By Own Correspondent
TOP economist, Doctor Prosper Chitambara said the decision by pension funds to hedge against future uncertainties by purchasing gold coins for value safekeeping.
He made the remarks following the revelations by the Insurance and Pension Commission (IPEC) to the effect that pension funds spent ZW$2,29 billion on Gold Coins within a short space of just six months bearing testimony to the value which locals are placing on the instrument.
The Reserve Bank of Zimbabwe (RBZ) introduced the bullion coins also known as the Mosi oa Tunya coins in a bid to create an alternative investment strategy to spend the ZW$.
The measure prompted locals to desist from the practice of chasing after the US$ as a store of value which in turn led to exchange rate depreciation due to supply- demand dynamics and also triggered unsustainable inflation levels.
IPEC data released this week shows that the country’s pension industry has fallen the bullion as an avenue to invest their local currency earnings largely generated from workers contributions.
“As at 31 December 2022, the industry had acquired 1,762 bullion coins of varying denominations with a value of ZW$2, 29 billion up from the initial investment of ZW$170 million since their introduction in June 2022,” said IPEC.
The strategy has not only served as a hedge against inflation, but also paid dividends with the sector cashing in from the current global appreciation in the value of gold.
“The coins were acquired at an aggregated cost of ZW$1,9 billion and appreciated in value as a result of increases in the price of gold on the international market,” the insurance and pensions regulator said.
Commenting on the uptake of the bullion by the pensions sector, economist Chitambara said the approach will go a long way to shield pensioners from market uncertainties.
“Gold coins have been accorded a prescribed asset status which means that pension funds have to invest a certain percentage into these gold coins. I think it’s a good investment in that they provide an opportunity to diversify the pension funds investment portfolio.
“We have also recently seen that the value of gold has tended to increase over time making it a good way of storing value especially for pension funds. There has also been depreciation of the US$ prompting investors the world over to seek recourse in the bullion which does not only store value but also appreciates making it a good alternative,” he said.