regulationshavebeengazettedthatpresent themselvesforexaminationonthesubjectof marriages,spousesandbeneficiaries.Thus, whatobtainsisthatrelianceonthedefinitions ofamarriageandsurvivingspouseispremised onthenewMarriagesActChapter(5:17).
Inordertoappreciatetheimpactofthenewmarriageslaw,referencemustbemadetothe positionthatpre-existedatlawassetoutinthepensionandprovidentfundregulations. Statutoryinstrument323of1991areregulationsthatwerepromulgatedintermsofthenow repealedPensionandProvidentFundAct[Chapter24:09].Section2ofSI323of1991inits interpretationprovideddefinitionsto‘marriage’and‘survivingspouse’asshownbelow;
“marriage”means–amarriagesolemnisedundertheMarriageAct[Chapter5:11]orthe CustomaryMarriagesAct[Chapter5:07],oranunregisteredcustomarylawmarriage,andthe words“husband”,“married”,“spouse”“survivingspouse”“widow”,“widower”and“wife” shallbeconstruedaccordingly;“survivingspouse”means–
(a)awidowofadeceasedmember,includingthewidowofapolygamousperson;and
(b)awidowerofadeceasedfemalemember;
Thedefinitionsofamarriageandsurvivingspouseasshownabovearethuspremisedonthe marriageslawpriortothenewMarriagesActChapter(5:17).Thus,effectivethe16thof September2022,anyreferencesinpensionslawtomarriagesshouldbeconstruedintermsof thenewmarriageslaw.
Abriefexplanationofthevariousmaritalregimesandtheimpactonretirementbenefitsis discusedbelow.
TYPESOFMARRIAGESINZIMBABWEUNDERTHENEWMARRIAGESACT CHAPTER5:17
ThenewMarriagesAct(Chapter5:17)cameintooperationonthe16thofSeptember20222.
ThislawhasbroughtachangetothemarriagelawsinZimbabwewiththeMarriageAct (Chapter5:11)andCustomaryMarriagesAct(Chapter5:07)beingrepealed.ThenewAct introducesacivilpartnershipandaqualifiedcivilmarriageandrecognisesanunregistered customarylawunionasamarriage(subjecttoregistration).3Amarriageisdefinedinsection2 as-“marriage”meansamarriagesolemnised,registeredorrecognisedassuchintermsofthis Act.
1.CIVILMARRIAGE
Acivilmarriageismonogamous,itisthe lawfulunionoftwopersonstothe exclusionofallothersandnopersonmay contractanyothermarriageduringthe subsistenceofamarriageunderthegeneral law.
2.REGISTEREDCUSTOMARY LAWUNION
Potentiallypolygamousmarriage.A customarylawmarriagemay,subjectto thecustomarylawofthepeople concerned,bepolygamousorpotentially polygamous.
3.UNREGISTERED CUSTOMARYLAWUNION (UCLU)
Amarriagecontractedsolelyaccordingto customarylawandnotsolemnisedinterms oftheAct.Theunionmustberegisteredby thepartiestosuchmarriagewithinthree monthsofthedateoftheunion.
4.QUALIFIEDCIVILMARRIAGE
Civilmarriagewhichispolygamousor potentiallypolygamous.Solemnisedby theMinisterofreligionforIslamicrites. CIVILPARTNERSHIP4
(1)Arelationshipbetweenamananda womanwho—
(a)arebothovertheageofeighteenyears; and
(b)havelivedtogetherwithoutlegally
beingmarriedtoeachother;and
(c)arenotwithinthedegreesofaffinityor consanguinityasprovidedinsection7;and
(d)havingregardtoallthecircumstances oftheirrelationship,havearelationshipas acouplelivingtogetheronagenuine domesticbasis;shallberegardedasbeing inacivilpartnershipforthepurposesof determiningtherightsandobligationsof thepartiesondissolutionofthe relationship.Thisrelationshipisnot recognisedasamarriage,itisonly recognisedforthepurposesofdetermining rightsupondissolutionoftherelationship.
Themaritalstatusofa memberisthereforeavery importantfactortobetaken intoaccountinthe administrationofapension fund.Itisimportantto determinewhetheramember ismarriedandhasaspouseor dependentsforthe disbursementofbenefits.A marriageisasdefinedin termsofthenewMarriages ActChapter5:17.A member’spensionmaybe payabletoaspouse dependingonwhethersuch spousequalifiesas‘eligible survivingspouse’intermsof thefund’srules.This
definitionincludesallofthe legallyrecognisedtypesof marriagesdiscussedabove. UnregisteredCustomaryLaw UnionSection2subsection3 ofSI323of1991makes provisionforunregistered customarylawunionsand recognizesitsstatusasa marriageandprovidesas below;
(3)Notwithstandinganything containedintherulesofany fund,anunregistered customarylawmarriageshall berecognisedforthe purposesoftherulesasbeing nolessvalidthanamarriage solemnisedunderthe
MarriageAct[Chapter5:11] ortheCustomaryMarriages Act[Chapter5:07],and whereproofisrequiredofthe existenceofanunregistered customarylawmarriagethe followingshallsuffice
(a)anaffidavitofthewife’s guardianincustomarylaw attestingtotheexistenceof suchmarriage;or(b)an affidavitofacloserelativeof thewifeandanaffidavitofa closerelativeofthehusband attestingtotheexistenceof suchmarriage.Theabove provisionrecognizing unregisteredcustomarylaw unionsasmarriagesfalls
“Forpension funds,theneedto verifythe existenceofa marriageismost likelytoarise whenamember dies,andthe survivingspouse claimspension benefits.“
away.Thenewmarriageslawcodifiesthe unregisteredcustomarylawunionandprescribes certainconductforittoberecognizedasa marriage.Anunregisteredcustomarylawunionis onlyconsideredamarriageifitisregisteredwithin 3monthsoftheunion.Furthersection46ofthe newmarriageslawhasretrospectiveeffect.It providesinsubsection3that;(3)Thepartiestoany unregisteredcustomarylawmarriagecontracted beforethedateofcomingintooperationofthisAct shallsecuretheregistrationofsuchmarriagein termsofthisActwithintwelvemonthsofthedate ofcomingintooperationofthisAct.Whereasthe newpensionslawcameintoeffectonthe2ndof September2022,theprovisionsofSI323of1991 remainineffectforpensionfundsinrespectof existingpoliciesuptothatdate.Thecominginof theMarriagesActChapter5:17alsobrings retrospectiveeffecttoSI323of1991asregards unregisteredcustomarylawunions.Thenew marriageslawhavingbeenbroughtintooperation onthe16thofSeptember2022requiresall unregisteredcustomarylawunionstoberegistered bythe16thofSeptember2023.Thequestionof disputesrelatingtowhetheroneisasurviving spouse(evidenceofthemarriagethrough affidavits)orifthereismorethan1surviving spousehasbeenresolvedbythenewlaw.A survivingspouseinacustomarymarriageisone whosemarriagewasregisteredwithin3monthsof theunionoronewhoregisterstheircustomarylaw
unionbythe16thofSeptember2023.Pension fundshavelosttherighttocarryoutfull investigationsandexerciseadiscretiononthe determinationofasurvivingspouseunderan unregisteredcustomarylawunionasperSI323 of1991.
