Omega Ukama 
ZIMBABWE’S State-run pension fund, the National Social Security Authority (NSSA), says it is exploring an offshore investment opportunity to hedge against local currency risk.
The Zimbabwe dollar has lost more than 70 percent of its value since its introduction in 2019.
“To further diversify income streams and hedge against currency risk, the authority is currently exploring an investment opportunity in a major African reinsurance player subject to obtaining support and approval from relevant authorities,” Cuthbert Chidoori, NSSA’s board chairman, said in the statutory body’s 2018 annual report, which was published recently.
This would be an addition to an investment of US$20 million in Afreximbank, which the authority made in 2017 through depository receipts listed on the Mauritius Stock Exchange, “as part of efforts to diversify and preserve the balance sheet value”.
The Afreximbank investment yielded a hard currency US$1 million dividend in 2017 thus, giving the authority a dividend yield of five percent.
“A similar dividend amount was declared for 2018 and was received in 2019.
“Going forward this investment will provide an excellent hedge to currency risk and cover for the authority’s foreign obligations,” he said.
Between 2008 and 2009, local investments were wiped out by one of the worst episodes of hyperinflation recorded in history with a peak annual inflation of 500 billion percent forcing the country to adopt a multi-currency regime which would be dumped a decade later for a return to the local currency.
Zimbabwe’s annual inflation as at December 2019 was 521 percent according to the Confederation of Zimbabwe Industries.
“The financial sector is shrinking by the day. The introduction of Zimbabwe’s own currency has been a disaster as many economists had predicted,” John Legat, Imara’s chief executive said recently in note.
“The effects of the decline in the value of the currency upon Zimbabwe’s banking, insurance and pensions sectors have been devastating in real US dollar terms.
“In short, the local capital markets will find it hard to fund any meaningful investments as we start the next decade,” he said.
This comes as the Reserve Bank of Zimbabwe has tacitly admitted that the country prematurely introduced the local currency without key economic fundamentals in place.
newsdesk@fingaz.co.zw
