Farai Mabeza, Senior Staff Writer 
THE Insurance and Pensions Commission (Ipec) says foreign currency-denominated assets are cushioning the industry from loss of value in the face of rampant inflation.
Month-on-month inflation was reported at 74,5 percent in June, after gaining 58,8 percentage points on May’s rate.
Annual inflation hit three digits to 175,8 percent from 86,5 percent recorded in the previous month.
In a pensions industry report for the quarter ended March 31, 2023, the regulator said foreign currency-denominated assets during the reporting period amounted to US$257 million, constituting 12 percent of industry total assets.
Industry Foreign Currency Assets (Sources: Pensions Industry Report)
“Foreign currency-denominated assets of the industry were mainly invested in quoted equities, prescribed assets and money market investments, which collectively constituted 82 percent,” Ipec said in the report.
“The quoted equity investments are mainly on the Victoria Falls Stack Exchange (VFEX).”
Prescribed Assets constituted 20 percent of the total foreign currency-denominated assets.
“The holding of foreign currency-denominated assets helps in cushioning the assets from being eroded by inflation in the current hyperinflationary environment,” Ipec said.
Contribution arrears for the period under review stood at US$8,5 million, constituting 5,5 percent of the industry’s foreign currency-denominated assets.
“The commission calls upon the boards of funds to follow up with sponsoring employers to ensure that contributions are timeously remitted to the funds to avoid the prejudice on fund members.
“Furthermore, it is crucial for the sponsoring employers to remit contributions in time to avoid their accounts being garnished by the regulator,” Ipec said.
Liquidity risk was rated to be low because of the high investments in liquid assets, mainly listed equity, cash and money markets.
Liquidity risk is defined as the risk of failure by the industry to make payments as they fall due because of a lack of liquid assets that can be easily converted to cash.
This comes as VFEX has said it will have a commodity exchange by the end of this year as it bids to increase trading and investments on the platform.
VFEX’s launch in 2020 marked the operationalisation of the Victoria Falls Special Economic Zone.
“Our aim at the Victoria Falls Stock Exchange so far has been to get more listings. Now the second part is to get more trading on the Victoria Falls Stock Exchange.
“Compared to last year, trading has increased but it is not yet where we want it to be. So, getting trading increased on VFEX is important,” VFEX chief executive Justin Bgoni told The Financial Gazette recently.
“And it is also important for us to have new products. So, we are hoping to launch shortly contracts for differences, normally known as forex trading. We are about to launch it in the next month or two. Then by the end of the year, we should be launching a commodity exchange for base metals starting with chrome. We really want to make the exchange more diverse in terms of new products,” he added.
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