DistributionofDeathBenefits:Isa partyinaCivilPartnershipaSpouse?
Thedistributionoflumpsumbenefitspayable onthedeathofamemberofafundisregulated bysection28ofSI323of1991.Section28of theregulationsprovidedthatdeathbenefitsdo notformpartofthedeceased’sestatebuthadto bedistributedinlinewiththeprovisionsofthe regulations.Aspreviouslysetoutinthisarticle, therearenoregulationspresentingthemselves forexaminationasregardsthepositionof partiesinacivilpartnership.Thecivil partnershipbeinga‘living-in’arrangement whichisfactualisgivenlegalstatusatthetime ofdissolution.Therelationshipisnotrecognised asamarriageandthewordspousecannotbe interpretedtomeanapartnerinaunionnot recognisedbythelaw.5Thepensions’industry continuestobeimpactedbylegislativeand regulatorychanges–thesenotonlyinclude enhancedfinancialreportingrequirementsand actuarialguidelines,butanincreasedfocuson governance,riskmanagementandcompliance requirements.Pensionfunds,boardmembersof
funds,fundadministrators,principalofficersandemployersmusttaketimetoappreciatetheimpact ofthenewmarriageslawonpensionfunds.Themaritalstatusofamemberisaveryimportant factortobetakenintoaccountintheadministrationofapensionfunds.Toproperlyadminister benefits,pensionfunds,boardmembers,principalofficersandemployersneedtobeclearonthe rightsandresponsibilitiesofspousesandotherdependents.
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Everycommercialbusinessfromsmalltolargehasgoalsitseeksto achieve,oneofthemisbeingprofitableintotheforeseeablefuture,that is,beagoingconcern.Businessriskscomeinasthreatstothe company’sabilitytoachieveitsfinancialgoals.Thesethreatscanbe externallyorinternallygeneratedinrelationtotheenvironmentthe businessisoperatinginandthetypeofindustryitisinvolvedin.Itisthe uncertaintiesthatariseinthebusinessenvironmentthatinfluence businessriskstobehighorlow.
Thoughbusinessrisksarebroad,theycanbebrokendownintoseveral categories.Examplesoftypesofbusinessrisksincludecompliance/ legalrisk,economicrisk,reputationalrisk,fraudrisk,operationalrisk andcompetitionrisk.Thedegreeofbusinessriskmayvaryfromone businesstotheotherandthisishighlyinfluencedbynatureandsizeof thebusiness.Forinstance,afinancialinstitutionbearsmorerisksthana standardisedgoods’retailer.
Nowadays,withtheworldbeingaglobalvillage,wehaveseenarisein complexityanduncertaintyinthebusinessenvironment.Thereare increasedcompetitivepressures,technologicaladvancesanddynamic changesincustomertasteandpreferenceshenceincreasedbusiness risks.
Currently,astheeffectsofCOVID-19pandemiccontinuetoevolve, uncertaintyinthe
businessworldcontinuestorisehenceposingahigheroperationalrisk. Theemergenceofthepandemicledtomanybusinessoperationsbeing
disrupted,makingbusinesscontinuityamajorissueformanyorganisations.However, manybusinesseshavemanagedtostayafloatandusedthepandemic-induceduncertainty asasourceofattainingacceleratedgrowthbybeingquicktoadapttochanges.
Thiscanbedefinedasthelikelihoodof adverseconsequencesarisingfromthefailure tocomplywithallrelevantlawsand regulations.Risksconcerningchangesin legislationinthefuture,complexreporting frameworksandrisksofcomplyingwith inappropriateorunclearregulationcanalsobe putinthiscategory.
Thelegalframeworkthat shapedourpensions’fraternity wasenactedduringthe pre independenceerawhenthe Zimbabweandollarwasmore valuablethanotherforeign currencies.
ThePensionsandProvidentFundActlimits theinvestmentexposureofpensionfundsin foreigncountries.Despiteseveralpositive amendments,thelegislationisnotflexible enoughtoconsidertheever-changingtrends inthemanagementofpensionfunds.
Pensionfundsareadditionallyrequiredto allocateatleast20%oftheassetsor investmentsintheirportfliostospecified prescribedassets,suchaslocallyregistered securitiesthatareissuedbyorguaranteedby thegovernmentoralocalauthority.The implicationisthatinordertoachievethe legislativecriteriaforprescribedassets.
PensionFundssometimesneedtodisinvestin lowerriskorhigheryieldinginvestments. CompliancetoPrescribedAssetratiospresent hurdlesformanypensionfundsbecauseitis exceedinglychallengingtofindcompetitive andqualityprescribedassetsinthe Zimbabweanmarket.
Therefore,non compliancewithlegislation andcompliancewithunfavourablemandatory requirementsexposesPensionFundstolegal, regulatory,liability,exchangerate,hyperinflationandmarketpricerisk.
Thiscanbedefinedastheriskoflosses resultingfrominadequateinternal processes,peopleandsystems(whether theseareinternaltotheregulatedentityorin aserviceprovider).Thisriskarisesmainly fromfailuresintransactionswith counterparties,ineffectivedecisionmaking andinadequateorinsufficienthumanand technicalresources.
