Government casts doubt over more pensions pay-outs

Bulk of the loss irretrievable…Chinamasa hints more pay-outs unlikely

Martin Kadzere
The Zimbabwean government has cast doubts on the possibility of full compensation for insurance policy holders and pensioners who suffered the loss of value due to hyper-inflation, hinting that the bulk of the losses may not be recovered.

The government commissioned an investigation in 2015 into how pensions and insurance benefits were paid out following a big outcry from pensioners and policy holders.

Pension fund values were badly eroded due to devastating hyperinflation, which soared to a record 500 billion percent in 2008, according to the International Monetary Fund.

The government wiped out the hyperinflation figures in 2009 when it abandoned the use of the Zimbabwe dollar for a basket of foreign currencies, but mostly dominated by the U.S. dollar, leading to what is now generally called dollarisation.

The commission of inquiry confirmed a “huge” loss of value to policy holders and pensioners and recommended compensation for the loss suffered. It established that while policyholders lost value during the conversion period, they had also lost value throughout the investigation period between 1996 and 2014.

Finance and Economic Planning Minister Patrick Chinamasa told Business Weekly the Insurance and Pension Commission has started the process of implementing the recommendations of an inquiry into the issue but was not optimistic they would be massive pay-outs.

Thousands of insurance policy holders and pensioners have been hoping and holding out for additional pay-outs after receiving insignificant amounts as low as $0,08c after several years of working. Some of them got zero values owing to lack of benefit inflation-indexation and currency de-basing.

The loss of value has left many people poor who were expecting a remedy from the government.

“What is retrievable is the issue,” Chinamasa said. “But in my view we might end up all disappointed.”

“Some of the loss is irrecoverable. Any loss that took place as a result of the hyperinflation; for instance if the investment was money in the bank is gone. So what they are going to do is basically to see what assets those companies still have especially real estate as well as assets on the stock exchange. But it is a bit complicated.”

In its report, the commission said high levels of inflation, currency debasing, dollarization conversion process and de-monetisation were the main reasons of the loss of value.

The commission noted the loss that resulted from inflation, currency de-basing and exchange rate used for de-monetisation contributed 43 percent of the loss, regulatory flaws; 21 percent while poor industry practices contributed 36 percent.

Minister Chinamasa said the government, guided by some recommendations in the report would work to improve good governance in the insurance and pensions industry.

“While I know it may not be easy to recover–through the amendments–we will be able to put the industry and pension industry back on its feet in term of a proper template,” he said.