IN most countries, pension funds are the ultimate symbols of financial patience, long-term capital steered cautiously to protect the dignity of retirement. In Zimbabwe, however, a growing concentration of pension savings in premium real estate raises uncomfortable questions about whether prudence has quietly given way to speculation dressed up as strategy.
By Brighton Musonza
At issue is not simply asset allocation preference, but valuation discipline, governance standards and fiduciary responsibility. Zimbabwean pension funds, custodians of the lifetime savings of workers across sectors, have become some of the most aggressive buyers of commercial and residential property. In principle, this is defensible. In practice, it may be laying the foundations for one of the country’s next financial crises.
The flight to “hard assets”
The shift into property did not happen in a vacuum. Zimbabwe’s history of currency instability, hyperinflation and financial repression has left deep institutional trauma. Fixed-income instruments have repeatedly been wiped out in real terms. Equity markets remain shallow and volatile. Offshore diversification is heavily restricted.
In such an environment, trustees and asset managers have embraced real estate as a perceived store of value, a tangible hedge against monetary disorder. Office parks, shopping malls and gated residential developments have become the new “safe” assets.
But safety in investing is not about how solid an asset looks. It is about the price paid relative to the cash flows it can realistically generate. And here the picture becomes troubling.
A hypothetical but realistic asset allocation for a large Zimbabwean pension fund might now look like this:
| Asset Class | Typical Prudent Range | Hypothetical Zimbabwe Allocation |
|---|---|---|
| Listed Equities | 30–50% | 15–25% |
| Fixed Income | 20–40% | 5–15% |
| Offshore Assets | 10–30% | 0–5% |
| Property (Direct & Indirect) | 10–20% | 45–65% |
| Alternatives/Private Assets | 5–15% | 5–10% |
An allocation where more than half of member savings sit in property would be considered highly concentrated in most markets. In Zimbabwe, it is increasingly normal.
Valuations detached from economic gravity
Market participants increasingly whisper that some property transactions involving pension funds are being concluded at valuations far removed from underlying demand conditions, in certain cases, allegedly two to three times the levels justified by local rental income, occupancy risk and exit liquidity.
These prices are sometimes rationalised by referencing replacement cost, future growth corridors, or comparisons with South African metropolitan nodes. Yet Zimbabwe’s economic fundamentals tell a different story. Formal sector employment remains constrained, disposable incomes are fragile, and corporate tenants operate in an environment of policy uncertainty and limited access to long-term finance.
A building’s value ultimately rests on the rent it can sustainably earn and the price a future buyer can afford to pay. If those anchors are weak, high valuations become accounting artefacts rather than economic realities.
The quiet danger of mark-to-model
In deep, liquid markets, inflated property valuations are eventually corrected by transaction evidence. Zimbabwe’s market offers no such discipline. Deals are infrequent, pricing is opaque, and independent valuation capacity is thin.
This creates fertile ground for “mark-to-model” accounting, where asset values are derived from internal assumptions rather than observable market trades. Discount rates can be nudged lower, vacancy assumptions softened, and rental escalations made more optimistic. Each adjustment appears technical. Collectively, they can transform a marginal investment into a balance-sheet success story.
The danger is not immediate collapse but slow distortion. Pension fund statements may show steady asset growth, reassuring regulators and members alike. Yet if those values cannot be realised in a genuine sale, the security is illusory.
The quiet danger of mark-to-model
Zimbabwe’s property market is illiquid. Transactions are infrequent, and pricing data is opaque. This allows funds to rely heavily on mark-to-model rather than mark-to-market valuation.
If only 5–10% of a fund’s property portfolio turns over in a given year, the rest may be valued using internal projections rather than real sale evidence.
A fund might therefore report:
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Annual property portfolio growth: +12%
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Rental cash yield: 4%
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Total reported return: 16%
But if comparable properties in distress sales clear at 30–40% below book value, those paper gains could evaporate overnight.
Liquidity risk in a system that needs cash
Pension liabilities are long-term, but they are not abstract. Retirees need regular, reliable payments. That requires cash flow and, when necessary, the ability to sell assets without catastrophic discounts.
This liquidity mismatch is particularly dangerous in Zimbabwe, where economic shocks can be abrupt and policy shifts sudden. Pension systems built on illiquid assumptions are vulnerable to precisely the sort of volatility the country routinely experiences.
Liquidity risk in a system that needs cash
Pension liabilities are long-term, but benefit payments are continuous. A mature fund may need 3–6% of assets in cash outflows each year to meet retiree obligations.