Specifically,thepensionfundindustryisan industrythatrequireshighskilledlabourin theformofactuaries,charteredfinancial analystsorcharteredaccountants.Thisasa resultofcomplexitythatsurroundsthework doneinthepensions’sectorasthereisalot ofanalyticsthatisdonewhichrequiresa specialisedskill.Atthemoment,thereisa massivebraindrainoftheskilledworkersin thepensionfundindustryasaresultof betterjoboffersandsecurityofferedtothem fromforeigncompanies.Thishasresulted indisruptionsintheindustrypresentinga majoroperationalrisk.Thisfurtherpresents ariskofdisruptionofoperationswhichalso hasanimpactonthegoingconcernofmany pensionfundrelatedentitiesasaresultof themassivebraindrain.
Liquidityriskcanbedefinedastheriskthat apensionfundinstitutionwillnotbeableto meetitspaymentobligationsastheyfall due,ortheentity’sinabilitytorecover funds.SincetheinceptionofthemulticurrencyregimeinZimbabwe,pension fundshavebeensufferingbecauseofthe cashcrunchcausedbyincreasingincidents ofrentaldefaultsfromtenantsintheir buildings,erosionoftradableinvestments andsubduedincomegrowth.Most employersarefacingviabilitychallenges duetothecurrenteconomicturmoiland thereforetheyareunabletoremitmonthly contributionstopensionfunds.The resultantliquiditycrunchmeansthatmost ofthesepensionfundswillbeunableto makepensionpay-outsinforeigncurrency ortomeetclaimsintime.Theliquidityrisk hasbeenfurthercompoundedbythefact thatpensionfundsareinvestedinproperties andrelyheavilyonrentalcashflows.Ahigh defaultrateinrentalsbysittingcommercial tenantshasbeenexperiencedsincethe inceptionofthemulti-currencyregime resultinginreducedcashflowsinthe pensionfunds’portfolio.
Reputationalriskcanbedefinedasthe damagethatcanoccurtoabusinesswhenit failstomeettheexpectationsofits stakeholdersortheriskarisingfromthe potentialthatnegativestakeholderopinion
ornegativepublicityregardingbusiness practiceswilladverselyimpactcurrentor projectedfinancialconditionsand resilience,resultinginadeclineinthe customerbaseorcostlylitigation.
Between2004and2009,manypeoplelost theirlifetimesavings.Duetothis,many peopleinZimbabwehavelosttrustand confidenceinpensionfunds.Theyview suchinstitutionsasinstrumentsformilking theirmoney.Thisposesareputationalrisk intheindustryforPensionFundrelated companies.Coupledwiththepast reputationaldamagesandtheuncertain economicenvironment,thepensionfund industryfacesahighreputationalriskthat
hasacontinuityimpactontheindustryasa wholeasthecontributorsalwayshavea questioningmindasaresultofreputational damage.Withthatcontext,alothastobe donetosanitisethereputationandproactive actionhastobetakenbyseveral stakeholdersinordertosafeguardtheir reputationfrompotentialfuturerisks.
Inconclusion,eventhoughbusinessriskis unavoidable,itcanbemanagedor mitigated,whichisthecoretaskof managementineveryorganization.By applyingsmartriskmanagement frameworks,abusinesscanenjoylarger profitsandachieveitsgoals.
Our transaction management offering provides a full range of corporate finance services, from M&A,valuations and capital raising to corporate strategy support. Our solutions coverthe processes involved in these transactions, including: business plan compilation,due diligence, financial modelling and strategic reviews. Our experience includes working with businesses across a number of sectors.
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The19thNational Congressofthe CommunistPartyofChina closedonOctober25,2017 withPresidentXiJinping gettinganothermandate toleadtheworld’smost populouscountryandits second-largesteconomy.
Oneofthekeyoutcomes ofthatCongresswasthe additionofPresidentXi’s nametotheCPC’s constitution.Thisisavery uniquelyChinesepolitical tradition,onewith immenseimplicationson theAsiantigerasanation.
Itessentiallymeans“Xi JinpingThought”isnow partandparcelofthe constitutionofthe CommunistPartyofChina, placinghisideasand
approachesatparwith thoseoftheFounderofthe People’sRepublic, ChairmanMao.Actingat variancewithXiJinping.
Thoughtis,toputitinone way,tobeworkingagainst theentireCommunist Partyanditsobjectives. But,whatisXiJinping Thought?
Inessence,itisapolitical theorythathas14main principlesthat,together, seektodriveChinaandits partnersintheworld,into aneweraofcollective prosperity,stability, discipline,improvementof livelihoods,environmental conservationandglobal ecologicalsafetyamongst otherobjectives.
MalvinChidzongaistheChief InvestmentandResearchOfficerfor NivteilCapital.Malvinisaversatile finance,riskandinvestment practitionerwithsignificantinfluence andexposureinthefinancialservice sectorandthegeneralcorporateworld.
Hebeganhisfinancialservicecareerat Agribank(nowAFCBank)andlateron joinedCFXBank.Afterhisbanking foraysinZimbabwe,Malvinhadastint inBeijing,China,withJiangXingTrading Co,wherehefacilitatedfinancial trades,importsandexportsof commodities.Uponhisreturnto Zimbabwe,hejoinedZimnatLion Insuranceandlateronmovedto ComartonConsultants,apre-eminent pensionfundadministrationcompany. WhilstatComarton,healsoworked underComarton’sactuarialsubsidiary, AtchisonActuarialConsultants,onthe craftingofseveralfinancialmodelsfor organisationsoutsidethefinancial servicesector.Amongstotherpostshe has,MalvinisthePrincipalOfficerof theSportsIndustryPensionFund.
