Pension funds must collaborate more on investment projects: ZAPF
Prosper Ndlovu, [email protected]
PENSION funds in Zimbabwe could achieve more meaningful business gains in markets that bring strategic value to their funds and create wealth for the pensioner through strategic partnerships, collaboration and syndication, Zimbabwe Association of Pension Funds (ZAPF) director-general, Mrs Sandra Musevenzo, has said.
Instead of operating as silos and seeking to out-compete each other, pension funds could opt for more syndication, which entails transfer of something for control or management by a group of individuals or organisations.
By embracing collaboration on key projects development, players in the insurance sector could unlock more economic value for win-win benefits through sharing ownership and decision-making responsibilities, said Mrs Musevenzo.
Responding to questions from the Chronicle, she said case studies have shown high impact of collaboration by insurance players.
In Zimbabwe, projects done through syndication include the US$300 million Beitbridge Border Post Modernisation, “Smart Surburb Land Development” models where hectares of land are being developed into modern infrastructure, Centragrid project through Old Mutual in generating 25MW of renewable energy as well as the Zimcampus student accommodation project for the National University of Science and Technology (Nust) in Bulawayo among others.
The collaborative model allows for risk sharing, access to diverse expertise and increased funding capacity, said Mrs Musevenzo.
“Pension Funds can achieve meaningful scale in markets that bring strategic value to the funds and create wealth for the pensioner through strategic partnerships, collaboration and syndication,” she said.
“Syndication is commonly used in large-scale infrastructure projects, real estate development and venture capital investments. The Government Employees Pension Fund (GEPF’s) investment in the R12 billion Mokoka Development in Johannesburg is another good example.
“This is one of the largest investments in the fund’s history. Mokoka is situated in the heart of Johannesburg, near the OR Tambo International Airport and the R24 highway.”
Mrs Musevenzo said the mega-investment was a mixed-use project that includes office space, retail outlets, residential units, hotels and conference centres.
“The BBC Pension Fund’s investment in the £1,2 billion London Regeneration Fund is a significant example of syndication in the UK,” she added.
“Here are some key details. The investment amount of £200 million (part of the total £1,2 billion fund) with fund focus on regeneration and development of London’s urban areas. The investment strategy is a mixed-use development, including residential, commercial and retail spaces.”
According to Mrs Musevenzo, embracing a collaborative approach and syndication comes with numerous business benefits.
She however, said disadvantages can emanate from complexities in decision-making and co-ordination, conflicting interests and goals, among syndicate members, risk of disputes and litigation while shared control and ownership can lead to diminished authority.
Mrs Musevenzo also noted the potential for unequal contribution and distribution of benefits and that in some scenarios exit strategies could be challenging to execute.
She however, said best practices could be applied to address the disadvantages, emphasising the need for players to embrace clear communication and defined roles, establishing strong governance structure, defining clear goals, objectives and exit strategies.
Businesses will also be required to conduct thorough due diligence and risk assessments, foster a collaborative and transparent relationship among syndicate members.
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