New investment options for Pension Funds? Let’s walk the talk Minister!

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The press has of late been awash with news about government coming up with some initiatives to help protect the Pensions and Insurance Industry. Some of the proposals relate to an introduction of a  ‘…number of derivatives and investments assets by the end of the first quarter, which will help soften pension funds skewed investments in the equities market and property sector’ and permission to invest offshore. On paper this looks fair and dandy! Digging deeper however exposes serious flaws with these so called proposals: For starters, it’s not the prerogative of the government nor the Minister (we know he likes these fancy products) to come up with or introduce new products. The industry is awash with talent and the required expertise can be harnessed to come up with these products. All government has to do is create that conducive environment and as they say the rest will follow. An example is the Prescribed Asset debate. Government should be asking themselves why they have not been able to raise funds in the required areas, and work to fix those disincentives, before considering measures such as Prescribed Assets. The appetite is indeed there for well-conceived public investment programmes. Secondly and more importantly, Pension Funds already own some offshore assets like Nedbank, Quilter, SeedCo International, etc. If government really means well, they should start by allowing holders of these assets to sell them and keep the proceeds offshore or reinvest in any other assets of their choice. At the moment all proceeds from these assets, including dividends, are required to be remitted back home. In conclusion, we think this is just a token approval. Where will the money to invest offshore come from? We need YUWESI for investments outside the country! Should we start with the list of critical items needing hard currency?

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The Lingo

OMIR

The ‘Old Mutual Implied Rate’ is a comparison between the Old Mutual share price on the London stock exchange / the Johannesburg stock exchange and the Zimbabwe stock exchange. Effectively RTGS is valued at 1:1 with the USD, but this difference in share price gives us the implied countries exchange rate.

RTGS

Real-time gross settlement systems (RTGS) is a funds transfer system where money transfer takes place from one bank to another on a “real time” basis and “gross” basis. Settlement in the “real time” means that the transaction happens almost immediately.

BOND

The Zimbabwe Bond Note is a surrogate currency issued by the Reserve Bank of Zimbabwe. This was originally issued against a loan facility from the African Export-Import Bank. The Bond Note is officially 1:1 however the market seems to have significantly discounted the value of the Bond Note.

ZAR

The symbol ZAR is the currency abbreviation for the South African rand.