+263719300072or+263772300072 mtchidzonga@nivteilcapital.co.zw
XiJinpingThoughtisalongtermvision,onethat indicatesanapproachtoa nationandworldbeyondthe fleetingyearsofan individual’slifeortermof office.Thispointstothinking ofthefutureassomething inspiredbythepastand greaterthanthepresent. PresidentXi,drivenand talentedasheis,hasnot steeredthroughhispolitical, economicandcultural missionallalone.Oneofthe peoplewhohasbeenwith himformajorpartsofthe journeyisanunassuming
gentlemancalledCdeWang Huning,whoatthe19thCPC Congressbecameamember ofthepowerfulsevenmemberStanding CommitteeofthePolitburo. CdeWangisbelievedtobe themastermindbehindthe ideologicalframeworksset outbyPresidentXiJinping andhistwoimmediate predecessors,PresidentHu JintaoandJiangZemin.Heis referredtobysomeasthe “mandarinbehindthe emperor”.BorninOctober 1955,hewasProfessorof Lawatjustage30,andfrom
therehehasrisenthrough theranksoftheCPCto becomeoneoftheseven mostpowerfulmeninChina. Oneofhiscoretenetsisthe Chineseproverb;“Bamiao zhuzhang”,whichmeansto “helpaseedlinggrowtallerby pullingitoutofitssoil”.The proverbistakenfromastory datingbacktotheSong Dynasty(960–1279AD) aboutaveryimpatient farmerwhowassoanxious toseehiscropsgrowthathe measuredtheirindividual heighteveryday.Hebecame veryupsetwhentheshoots
werenotreachingouttothesunasquicklyashedesired,andsohecameupwithwhathe thoughtwasabrilliantplan.Thefarmerwenttohisfieldsandpulledeachplantupalittle outofthesoilsothatitwouldbetaller.Verypleasedwithhislongday’swork,hewenthome andproudlyannouncedtohisfamilythatthecropswerenowtaller.Hissonwenttothe fieldsand,unexpectedly,foundthateverysingleplanthaddied.Thisisasimplestorywith asimplelesson:youcannotspeedupdevelopmentinanunnaturalwayandexpect everythingtobehunky-dory.However,arewenotseeingthisfromourstakeholdersinthe pensions’sectorpullingaseedlingupwhilethinkingwearehelpingitgrow?Arewenot seeingpeoplecontributingverylowpercentagesoftheirmonthlysalariesandalso contributingintotheirpensionpotsforveryfewyearsandthenexpecttogethugemonthly
pensionpayouts?Eveniftheinvestment returnsonthecontributionsbeingmade areaboveaverage,manypeoplewould stillgetmeagermonthlypensionpayouts astheleveloftheirpensioncontributions areverylow.Toputsomenumerical contexttothissituation,manypeopleare contributinglessthan5%ofwhatthey earnassalariestowardstheirpension contributions.Now,assumingthatthe5% ofone’ssalarywillearnanaverageof10% returnbeitinhardincomeorcapital appreciation,attheendoftheyear,that person’spensionpotwillhaveonly5,5% ofhisorherannualsalary.After10years, thatperson’spensionpotwillhaveslightly above50%ofthatindividual’sannual salary.After20years,thatsameperson’s pensionpotwillhaveamonetaryvalue whichisslightlyaboveoneyear’ssalaryin thepensionpot.Thatone-yearsalaryis nowsupposedtosecureamonthly pensionpayoutforthatpersonforthe next30to40yearsofthatperson’s retirementlife.Canyouimaginewhatthat person’smonthlypensioncanbeafter retirement.Fromtheaboveexample,itis clearthatpeopleareexpectingmore pensionbenefitsbuthavingcontributed verylittletowardstheirretirementplans andforaverylittletime,ifnottoolateinto theircareers.Somepeoplealsohopeto
strikesome“deals”astheirretirement plans.Nevermindthatthisisan ephemeralsuccesspaththathasno guaranteeorsustainabilityandcando moreharmtoanindividual’slegal situation,professionalstatus,personal reputationandfinancialstanding.
Formanypeople,theirincome replacementratiosareverylow posttheirretirement.Ideally, peopleneedtostartsavingand investingfortheirretirementplans earlyintheircareers.Foradecent ,peopleneedto startcontributingmeaningfullyin their20s.
Thiswillgiveatleast40yearsfortheir contributionstoearnsufficientreturnsfor decentretirementincome.Foremployers andemployeesalike,thereareother sourcesthattheycanleverageonwitha viewtocontributemoretowardstheir retirementplans.Employers’ contributionsandemployeecontributions arenottheonlyavailablesourcesof contributionsforpensionfunds.For example,theSportsIndustryPension Fundputinplaceacontributions frameworkthatwentbeyondthe
traditionalpensioncontributionsourcesfromemployerandemployee contributions.Thepensionfundcreatedothersourcesofpensionfund contributionsleveragingongatetakings,mediarightsandadvertisingrevenue fromtouchlinebillboards.Inrestrictingoursourcesofpensioncontributionsand expectingtogetdecentpensionsaftercontributingforashortperiodinouractive yearsofemployment,arewenottryingtohelpseedlingsgrowbypullingthemout ofthesoil?MaythewisewordsfromoneofthegreatestleadersfromChina, creditedtolayingthefoundationforChinaasaneconomicpowerhouseinspireall pensionandretirementplanstakeholderstoconsiderandtryotherwaystocreate alternativesourcesforpensionfundcontributionsandretirementplans:“Itdoesn’t matterwhetherthecatisblackorwhite,aslongasitcatchesmice.”–Deng Xiaoping.
LazarusMasunungure Comingfromanother periodofeconomicstress justadecadeandhalfago, whenlocalpensionfunds facedbankruptcyasa resultofhyperinflation, thismaybeyetanother scaryperiodforpension funds.Astheglobal economywasstartingto showsignsofrecovery fromthedominoeffects ofCovid-19,it experiencedanotherblitz asgeo-politicaltensions tookcenterstage.The Russia-Ukraineconflict rekindledthedestructive flameascommodity priceshikedandpeakedat thebackofsevere shortagesofgrainsand energytraditionally sourcedfromthetwo countries.Locally,the economyhasseen alternatingepisodesof gallopingandhyperinflation,withthelocal currencyconstantly depreciatingagainstthe USDollar.Thefiscaland monetaryauthoritieshave responded,acoupleof times,bytighteningfiscal andmonetarypolicy respectively,whichhas,to someextenthurtother sectorsoftheeconomy.It thusbecomesnecessaryto
understandthe implicationsofthis economicturmoilon pensionfundsandextend theattentiontowhatmay appeartobebest strategiestocounterthe effects.Economic slowdownsandinstability putsdownwardpressure onreturnsoffinancial assetsandinturnpension fundreturns.Thisis becausepensionfunds typicallyinvestinassets thatarecorrelatedwith stable,economicgrowth.
