Pension funds should respond to new normal: ZAPF
HARARE, Pensions fund investments should respond to the new normal by diversifying into E –commerce while also lowering rentals to retain higher occupancy ratios, Insurance24 has learnt.
This comes as the impact of the lockdown on tenants’ businesses is set to have an adverse effect on rental income streams and spike the level of voids in properties in the short to medium term.
Given that the pensions industry controls a significant portion of Zimbabwe’s commercial real estate, Zimbabwe Association of Pension Funds (ZAPF) Director General Sandra Musevenzo this week told a journalist virtual mentorship programme that already tenants were seeking rent free periods and major rent discounts.
“Pension Funds should lower rentals to ensure that buildings retain higher occupancy ratios. Pension funds’ investments should respond to the new norms resulting from covid-19 , that is, lessen demand for office spaces.
We need to diversify from owning large office buildings and shopping malls and perhaps go more into warehouses as e-commerce is the new norm (more online shopping so bigger demand for storage spaces).
The other opportunity is to reinvest into other property sectors like health (hospitals, clinics),” she said.
Musevenzo added that the effects of this pandemic, compounded by the general economic slowdown, will negatively affect investment returns and ultimately the funding level of pension funds.
The stock exchange is seen suffering if the COVID19 effects continue weighing on economic output. “Listed businesses will underperform, returns from money market investments and fixed income securities may lag inflation even further.
As a result, asset values may fall resulting in actuarial deficits etc. All this will directly and indirectly affect the business continuity of pension funds, compromise payment of member benefits and ultimately threaten them as going concerns,” she said.
Pension funds are also seen being incapacitated to participate in infrastructure developments and other projects of national importance, including sufficiently partaking in prescribed assets, as they switch to survival mode.
Whilst the level of future impact the pandemic on the pensions industry is not known for certain, Musevenzo said some negative consequences in the short to medium term were anticipated.