The Treasury has granted Prescribed Asset (PA) status to seven major projects, two of which are denominated in United States dollars.
This means that institutions such as insurance companies and pension funds can choose to invest in one or more of these assets to fulfill their legal obligations.
These entities are required by law to hold part of their investments in prescribed assets.
The extension of prescribed asset status beyond bonds and other public instruments to “alternative projects” has been necessitated by industry calls for investment assets that can hedge against inflation and have a greater socio-economic impact.
The list includes: First Mutual’s $ 200 million Micro Finance issue, whose focus is working capital for on-lending to clients in key sectors of the economy.
The issue has term options of 6.12 or 24 months, and a semi-variable interest rate fluctuating between 30% and 60% with a 1% for each 10% increase or decrease in the price index. consumption (CPI).
Then there is the $ 350 million Silo Food Industry issue aimed at the manufacturing sector as working capital for the processing of basic food products. The issue has a term of 180 days and an interest of 35 per year.
Sahwira Agriculture is seeking to raise US $ 20 million for capital spending and working capital financing for crop production. The issue has a duration of 270 days and offers an interest of 8% per annum.
After fully subscribing to its initial $ 1 billion issue, Mangwana Opportunities Private Limited is seeking to raise an additional $ 1.5 billion over the previous amount to bring the total issue size to $ 2.5 billion by through equity. The increase aims to finance the productive sectors of the economy namely agriculture, mining and tourism.
The Murombedzi Solar Park, which seeks to raise US $ 8 million to finance the Murombedzi solar power project, has been granted prescribed asset status. The issue has a term of 10 years, attracting an interest of 10% per annum payable semi-annually (indexed to the US dollar).
CICADA is considering an increase of 300 million dollars to finance the contractual winter agricultural season 2021. It has a duration of 270 days. Interest is 30 percent per annum with a differential rate of +2 percent annual coupon per 6 percent increase in the price of the commodity from the set base price to the price obtained at the point of sale.
AMA agro-bills from AFC (formerly Agribank) to the tune of $ 100 million – whose objective is to finance the production of horticultural and oilseed products for the 2020/2021 agricultural season – have been granted prescribed asset status . Agro-bills have a term of 360 days, with negotiable interest, on a private placement basis within a range of 20 percent to 35 percent per annum (indexed to the US dollar).
The increase in investment in these prescribed assets will mark a significant departure from the long-standing strategy of local pension funds and insurance companies of investing in stocks and publicly traded property.
However, levels of compliance with regulatory asset requirements remained low in the insurance and pension industry.
With regard to specific sub-sectors, the Insurance and Pensions Commission (IPEC), in its reports for the first quarter of 2021, pointed out that all funeral insurers do not meet the prescribed minimum asset ratio of 10%, as stipulated by statutory instrument 206 of 2019.
“The investments in prescribed assets were insignificant as they only represented 0.11% of the total asset portfolio. The total amount invested in investments in prescribed assets was $ 1.82 million against a minimum amount of $ 172.17 million for the sector to comply with the Minimum Prescribed Asset Threshold of 10 percent, “he said. declared the regulator.
Of the eight short-term reinsurers, three met the prescribed minimum asset ratio of 10% as of March 31, 2021.
Nonetheless, statistics showed that investments by short-term insurers in assets prescribed by short-term reinsurers rose 13.89%, from $ 1.08 billion at the end of 2020 to $ 1.23 billion. dollars at the end of the first trimester.
The levels of compliance of the pension fund industry with prescribed assets remain very low despite an increase in holdings of prescribed assets during the period, with the latest figures showing that the value of prescribed assets increased in nominal terms by 135.81 per cent. cent to 5.4 billion dollars, from 2.29 billion in the previous comparable period.
Pension fund compliance stood at 3.05 percent against the regulatory minimum of 20 percent for the period under review.
For the life insurance industry, IPEC reported an average prescribed asset compliance ratio for life insurers and life reinsurers of 0.31% and 9.06% respectively, against the ratio of assets prescribed minimum required of 15%.
During the first quarter, the regulator said all direct life insurance companies and three in four life reinsurance companies were not meeting the prescribed minimum asset ratio of 15%. – weekly ebusiness.