In liquid portfolios, this can be managed through bond coupons, dividends and selective asset sales. In a property-heavy portfolio:
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Rental flows may be irregular
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Vacancy can spike during downturns
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Asset sales can take 12–36 months, often at steep discounts
If 60% of assets are in property and only 40% are liquid, a modest spike in retirements or economic stress could force funds into distressed sales, crystallising losses that had previously been hidden in valuations.
Governance under strain
The heart of the issue is fiduciary duty. Trustees and asset managers are legally and ethically bound to act in the best interests of pensioners, balancing return objectives with capital preservation and diversification.
When portfolios become heavily concentrated in a single asset class, especially one subject to opaque pricing and political influence, questions of governance inevitably arise. Are investment decisions being driven by rigorous, independent analysis or by relationships with developers, pressure to support “national projects”, or the convenience of assets that appear stable on paper?
If future write-downs erode fund values, legal and regulatory scrutiny will follow. “It was the economy” is unlikely to suffice as a defence if due diligence, valuation independence and risk management prove weak.
Governance under strain
Trustees have a fiduciary obligation to diversify and to ensure that asset pricing reflects economic reality. Internationally, concentration limits often restrict property exposure to 20–30% of total assets precisely because of valuation opacity and liquidity risk.
When exposure rises to double that level, governance risks follow:
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Valuers may face subtle pressure to support prior pricing
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Developers may structure deals attractive to funds but risky to members
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Investment committees may become reliant on a narrow circle of advisers
If large write-downs emerge in future, the legal question will not be whether Zimbabwe faced macroeconomic challenges. It will be whether the trustees exercised reasonable prudence given those known risks.
The illusion of the inflation hedge
Property is often marketed to trustees as an inflation hedge. In Zimbabwe, that argument carries emotional weight. But an asset bought at an inflated price does not magically become prudent because inflation exists.
A hedge protects purchasing power when assets are fairly valued. It does not rescue capital from overpayment. If rental yields are low relative to acquisition cost and capital gains depend on ever-rising paper valuations, the hedge becomes a speculative bet.
Property is frequently described to pension boards as an “inflation hedge”. But a hedge protects value when assets are fairly priced.
If a property generating $400,000 in sustainable annual rent is bought for $12m, the yield is just 3.3%. Even if rents rise with inflation, the starting price may already have destroyed long-term real returns.
Inflation does not rescue overpayment. It merely inflates the narrative.
Systemic implications
The risk extends beyond individual pensioners. Pension funds are among Zimbabwe’s largest pools of domestic institutional capital. If their balance sheets are overstated, the problem becomes systemic.
Overvalued property assets can mask underlying funding gaps, delay necessary reforms and create a false sense of stability in the financial system. When corrections come, they can be sudden and confidence-shaking, particularly in a country where trust in financial institutions has already been tested.
Pension funds are among Zimbabwe’s largest domestic institutional investors. If a significant portion of their balance sheets is overstated, the issue becomes systemic.
Hypothetically, if the sector holds $3bn in assets and 50% is in property, a 30% downward revaluation would erase $450m in member value. That would not only hit retirees — it would weaken confidence in the entire savings and insurance architecture.
In a country with a history of pension erosion through inflation and currency reform, another wealth shock would be economically and politically destabilising.
A need for reform, not retreat
None of this argues that pension funds should abandon property altogether. Real estate can play a legitimate role in long-term portfolios. But discipline is essential.
Stronger independent valuations, more conservative discount rates, transparent disclosure of rental yields and vacancy levels, and clear limits on concentration risk would all improve resilience. Regulators must ensure that reported values reflect economic reality, not optimism.
Most importantly, trustees must remember who ultimately bears the risk. It is not developers, valuers or fund managers. It is the pensioner decades into a career, trusting that today’s contributions will translate into tomorrow’s security.
Zimbabwe’s pension system cannot afford another generation of wealth erosion disguised as prudent investment. Bricks and mortar may look solid. But when bought at the wrong price, they can rest on financial sand.
Property has a legitimate role in long-term portfolios. But discipline must return.
Practical reforms could include:
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Capping property exposure at more conservative thresholds
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Mandatory independent valuations using higher risk-adjusted discount rates
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Disclosure of actual cash rental yields alongside capital values
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Stress testing portfolios against 20–40% valuation declines
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Greater allowance for offshore diversification to reduce domestic concentration
Above all, trustees must remember who bears the ultimate risk. It is not developers, valuers or fund managers. It is the pensioner who worked for 30 years, believing their savings were being protected, not parked in assets whose prices exist mainly on spreadsheets.
Bricks and mortar may look solid. But when bought at the wrong price, they can rest on financial sand, and pension systems built on sand rarely withstand the storm.
Brighton Musonza (MBA, UK), BSc Business Management (UK), Fellowship Institute of Chartered Management (FICM), Associate International Institute of Business Analysis (IIBA), SAP Consultancy.