Forexample,stocksand bondstendtogenerate positivealphareturns whentheeconomyis growingsteadilyamidst lowinflationlevels.Thus, whentheeconomic growthisslow,these assetstendtoperform poorly,whichcanleadto lowerreturnsforourlocal pensionfunds.Similarly, inaninflationary environment,thereturns fromsuchassetsmayfail tomatchtherising inflationlevels.Thestock marketrecordedapoor runin2022whenthe economywashardhitby inflation,largelydueto thepolicymeasures introducedbythe
governmenttmanage inflationandexchange ratespirals.Also,the USDbourse(VFEX)is stillilliquidand generatingnegative returns–typicalofan emergingexchange.To thisend,inflationand currencydepreciation continuetoweighdown overalleconomicgrowth andconsequently investmentreturns.
Inflationarypressures tendtoerodethenetasset valueofpensionfunds. Thepriceofassetscan riseandfallwithinflation. Foraninvestment portfoliotomaintainits valueinaninflationary environmentsuchasours, therateofreturnonthe pensionassetsshouldat leastequatetherateof inflation.Historically,the localstockexchangehas beenknownfor generatingaboveinflationreturnsoratleast re-pricewithinflation. However,inresponseto policymeasures introducedonthecourse in2022–i.e.capitalgains taxof4%forsharessold beforeavestingperiodof 270days,the
marketbecameilliquid andtookatumbleperformedsub-inflation. Giventhatthemajorityof pensionfundswere(still are)heavilyinvestedin stockmarket(ZSE),the pensionvaluewaseroded.
Emergingmarketssuchas oursarehighlyinefficient, hence,mostinvestment assetsmaytrailtherateof inflation.Further,whilst assetssuchasequitiesand propertymaytrack inflation,ifinflationgets outofhandtohyperinflationlevels,itis possibleforsuchasset classestounderperform astheeffectof hyperinflationonthe generaleconomyalso adverselyaffectsthe underlyingperformance ofcompaniesandtenants.
Ontheotherhand, currencydepreciationis alsohavingdevastating impactsonpensionfund business.Localpension funds’portfolioshave beenpredominantly Zimbabweandollar denominatedwiththe majorassetclasses providinginvestment securitiesinZWL.The ZWLhasbeenonan
incessantdepreciationtrendagainsttheUSD ontheauctionsystem,fromZWL108.6660/ US$inJan2021toZWL5,739.7961/US$in June2023.Thismeansthatforaportfolioto preserveitsrealvalue,itwouldalsohave grownatleastatthesamerate(s).Itis difficulttoregistersuchgrowthonZWL assetsgivensuchacceleratedlevelsof currencydepreciationandasaresult,the realvalueoftheportfolioalsodeclinesas thecurrencycontinuestodepreciate.
Further,themacroeconomicstabilityhas limitedtheuniverseofavailableasset classes.Therearesomeassetclassesthatare lessattractiveduringinflationaryperiods. Theseincludemoneymarketinstruments andbondsyetinstablemarketspension fundsshouldhavehigherexposurestosuch assetclassesastheymimictheliability structureofpensionfundsandprovidethe neededliquidity.Thesefixedincome instrumentstraditionallytendtohaveafixed rateofreturn–i.e.interestorcoupon.With inflationrisingabovethisfixedrateof return,theassetvalueiserodedinrealterms. Thus,theZimbabweandollar(ZWL) denominatedmoneymarketinstrumentsand bondshavebecomelessattractiveto investors.Thiscreatesabalancingproblem ontheassetportfolioasthepensionfundend upwithhigherconcentrationtoilliquidand volatileassetclasses.Atatimewhenthe stockmarketwasdecliningin2022suchthat anyexitwaswithoutanotablelossandthe fixedincomespacewasshrinking,liquidity riskbecameinevitable.However,USD denominatedfixedincomeinstrumentsare nowcomingtomarket–thesearemore attractive.Still,thereare,however,twin limitations;thetenorisrestrictedto2025as therearecurrencyuncertaintiesbeyond then,andsomepensionsfundsdonothave USDcontributionstotakepositionsinthese assets.Wheninflationisrisingataratefaster
thantherateofreturnonfinancialassetse.g. sharesandbonds,portfoliovalueiseroded ataratewhichisequaltothedifference betweeninflationrateandportfoliorateof return.Thisimpliesalossofvalueto pensionfund’smembers.Itisagainstthis backgroundthatpensionfundswith significantquantumofmaturingobligations mayfailtosettlepensionbenefitsinpartor infull.
TheJusticeSmithCommission-whichwas appointedtoinvestigatethelossofpension valueduringthehyperinflationaryperiod (2008-9)recommendedthatpensioners shouldbecompensatedfortheevidentloss ofvalueandboththeauthoritiesandpension fundsthemselveswerefoundculpable. Whilstthecompensationframeworkwasput forwardforimplementationbyIPEC recently,wemayneedanothercompensation frameworkagainifthecurrenteconomic instabilityworsens.Therealityisthat,inan unstableeconomicenvironment,theriskof makingsub-optimalinvestmentdecisions andlosingmoneybecomesinevitable.In addition,thecostofprovidingpensioncare escalatesundersuchconditions.
Thecostoflivingisdirectlyproportionalto inflation.Forexample,themonth-on-month inflationforJunewas74.5%,i.e.thecostof livingalsoincreasesbyatleastthesame rate.Thismeansthat,inordertomaintain thestandardoflivingoftheretirees,the sponsorneedstoincreasepension contributionsbyatleastthesamerate.Itis howeverdifficulttoequallymatchtherateof inflationbecausetherateofsalary adjustmentmayalsotrailinflation.Also,the environmenthasmadeitdifficultforpension fundstocomplywithIPECregulations.
Forinstance,IPECintroducedmaximum exposureguidelinesperassetclasstobe
adheredtobyPensionFundsforwhichcompliance inthisexceedinglyunstableeconomyisnotonly difficult,butalsonearlyimpossible-atleastinthe shortterm.Why?AssetManagersmayseeitfitto trimdownexposuresintoassetclasseswhichare susceptibletocurrencyandinflationriske.g.listed equities(ZSE)andfixedincomeinstruments.On theotherhand,increasingexposurestorealassets suchasrealestateandcommodities,oreven offshoreinvestments(thoughnotinsulatedfrom currencyrisk)mayseetheFundhavingextended exposureinrealestateandoffshoreinvestments, abovethestatutorylimitof40%and15% respectively.Alternativeinvestmentsarealso becomingtopicalduetotheirabilitytomitigate bothinflationandcurrencyrisk,butwithonlya 15%exposurelimit.TheFundTrusteesarefaced withadilemma;shouldweremaincompliantand subjecttheFundtovalueerosion(detrimentalto investors)orde-risktemporarilyandpreserve valueandevengeneratemorevaluebyincreasing exposuretorealassets(mayexposethefundto concentrationandliquidityrisk).
