By Steven Godfrey Mkweteza
Reserve Bank of Malawi (RBM) says Malawi is making strides in pension funds management.
Governor for the country’s sole financial institution regulator Dalitso Kabambe said since the passing of the Pensions Act in 2011, the number of people with pensions has increased from 102,505 in 2011 to 422,993 as at 31st March 2019.
Kabambe said the pension funds administrators at the symposium which was held in Blantyre on Tuesday.
Kabambe said annual contributions collected have remarkably increased from a meagre K8.6 billion in 2011 to K98.3 billion in 2018 with a scope for further increases with more compliance.
“Pension assets have increased from K74.8 billion in 2011 to K757.4 billion in March 2019. At this level, pension assets are now at around 14.4 percent of the GDP and are growing rapidly at 30% annually. It is projected that by the end of 2019, Pension Assets will be at K894 billion and by the end of 2020, they will increase further to K1.1 trillion, “said Kabambe.
However, Kabambe said Contrary to what is obtaining in the region and beyond, in Malawi, 45 percent of these funds have been invested in shares listed on the Malawi Stock Exchange.
He said 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,” said Kabambe.
” At the same time, we have a situation where on one hand Pension Funds are growing rapidly while on the other hand, the Stock Market is not growing fast enough and Government debt is scheduled to be reduced, meaning that better ways ought to be found for redirecting Pension Funds towards long term investments such as infrastructure”.
According to Kabambe said 13 percent of funds are funding infrastructure developments in the country
In a separate interview, President for the life and pensions association of Malawi (LIPAM) Stain Singo said the achievement was minimal, looking at the numbers of the companies that are not remitting funds.
He said despite instituting stiff measures to punish those companies that are not remitting pensions of their employees, the trend still continues.
“We have so many cases whereby employees complain to us that they were been deducted person in their salaries but the funds were not reaching us. Malawi could have been accumulating alot of funds if these companies remmit to their pension funds,” he said.
In Malawi, Old Mutual and Nico holdings are the main pension administrators.
According to statistics compiled by the OECD, regionally, the accumulation of pension assets as a percentage of GDP is comparable to Kenya and Lesotho while internationally, it is comparable to countries such as Spain, Norway, France and Portugal.
The OECD indicates that alternative investments have gained ground the 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. And more specifically, in Tanzania and Zambia, land and buildings alone constituted 24 percent and 21 percent, respectively.
