A LOCAL construction firm, Firmcare Construction, has inked a deal with Baker Tilly Capital Zimbabwe (Trustees), which will see the two tapping into pension savings to bolster growth in the country’s real estate sector.
Pension savings are managed by specially established institutions called pension funds.
Details of the transaction were still scant this week, but officials at Firmcare indicated it would involve the issuance of a bond bearing a 9,5% annual yield for investors.
Moves towards activating the deal were recently set in motion after the parties submitted a proposal to the Zimbabwe Association of Pension Funds.
Mathew Jubenkanda, business development and marketing consultant at Firmcare, told businessdigest that their plan was to address funding gaps in the country’s real estate sector by channelling liquidity held by pension funds to bankroll projects.
“This is attained by picking real estate assets showing early signs of distress (diminishing capacity to provide liquidity to owners), re-design the asset and (invest in) residential or commercial property,” Jubenkanda said.
He said the bond will be indexed in Firmcare United States dollars.
“This investment strategy is attractive to pension funds that are in distress as they can invest in cash or in species for a 12 to 24 months horizon in which they can unlock liquidity and interest income from the bond,” Jubenkanda said.
- Firms line up real estate sector bond
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The deal comes amid growing calls by experts for investors to tap into the alternative investments with potentially high returns. Alternative investments are opportunities outside traditional options like stocks.
These may include a wide range of assets, such as real estate, commodities, private equity, hedge funds, art, collectables or cryptocurrencies.
Pension funds are strategically placed to address some of the economy funding problems by channelling liquidity from savings into areas lacking capital.
The main objective of pension funds is to provide financial security to members and beneficiaries in the event of retirement, death or invalidity. They control large pools of resources, which can be reinvested and earn returns.
However, most of these institutions are facing serious challenges stemming out of depleted contributions following massive capital flight and job losses.
Experts say with the right governance, regulation and instruments to assess and manage risks associated with long-term projects, pension funds can take on a greater role in transforming the country’s infrastructure landscape.
Challenges facing pension funds date back to the pre-dollarisation era when hyperinflation made it difficult to invest. Some of them have been accused of using members’ contributions to sustain the lavish lifestyles of their executives with very little earmarked for members.