Consequently,thetraditionalinvestmentstrategies maynotworkwellinanunstablemacroeconomic environment.Thisisespeciallytruewhentheusual strategyusedtoincludeasignificantexposureto assetclassesthatdonotprovideacushionagainst inflation.Thestockmarketusedtobethereadily availableanddominanthavenforpension contributions.However,withtheobserved turbulencesonthelocalbourseatthebackofthe twineffectsofinflationandcurrencydepreciation, itsdominanceisfastreplacedbyotherasset classes.Traditionally,pensionfundsgloballytried toavoidcommoditiesonaccountoftheirrelatively marginalandvolatilepathofreturns.Withthe globaleconomybecominggloomyandgeopoliticaltensionsescalating,commoditieshave beguntoattractinterestfrompensionfundsasthey bringthemuch-neededstabilityandinflation cushion.Atthispoint,itisnowunequivocalthat thecurrenthappeningsaredetrimentaltothe
pensionbusiness.Thereareacoupleofstrategies thatTrusteescanconsiderinordertopreserve value,theseinclude;
� ensuringportfoliodiversificationbyextending exposureinassetclassesthathedgesagainst inflationandcurrencyriske.g.realestate, commodities(goldcoins,grain,etc),private equity;
� takingadvantageofthe15%allocationfor offshoreinvestmentstomitigatecountryspecific risks,
� strikinganoptimumblendofshort-termandlong termalternativeinvestments,
� revisitingthestrategicandtacticalasset allocation
� thegoalistohardentheportfolio,oratleasta largeportionoftheportfolio.
� ConsideringUSD-linkedfixedincome investmentinstruments
Pensionsbynaturearetailoredforastable environmentgiventheneedforpredictable paymentobligations.Assuch,inflationremainsthe biggestenemyofthepensionerandpensionfunds. Unfortunately,pensionsarestillnecessarytoavoid old-agepovertyhencetheneedtobeinnovative andensurepensionfundscontinuetodelivervalue despiteanunstableeconomicenvironment.Itis againsttheabovebackdropthattheinflationary pressuresandcurrencyissuesareweighingheavily ontheperformanceofpensionfunds.Ithowever remainsimportantforFundTrustees,Investment ConsultantsandAssetManagerstodeviseplans thatensurevaluepreservationforthegreatergood ofthepensionfundmembers.Statutory requirementsshould,bearinginmindthe difficulties,beadheredtoandwherenecessary, seekregulatoryguidancefromthepensions’
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ZimbabweAssociationofPensionFunds(ZAPF)incollaborationwithNivteil CapitalcordiallyinviteinterestedstakeholderstoparticipateinInvestmentTours atAristonandTangandaestatesandmanufacturingplantsinMutareand Chipinge.TheseInvestmentTourshavebeenorganizedwithaviewtofacilitatea hands-onoron-the-groundappreciationoftheoperationsoflistedcompanies wherePensionFundsandotherinvestorshaveshareholding.
DatesfortheInvestmentTours:26Julyto28July2023
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� AdvertisingandSponsorshipPackagesalsoavailabletointerestedstakeholders
Centurieshaveseentheriseand fallofGreatcivilizations, advancementsintechnological progressandgeneral development,thathasbeenbuilt onthesweat,courageandenergy ofpeoplewhodecidedtotakeit uponthemselvestobethe pioneersofchange.Trendsetters likeJohnDRockefeller,JP Morgan,AndrewCarnegie, StriveMasiyiwa,AlikoDangote, onlytomentionafew,haverode thestart-upwaveastheydecided toavoidtheconventional employeemindsetthathad becomewidelyaccepted.
Likeeveryothermajorturnaroundinthisworld,awave ofestablishingnewventureshas washedupontheshoresofour businesslandscapeinrecent years.Attributabletovarious reasons,thewaveofstart-ups hasemergedandwecansafely concludethatnecessityhas proventobethemotherof innovationasmostentrepreneurs havebeenmotivatedbythe existenceofproblemsinour society.
Thewaveofentrepreneurs’startupscanbetracedbacktothe establishmentofareaslike SiliconValley,atechnology innovationhubthathas witnessedtheriseofmanytech-
start-upsintheUSA.Reference canalsobemadetoother outstandingstart-upslike AirBnbandUberthathavebeen abletogrowandimpactthe world.Itisvitalthatreadersalso lookintobiographieslike“The ManWhoBuiltAmerica”, essentialcontentthatshowsthe entrepreneurialjourneyof successfulpeopleandhowthey arrivedatthedecisiontostart theirenterprises.
Zimbabweisridingthe entrepreneurs’start-upwave. Theeconomy,however,hasbeen ravagedbyunhealthycyclesthat haveledtoaseriesofchallenges. Hyperinflation,unstable exchangerates,poorliving standardsandanarrayofother socio-economicillshavebeen themajorhighlightsofthe21st CenturyforZimbabwe.One wouldthinkthatwiththesekinds ofills,thebusinessworldwould beadiscouragingfieldtoventure intobutthisisquitefurtherfrom thetruth.
Statisticshaveproventhatthe formalemploymentratein Zimbabweisverylowmeaning thattherestofthepopulationis dependentoninformal unemploymentforsurvival.It canbeestimatedthatabout90% ofthepopulationisdependenton informaloperations.Dueto economichardships,theformal employmentplayershavealso beenseentoplugintothe informalsectorinabidtobeef uptheirrevenuestreams. Kubatana.netcommentedonthe informalsectorinoneoftheir articles,concludingthatasof 2021,theinformalsectorwas estimatedtohavecontributed 40%tothegrossdomestic productofourcountry.
