By Kingsley Jassi:
The possibility of investing pension funds in offshore destinations may soon become a reality as the Reserve Bank of Malawi (RBM) explores ways to allow outbound investment flows.
RBM Governor McDonald Mafuta Mwale revealed, last week, that the central bank was considering opening up regulations for offshore pension fund investments, though emphasising that a cautious approach would be taken.
The governor indicated that the central bank was examining how pensioners could maintain the value of their savings amid high inflation rates that have been eroding their purchasing power.
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“Offshore investments is an area we are looking into because it can help to increase returns on investment but it’s still under discussion [in terms of] how best we can approach it, considering the current issues in the economy,” Mwale said.
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Several industry players have expressed frustration with the restrictive policies that limit investment returns.
NBM Pension Administration Limited is on record to have lamented such restrictions, stating that they prevent access to opportunities that could maximise returns for pensioners and generate foreign exchange.
Some experts suggest offshore investments could help Malawi generate foreign exchange through profit remittances, as the country has minimal outbound investment.
An investment analysis by the United States Department of State cites this restriction as a limiting factor for Malawi’s outbound investment, noting: “The Pension Act and accompanying regulations prohibit domestic investors from investing pension funds or umbrella funds in foreign schemes.”
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Economic expert Lesley Mkandawire believes Malawian firms should be encouraged to invest outside the country with proper incentives but pointed out that current forex regulations could be discouraging because they make remittances costly upon receipt.
“If one has to lose part of their foreign proceeds, then it’s a discouragement. We need to check how our neighbours are doing it because in Zambia, for example, one gets their remittances in full unlike here,” Mkandawire said.
The central bank also indicated it was working with the pension industry to redirect investments toward growth areas of the economy, noting that a significant portion of resources were being invested in non-productive sectors.
As of last year, listed equity investments accounted for 56.4 percent of pension funds while government securities represented 24.7 percent, with the remainder in unlisted investments across various industries.
