adminMartin Tarusenga
The past few years have seen significant media reporting on gross mismanagement of pension and insurance funds.
This is against a background where huge amounts have been pumped into these funds over the years, in form of pension fund contributions and insurance policy premiums. Annual reports by the former Registrar of Pension and Provident Funds, and by IPEC show a fall in value of pension fund assets under the administration of insurance companies, as regulated by the former Registrar, now known as IPEC, from $3 billion in 1992, to just below $800 million in 2009.
The latter $800 million (inclusive of insurance funds) for 2009, is less than 30 percent of the 1992 fund value, and is the total value of funds held by the ten life insurers operational in Zimbabwe at year end in 2009.
This fall in the value of pension funds in Zimbabwe, should be compared to the general world-wide trend of a continued increase in the value of pension fund assets averaging at least 6 percent per annum since 2003 (Towers Watson Global Pension Assets Studies 2013 & 2014).
Pension fund membership of these funds in Zimbabwe, increased to a peak from 720,000 members in 1987, to 1 200 000 members in 2001.
The respective schemes of these members increased from 1,500 schemes to 2,700 schemes over the same period.
The contributions that these members made to the schemes averaged $230 million per annum, for the period from 1987 to 1998.
With well over 80 percent of these members, well below retirement age, and with benefits due to members on withdrawal or on death before retirement being insignificant, well over 80 percent of the $230 million in annual pension contributions, are reasonably expected to have gone into boosting the $3 billion asset base, read as at 1992.
The indicative industry size described above from the 1980s only highlights group occupational pension schemes as regulated by IPEC.
It leaves the various other pillars of social security available in Zimbabwe, as governed by various Acts of Parliament, notably the National Social Security Authority pension schemes.
The table below provides an insight into social security provision in Zimbabwe and the Acts of Parliament that governs them.
Current governing Statute – Governed social security Pillar:
Pension and Provident Fund Act
Insurance Act
Insurance and Pension Commission (IPEC) Act
Trust Laws
Other Acts eg Local Authorities Employees (Pension Schemes) Act Chapter 29.09 Employer sponsored Group occupational pension scheme contracts: Insured Schemes
Self Administered Schemes :
Mining Industry Pension Fund (MIPF)
Local Authorities Pension Fund (LAPF)
Construction Industry Pension Fund (CIPF)
Clothing Industry Pension Fund (CIPF)
Catering Industry Pension Fund (CIPF)
ZESA Pension Fund
National Railways of Zimbabwe Pension Fund (NRZPF)
State Services (Pensions) Act Chapter 16.06 – Public Service Pension Scheme contracts
National Social Security Authority (NSSA) – Supplementary pension provision contracts for employees of the Public and Formal Sectors, under the National Social Security Authority (NSSA) Pension and Other Benefits Scheme
– Workers Compensation & Accident and Prevention Scheme
Insurance Act and the IPEC Act – Individual/group insurance policy contracts
Insurance Act
Insurance and Pension Commission (IPEC) Act
Trust Laws – Reinsurance of insurance company insurance policy contracts
Apart from the indicative sizes, reports also suggest huge amounts leaking from these funds over the years through various tactics including over-charging by insurance companies for services rendered, misappropriation to shareholder funds, demutualisation, mismanagement including accounting understatements and outright fraud.
Insurance companies have been rocked by crises, with First Mutual series of crises dating back in the early 1990s, when the then chief executive was implicated in breaking exchange controls to import a luxury company car, followed by the late 1990s investment scandals and externalisations, then demutualisation problems, then Timba Afre scandal leading to the handover to current management under unclear circumstances involving NSSA.
Then the over-charging of huge pay pecks to insurance company staff, including large luxury company cars and school fees allowances.
The paltry payouts to pensioners and insurance policyholders that they are now unhappy with stand out in stark contrast to the conspicuous spending by insurance company management, and suggest that service providers benefit much more than the owners of the funds – pensioners.
And yet very little has been done about this whistle-blown huge white-collar crime. The white-collar crime may therefore be current, on-going, and at the continued loss of life savings by pensioners.
But perhaps more secondarily to pensioners, but primarily to the nation as a whole, it defeats Finance Minister’s grand objective of resuscitating financial services that the economy so needs, through the initiative to institute a Commission of Inquiry.
Readers will be spared another exposition of how an economy cannot grow without a “deepened” financial services, pension and insurance services included – save to mention that the pension and insurance industries in Zimbabwe would have been worth upwards of about $12 billion, taking into account several pension/insurance fund fundamentals, not least annual contributions raked in over the years, the paltry benefit payouts, the asset base back in the early 1990s, and conservative growth rates shown at international level.
That says a lot about how much is being misappropriated, and/or not accounted for by insurance companies and related service providers.
The continued apparent assault of pension and insurance funds by insurance companies, with no immediate urgent action to curb this misappropriation of the funds, just presents pension and insurance services in Zimbabwe, financial services overall, as big black holes.
Immediate urgent action needs to be taken to recover funds unaccounted for.
It must not exclude putting service provider management on forced leave without benefits, this is to prevent obstructing the course of justice as they have evidently been doing; reviewing laws to prohibit appeals laws to defer (‘stay’) inferior court judgement executions for pension/insurance policy benefits disputes (just like in labour and child maintenance disputes); increasing the number of High Courts, and Supreme Courts; remunerating judges based predominantly on the number of cases, and case complexity, successfully completed by the judge in the courts; providing that most of legal counsel fees be paid once a case has succeeded in the courts; urgently reviewing pension and insurance legislation to impose stiff deterrent penalties on insurance company management and the company overall, among other reviews.
Martin Tarusenga is General Manager of Zimbabwe Pensions & Insurance Rights.
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Opinions expressed herein are those of the author and do not represent those of the organisations that the author represent.
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