With the country’s pension funds rapidly increasing, corporate and financial strategist James Kamwachale Khomba has advised government to put the pool of resources into long term profitable investments.
Since the new Pension Act enactment in 2011, Malawi’s pension industry has been among the world’s fastest-growing following the sharp growth in pension savings and assets, growing at an average of 34 percent annually.
According to figures from the Reserve Bank of Malawi (RBM), the sector registered significant growth last year recording a positive return of 62.1 percent compared to a negative return of 8.5 percent in 2016.
Khomba said in an interview on Wednesday pension funds presents great opportunities for increased savings and investments to boost productive sectors; hence, the need for government to take charge of its financial management.
He said pension funds are supposed to be well managed by a designated office that is supposed to take care of such issues but the Malawi case seems different.
“We know that annual pension funds [are idle]. This is the kind of attitude we are failing to understand. We have so many ways in which pension funds can be utilised such as in Treasury Bills [TBs], Unit Trust and even in the private sector directly. This is the kind of management that must be enhanced if we are at all serious about utilising these recourses,” he said.
He said the government needs to manage these resources, saying the billions that the country is currently sitting on in form of pensions could multiply if handled correctly.
“We encourage the government to take a proactive action in as far as financial management is concerned about investing in portfolios that give us the best returns. With this in place, we can make more billions than what we currently have and use this for other meaningful uses,” he said.
Meanwhile, the pensions and gratuities budget line has been allocated K80.6 billion representing a six percent increase from the 2017/18 National Budget likely outturn figure of K76.1 billion.
Of the K80.6 billion, K11.4 billion is a contribution to the National Pension Scheme for newly recruited staff and officers of 35 years and below, according to the 2018/19 National Budget.
But Minister of Finance Economic Planning and Development Goodall Gondwe said in an interview government along with the pensions trust is currently looking into proper investment avenues to invest the money in.
“We are aware that there are indeed some idle funds in the economy but the ministry does not make the decisions on its own. Government is just part of the existing trust that looks into such matters. For now, I am aware the trust is looking into ventures in which this money can go into,” he said.