Inacountryravagedby economicills,itcameasa surprisethattheinformalsector wascontributingthathighofa figuretothevalueofeverything producedwithinthecountry’s borders.Thishasledtothe realizationthatduetothe economicillsinZimbabwe,the employeemindsetisslowly erodingawayasNecessityis provingtobethemotherof innovationinZimbabwe.The unavailabilityandtheever-rising
“Theriseof hasbeen unconventionalasmost oftheseentrepreneurs areoperatingonan
costsofmostbasicneedslikefood, clothing,healthcare,educationand accommodationhaveforcedmostcitizens intotheentrepreneurs’arena,informallyas theymaybe.
Unawareoftheimpactthattheirneedshave hadontheprogressofbusinessinnovation inthecountry,variousinformal entrepreneurshaveshiftedthetidesof businessmanagementandareindirectly motivatingpeerstogravitatetowards entrepreneurship.Thismotivationhasledto theriseofagenerationoftransactional tradersthathaveoftenbeeninformally calledhustlersintheartof“KuNgwavha”astreet-termthatlooselytranslatestoany activitythatgeneratescash-in-hand.
Thishashelpedprovidesustenancefor citizens,butunmonitored,these“hustlers” havealsocontributedtounstablevariables likeexchangeratesandhyper-inflationin oureconomy.Taxevasionisanotheraspect thathasthenmotivatedtheGovernmentof Zimbabwetoshifttheirfocustothese informaloperators.Everyparadigmshift faceschallengesandtheriseoftheinformal sectorhasnotbeensparedthisresistance.In ordertoensurethattheGovernmentkeeps alleconomicplayersincheck,amoveto formalizetheinformalsectorhasbeen adoptedthathasseentimeandtimeagain conflictsbetweenthegovernmentand informalbusinesses.Themovetoformalize operationshasfacedresistanceas formalizingtheinformaltraderswillmean theyhavetoconformtoprofessional protocolsputinplacebyvariousauthorities liketheZimbabweRevenueAuthority,local councilsandTheReserveBank-onlyto mentionbutafew.
Thisbiashasnotprovedtobeeasyasthere isalackofknowledgeinbusiness managementbymostinformaltradersthat
haspreventedgrowth,becauseofthe impulseandfearbroughtaboutbythe possibilityofpoverty.Anunfortunate processofforgoingprinciplesof accountingandfinancialmanagement becauseofanimmediateneedtomanage povertyortocrystallizegainshas influencedthewayinformalbusinesses operate.
Apartfromtheexpensesincurredin businessmanagement,authoritiesinthe eyesofthecitizenshavebecomemoneyhungryinstitutionsthatseemtobeaimed towardsincreasingthecoststructure, somethingthathasnotbodewellwithmost informaloperators,assignaledbytheir reluctancetoregistertheircompanies, conformtosetpoliciesandevasionof taxes.
Theriseofentrepreneurshasbeenaneyeopenertotheuntappedopportunitiesin Zimbabwethatshouldmotivateemployees andpensionerstosetuptheirown businessestohelpthemafterretiringfrom theirjobs.Lefttoitsowndevices,the informalsectorwillcontinuetogrowona majorlevel,however,individualgrowthis likelytostall.Thus,itisessentialthata smoothtransitionprocessbeadoptedbythe government.Itisthisauthor’sviewthat theseinformalbusinessesneedtoreceive themuchneededbusinessmanagement skills’training.
“Tothisendwecan safelyconcludethat theZimbabwean economyrestson unconventionalpillars offoundation.”
StevenJobsandBillGatesstarted and atinformallevelsandexpectingour fellowcountrymentostartataformallevelmight preventmanypotentiallyimpactfulbusinesses frombeingstarted.
Informalastheymaybe,itisessentialthat theyadoptasubtleformalwayofoperations.Thishasthe highprobabilityofensuringgrowthonanindividuallevelfortheseinformalbusinessesbeforethey graduateintoformalbusinesses.Changecanneverbeimposedheavilyonanygivencommunity,thus smallchangestothewayinformalbusinessesaredoingbusinesscanhelpininitiatingacceptanceof formalregulationbythegovernment.Thissupportcanalsohelpalotofemployeesincurrent employmentandpensionerswhomayhaveworthwhileventurestostart.
Issuer: ZimgoldOilIndustries(Private)Limited
Instrument: CommercialPaper
Arrangers: FirstCapitalBankLimitedandEFESecurities(Private)Limited
Registrar,Trustee&TransferAgent: CABSCustodialServices
MethodofPlacement: PrivatePlacement
TypeofInstrument: FixedRate
AggregateCommercialPaperAmount: USD$5,000,000(UnitedStatesDollarsFiveMillion)
Tenor: 180days
CouponRate: 11%perannum
PrincipleRepayment: OnMaturityunlessotherwiserolledoveratthediscretionoftheinvestor
Couponpayment: OnMaturityunlessotherwiserolledoveratthediscretionoftheinvestor
Currencies: TheCommercialPaperwillbeissuedinUSdollarsonly.
PurposeofIssue: Tofinancepurchaseofsoyabeansandsunflowerforoilexpressingandcrudeoilfor refiningandpackingtheoil
OfferOpeningDate: Tapissuecommencing12
th May2023
TypeofIssue: TapIssue(Issuertocontinuereceivingsubscriptionuptoatimewhenrequired subscriptionisachievedoritbecomescommerciallyuntenabletoacceptoffers.)
Security: PledgeofStockscomprisingofSoyabean,edibleCrudeandrefinedoilandother finishedstocksofthecompany
FormofCommercialPaper: TheCommercialPaperwillbeissuedindefinitivecertificatedregisteredform, serialized.TheCertificate(s)issuedwillbeevidenceofthetotalamountof CommercialPaperheldbyaholder.
SpecialFeature: PrescribedAssetStatus
StatusofCommercialPaper: TheCommercialPaperconstitutesregistered,direct,general,securedand unconditionalobligationsoftheIssuer,whichwillatalltimesrank paripassu among themselves.
EarlyRedemption:
Issuermay,atitselection,redeemallorpartoftheoutstandingCommercialPaperat par(plusanyinterestaccruedatthedateofredemption)(the“EarlyRedemption Amount”)onanyPrincipalRepaymentDateprovidedthattheCPholdersshallhave receivedfromtheIssuernotlessthanthirty(30)dayspriorwrittennoticespecifying theamounttoberedeemedandthePrincipalRepaymentDateonwhichsuch redemptionistotakeplace.
