Nssa seeks to reprice Treasury Bills

ZIMBABWE’S state-run pension fund, the National Social Security Authority (Nssa), says it is negotiating with relevant authorities for a better yield on Treasury Bills (TBs) that are on its books.
The majority of the government paper in issue yields less than 10 percent per year, while the Reserve Bank of Zimbabwe’s accommodation rate is currently at 35 percent, and the country’s annual inflation closed 2019 at an estimated 521 percent.
“In order to preserve the value of its balance sheet, the authority’s strategy was to continue investing in real assets and would seek to engage the relevant authorities with a request to reprice the long-term TBs in line with the movement in interest rates,” Cuthbert Chidoori, Nssa’s board chairman, said in the statutory body’s 2018 annual report, which was published recently.
The report shows that the authority had TBs stocks of about US$285 million as at December 31, 2018, the chunk of which was issued by the central bank.
Since then, however, President Emmerson Mnangagwa’s government has dumped a multi-currency system for the Zimbabwe dollar, decreeing, in February last year, a 1:1 conversion between US dollars and the domestic unit.
Since the introduction of the currency, its exchange rate with the US dollar has fallen from 2,5:1 to about 17:1 on the official market.
On the parallel market, the rate is now 26:1.
This means that Nssa does not only have to worry about shrinking yields, but also value erosion on the principal amounts. TBs are also on the list of “prescribed assets”, which insurers and pension funds are required to hold, by law.
As such, insurers and pension funds industry have had to helplessly watch their balance sheets burn.
“One of the challenges for the local insurance and pensions sector is the issue of regulatory restrictions in investing. In an inflationary environment, funds that are not adjusted quickly will suffer through the loss of value,” Chakanyuka Nziradzemhuka, the chief strategic officer at the Nssa told a workshop recently.
“One such restriction is the rule on prescribed asset ratio. It says we are largely supposed to be in fixed income securities,” he said, adding that another unfavourable rule was “the one that says you can only invest up to 10 percent of your funds offshore”.
Meanwhile, the Insurance and Pensions Commission (Ipec) has also said government should rethink prescribed assets.
“Government must come up with acceptable instruments, which meet their investment objectives, especially when you look at the need to preserve value,” Grace Muradzikwa, Ipec’s commissioner said at a recent media briefing. newsdesk@fingaz.co.zw