By William Kumwmbe:
Pension assets have grown from K74.8 billion in 2011 to K757.4 billion in March 2019, figures from the Reserve Bank of Malawi (RBM) show.
At this level, pension assets are now at around 14.4 percent of Gross Domestic Product, growing at 30 percent annually.
Passing of the Pensions Act in 2011 has seen a substantial rise in pension remittance.
Annual contributions collected have increased from K8.6 billion in 2011 to K98.3 billion in 2018.
RBM projects that, by end 2019, pension assets would swell to K894 billion and increase further to K1.1 trillion by the end of 2020.
Number of people with pensions has also increased from 102,505 in 2011 to 422,993 as at end March 2019, with the number of pension service companies growing to six from three in 2011.
Addressing stakeholders at a symposium on pension funds investment in infrastructure in Blantyre Tuesday, RBM Governor Dalitso Kabambe, however, low flow of the funds towards infrastructure development projects.
“From where we are coming, this is no mean achievement. Nevertheless, in most comparative countries, pension funds have been used for building infrastructure including skyscraper buildings, energy plants, water supply systems, residential compounds, road infrastructure and others,” Kabambe said.
Kabambe said contrary to what is obtaining in the region and beyond, here in Malawi, 45 percent of these funds have been invested in shares listed on the Malawi Stock Exchange.
A further 29.6 percent has been invested in Malawi Government Debt Securities, with the balance of 10 percent invested in fixed deposits.
“This means that the bulk of our pension funds have been invested in short term instruments which are prone and vulnerable to short-term interest rate movements as well as share price fluctuations. This is not what pension funds are meant for as these are long-term liabilities,” Kabambe said.
Recently, the Organisation for Economic Co-operation and Development indicated that alternative investments had gained ground world over, with the percentage of assets committed to alternative investments reaching 51.3 percent in South Africa, 51.9 percent in Tanzania, and 40.3 percent in Zambia, by 2017.
In Tanzania and Zambia, land and buildings alone constituted 24 percent and 21 percent, respectively.
Old Mutual Group Chief Executive Officer, Edith Jiya, conceded that more needs to be done in asset allocation.
“We need to work more on asset allocation to ensure that we are channelling the funds accumulated to areas that would provide a particular return but we also need to consider managing the risks that are there in this new channel,” Jiya said.
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