BondApplications:
ApplicationsshallbemadebysubmittingtheSubscriptionForm,toTheArrangers, FirstCapitalBankor,EFESecurities(Pvt)LimitedcopiedtotheRegistrar,Trusteeand TransferAgent,CABSCustodialServices.Uponwrittenconfirmationofallotment investorwillbeadvisedofthenominatedaccounttoeffectelectronictransferafter whichtheywillsubmittheProofofPaymenttoFirstCapitalBankorEFESecurities.
GoverningLaw:
EventsofDefault:
TheCommercialPaperIssuewillbegovernedbyandinterpretedinaccordancewith thelawsoftheRepublicofZimbabwe.
Usualandcustomaryforfacilitiesofthistypeincludingbutnotlimitedtofailureto pay,failuretocomplywithobligations,crossdefault,misrepresentation,insolvency andinsolvencyproceedings,creditorsprocess,unlawfulnessandunenforceability, repudiation,actionincontraventionofconstitutionaldocumentsMaterialAdverse Change.
Taxation:
AllpaymentsbytheIssuerinrespectoftheCommercialPaperwillbemadesubject to deductionoftaxesifsuchdeductionisrequiredbylawandtherewillbenocalloption fortaxationreasons.
Redemption:
TheCommercialPaperswillberedeemedattheirredemptionamount(determinedby theCalculationAgent,ifnecessary)onthedatespecifiedintherelevantCommercial Paper.AmountsdueontheCommercialPaperwillbemadeinthecurrencyinwhich theCommercialPaperaredenominated.
SellingRestrictions: CommercialPaperarenon-transferable.
ZAPF:WhatistheZimbo-Afroretirement model?
AWM:TheZimbo-Afroretirementispredicated onleavingtheurbanareasuponreaching retirementandmigratingbacktotherural areastoleaveanagro-centriclife.Thismodel involvesusingtheretirees’amassedfinancial capitaltoacquirefarmingtechnology,livestock andgoingtoestablisharuralhomesteadwhere onewillliveengaginginsubsistencefarming–bothanimalandcrophusbandry-untiltheday theydie.
ZAPF:WhatmotivatedAkribosWealth Managers(AWM)tomodernizeZim retirement?
AWM:Adoptionofthecurrentwestern retirementmodelintheAfricancontext, despiteachievingitsintendedobjectivealbeit slowlyhasfailedtofullyappealtotheAfrican retiree.Itusestoomanyfinancialassetswhich retireesfeelaredetachedfrom“reality”.The Africanretireepreferstangibleasset accumulation.Hencetheneedtorevisitthe wayZimbabweansretire.
ZAPF:Whatarethemajorshortcomingsof theexistingretirementmodelinZimbabwe?
AWM:Theuseoffinancialassetshasexposed theZimbabweanretireetovalueerosiondueto risinginflationandpersistentcurrency depreciation.Uponretirementmostretirees findthemselvesdestitutewithoutbothincome andbasicshelter.Thechallengescutacross socialclasses.Forhighincomeearnersthe changeinlifestylefromworkingtoretirement isevenmoredifficulttomanage.Mostofthese retireesfindthemselveswithbigurbanhouses thatareexpensecentreswhichtheycannot affordtomaintain.Toaddressthesechallenges
RETIRINGTHEAFRICANWAYMODERNISINGTHE “MUDYANDIGERE”
AWMpartneredwithexpertsinInfrastructure developmentandAgriculturetocomeupwith aturnkeysolution-EXRECO.
ZAPF:WhatisEXRECO?
AWM:EXRECOisaretirementsolutiontailor madefortheZimbabweanretiree.ItIsa retirementsolutioncraftedbyZimbabweans forZimbabweansandAfricansatlarge.
ZAPF:Howistheprojectedbeing implementedintermsoflocation?
AWM:Theprojectshallbeimplementedin peri-urbanlocationswhicharestrategically locatedacrossthecountryforeaseofaccessto themainroadnetworks.
ZAPF:Whatisthecurrentstateofthe project?
AWM:231haoflandhasbeenallocatedfor thefirstphaseoftheprojectinChegutuwhich shallbesubdividedinto2haand1haplotsand oneachplotweshallbeputtingupahouse withmoderndesigns,aboreholeanda greenhouseforhorticultureprojects.
ZAPF:Howdoestheprojectgenerate returns?
AWM:Theprojectcashflowsshallbe generatedfromsaleofthedevelopedplots, foreigncurrencyfromhorticultureexportsand rentalincomefromsharedinfrastructure.
ZAPF:Howdopotentialinvestors participateintotheproject?
AWM:Institutionalinvestorscanbecome equityholdersthroughordinarysharesintothe SPV(EXRECO)whicharepricedat$1each foratotalofissuanceof4,000,000shares. Individualscanalsoinvestbypurchasingthe plotswiththecompleteinfrastructureata priceofUSD$280,000.
ZAPF:Whatarethebenefitsfor institutionalinvestors?
AWM:Havingexposuretoprivateequity investmentsenablesinstitutionalinvestorsto diversifytheirportfolioswhichcanenhance returnsattheendoftheday.Furthermore,the projecthasappliedforPAstatuswhichwill improveinsurancecompaniesandpension funds’compliancestatus.
ZAPF:Whatistheminimuminvestment forinstitutionalclients?
AWM:$10,000.
ZAPF:Whatarethetargetedtimelines?
AWM:Thetargetedtimelinefortheprojectis 18monthsandisexpectedtocommenceendof beginningofSeptember.
INVESTINGFORRETIREMENT
THROUGHAGRO-RESIDENTIAL PLOTSTHATWILLOFFER
IMMEDIATEINCOMEFROM
HORTICULTUREPROJECTS
WITHFOREXEARNING
Afinancialtransactionwherethe borrowerseekstousesecurities ascollateralforfundsborrowed.
Thereceiptofshareproceedsas earlyasonedayafterdateoftrade insteadofthenormalthreedays aftertrading.
Securitiesdematerialisationisaprocess bywhichphysicalcertificatesaretaken backthroughthetransfersecretary anddestroyed.Anequivalentnumber ofsharesarereceivedintotheinvestors CSDaccount.
Oursystemscanadministerany assettype.Wecanon-board equities(listedandnon-listed), fixedincomesecuritiesandany formofalternativeinvestment assets.
Allaftertradeprocessesand transferofsecurityownershipare handledefficientlyandtimeously throughourrobustsystems.
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