Eagle-eyed pension fund investment and transparency with nationalistic approach

IF asked, as a salaried Tanzanian, paying to obligatory pension and saving for retirement through pension contribution, what world would you want to retire into?

Most would, undoubtedly state that they want to retire and receive pension without hiccups. This indirectly suggests, salaried people who are now making contribution want pension funds to invest rationally to generate returns.

Reading such peoples mind, I wouldn’t desire to conclude that pension fund executives are riding a horse race as far as performance and sensible project assortment is concerned or engage in a race over who has the best moral standard in identifying less-risky projects, however, to focus my assessments on how best pension funds can be utilized, controlled, invest rationally, and in the end see their established obligations being met.

Anecdotal survey conceded as part of an attempt to better understanding pension funds and kind of investment handpicked, suggest that there is a call for greater disclosure on investment in order retirees to have assurance when their time to retire i.e. voluntary of compulsory age come, retired persons are self-confident of their pension disbursement.

A bulk of the senior citizen who reacted to my assessment, are of the view that pension funds should, in general, be more transparent and more strict in their investment strategies and should be ready to disclose more-than about the way that they invest.

Widely held opinion, think that pension funds should make information about the segments they invest more accessible and straightforwardly to contributors if possible employing mobile text modus operandi.

Daily news dated 12th February 2020, carried an interesting title at the international section pg. 15, that prompted my thoughts about our pension funds and the way investment are selected and sanctioned and importantly constraints that might affect pension funds mainly with regard to; one value for money nest egg projects.

Two firm project choices and three, monitoring which as full-package influence execution of selected investments and, in the end, on retirement earnings.

I might be wrong, but I am made to believe that the role of pension funds in safeguarding the future of their members through growing and securing their retirement savings is well known, but in my view, there is relative deficiency of research that could provide contributors with a chance for a richer understanding of the way pension funds invest.

While the story about what it might take to engage pension funds to finance the SDGs as reported cling to on echoing in my thinking and subsequent call on font page (see daily news 12th 02 2020), where the Head of State want loose end tied, marshalling directives for responsible authorities to address what the Head of State termed as insupportable deals that involved among many costs to construct a two kilometres tarmac road at unthinkable ‘cost deal’ not done anywhere in the world, prompted my thinking about kind of investment and value for money.

My assessment on pension funds and type of investment designated signals that for too long, the role of pension structures in responding to the longterm needs of our economy, our society and our environment has been misconstrued because of understanding gap.

Ventures undertaken by pension funds is not just about mitigating risk and maximising returns, but also about creating prospects.

It is not my goal to deep dive on where Tanzanian working population pension fund contributions are invested or intending to dig down on project by this time handpicked on our behalf, but instead to think judgmentally about Tanzania’s pension industry and whether the kind of investment funded guarantee solid long-term return that wouldn’t seek government bail to pay retirees.

As we ponder what it take to engage pension funds to finance designated project(s) it is imperative to remember pension contributions entail to invest money into asset classes sanctioned and using basic judgment a combination of asset allocation skills, risk analysis, assessment and timing to determine the best classes of assets in which pension contribution is invested in is critical.

Many of us accept a few, as pension providers don’t have trace or understand on which assets classes our contribution is engaged. Cognizant of this knowledge could help contributors understand mechanisms that lead to their repayment.

There are various assets classes, but for illustrative and educative purposes, mention a few that include; domestic ordinary shares, treasury bills, state government securities, local market securities, real estate properties, infrastructure, cash and other assets etc.

The public pension funds in my view are entrusted with the life savings of millions of Tanzanians and as current and future retirees there is a need to see pension funds being invested in good assets strategically. It is well known fact that in many governments including those in our region have always seen pension funds as would-be sources of development finance.

Appeals to use pension reserves to fund jobcreating industries or strategic enterprises are common. What I know in mobilising funds for investment is that by making it easier to invest in well thought through assets, some briefly hinted earlier, both the country and pension funds, which are struggling in a low-yield environment, will be able to generate good return.

In my view, pension funds are natural investors but when misused can be overwhelming. Subsequent the wellknown financial crisis, cashstrapped nations around the world were besieged to invest in energy projects, water infrastructure, transportation networks and social projects that are vital for economic growth that form part of the SDGs.

In the pension funds and investment literature is being estimated that 57 trillion US dollars will be required worldwide by 2030 to finance infrastructure projects.

Tanzania like any other nations and coming to terms with sanctioned Public Service Social Security Act, 2018 and its Written Laws Miscellaneous Amendment Act, 2018, seeing five pension funds being reduced to two i.e. the National Social Security Fund (NSSF), PPF Pension Fund, Public Service Pension Fund (PSPF), Local Authorities Pension Fund (LAPF), and Government Employees Provident Fund (GEPF), in my view, what is required is more doable projects to invest in that embraces nationalism, not more restructurings.

Personally I don’t see that there is a need for more farreaching restructuring to get more from pension funds. What is desirable in my view is more investible projects that have moderate returns and moderate risk in line with global trade’s project appetite.

One of the biggest issues institutional investors face in our region and that could be applicable to Tanzania, is firm understanding and managing complexity in projects financed. Operating projects in today businesses environment involves addressing multiple areas of complexity that create layers of difficulty across the industry, across the entire value chain and threaten companies’ profits and growth.

Overseeing multiple operations across different social, cultural and business environments and dealing with party-political and fiscal policy and at the sometime meeting increasingly tough environmental and safety regulations and recruiting and retaining a skilled workforce while keeping up with advancements in technology and earmarking funds for new projects will continue to be a tall order for pension funds.

These difficulties will remain a barrier to successful growth of pension fund ventures and the level of complexity will only increase if shoddy investments are financed without critical analysis on the feasible future of such project’s return.

Economists have allocated considerable energies and efforts in understanding what happen when resources can be and have been invested by firms, and by governments with or without nationalism at heart.

What these economists suggest is that without nationalistic in everything we do or engage on behalf of Tanzanians, especially when entrusted with public offices, might be problematic and more difficult to attain desired national goals.

So the question for those trusted to manage and invest on behalf or to advise on and to select investments, or to identify and enter into agreement with third part to invest the pensions funds on future retirees is: how do we embrace nationalism when seeing investing people contribution in a way that will deliver appropriate returns, aligns with members’ values and supports a positive future of our nation?

FROM the beginning of time to present days, singers, ...

Author: Dr Hilderbrand Shayo

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