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EZULWINI – Swaziland hopes to inject up to E10 billion into the economy through investments by retirement funds and insurance companies in the short term.

Financial Services Regulatory Authority (FSRA) Chief Executive Officer Sandile Dlamini explained that this would be made possible through the proposed amendment of investment schedules from 30 to 50 per cent in the Insurance Act and Retirement Funds Act of 2005, which currently awaits to be gazetted.  

Dlamini said they were strongly supportive of government’s stance to increase investment obligations for retirement funds, and insurance companies because most of them tend to invest monies invested by locals in foreign countries and off-shore, yet the money should in essence support development of the kingdom.

He said as at December 2017, total assets held by retirement funds and insurance companies were at a whopping E32 billion, with less than E5 billion invested locally.

This effectively means should the proposed amendment see light of day, local retirement funds and insurance companies could be compelled to invest at least E15 billion in Swaziland.

“The bulk of money held by retirement funds and insurance companies is invested outside the country.
‘‘Through the proposed amendment, which is part of the developmental agenda, we seek to ensure that these funds and insurance providers look at Swaziland as an investment destination,” Dlamini justified during the retirement funds breakfast seminar hosted by Fiduciary Trusteeship Services (FTS) at Royal Swazi Sun Hotel yesterday.

Retirement Funds Advisor Chris Gama said the move to increase investment schedules by retirement funds and insurance companies was a good opportunity to develop the Swazi economy.
He said the amendment would help further reduce the minimal vulnerability to external shocks in foreign markets, such as the JSE, where retirement funds assets were heavily invested in equity instruments.

“If insurance firms and retirement funds invest up to 50 per cent of their assets in-country, it means the people who are making contributions will be investing in their own future, which is a good thing to do for an economy that seeks to grow and compete globally,” said Gama. 

He further said investing more into the kingdom presented an opportunity to diversify investment.
Manager Alternative Investments at the Government Institutions Pension Fund of Namibia Sara Enzo also shared similar sentiments.
She said the proposed amendment would greatly improve the Swazi economy through bolstering infrastructural, agricultural and educational development, among others.

She mentioned that just like Swaziland, Namibia also intend to ensure that the E110 billion assets held by insurance and retirement funds, help improve their economy for the better, as opposed to advancing foreign economies.
Enzo said over the years, they had managed to increase domestic investment by insurance companies and retirement funds from only 10 per cent in 1992 to 45 per cent as at January 2018.

“If the trend globally is to utilise local monies to spur development, then we should do the same in our own economies,” said Enzo.     
The Central Bank of Swaziland (CBS) reported that retirement funds assets were heavily invested in equity instruments with 68 per cent through the Johannesburg Stock Exchange (JSE).

This was noted to be unlike in the local market, where the majority of funds are invested in the money markets and in debt maturing within 12 months (31 per cent).

The CBS financial stability report stated that overall, this showed that pension funds’ preferred investment instruments were equity (51 per cent), debt maturing after 12 months (19 per cent), and the money market and debt maturing within 12 months (13 per cent).
It should be mentioned that pension funds are categorised as systemically important (Non Bank Financial Institutions in (NBFIs) in Swaziland.

CBS said the retirement funds industry played a significant role in the country’s financial system, as measured by the ratio of their assets to Growth Domestic Product (GDP), which stood at 48.2 percent as at 31 December 2016 - the highest when compared to all the other sectors within the financial system.

It was explained that the retirement funds industry comprises 70 stand-alone funds, nine umbrella funds with 127 participating employers and five benefit administrators.
“The industry is dominated by the Public Service Pensions Fund, which constitutes 76.9 percent of total assets, followed by the Swaziland National Provident Fund with 7.7 per cent (E2 billion),” said CBS.

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