Online Reporter
Nelson Gahadza, Harare Bureau
THE Government is working on amendments to Statutory Instrument (SI) 162 of 2023, in a move expected to give impetus to pre-2009 compensation payments for private sector pensioners who lost the value of their savings due to hyperinflation.
Government is now targeting to complete the payouts for the loss of value to pensions within three years. Zimbabwe eventually demonetised the Zimbabwe dollar in 2009, after hyperinflation had rendered the domestic unit of account worthless.
In 2015, the Government established the Justice Smith Commission of Inquiry to investigate the loss of value in insurance policies and pensions due to the conversion of Zimbabwe dollar-denominated benefits to the US dollar-dominated multi-currency system in 2009.
The commission found that policyholders and pension scheme members were indeed prejudiced during the conversion process and recommended compensation.
SI 162 of 2023 established the framework for the compensation payouts, with the Government indicating it has already begun compensating its pensioners.
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube, in a speech read on his behalf by the finance director, Mr Kudakwashe Zata, stressed the urgency of resolving the long-overdue pre-2009 compensation issue.
“There is a need to bring closure to the issue of 2009 compensation, which is long overdue. The Government has already commenced paying its pensioners and is committed to bringing the issue to finality within the next three years.”
Minister Ncube urged the Insurance and Pensions Commission (Ipec) “to ensure that the industry also takes this issue seriously.” He reiterated that Treasury was “decisively dealing with the matter” and actively pushing for amendments to SI 162 of 2023.
The resolution of the pre-2009 compensations is also outlined as a policy measure within the 2025 National Budget, which announced the need for comprehensive reforms to the national pension system. Initial payments under these schemes were slated for March 2024, but delays arose due to non-compliance with the provisions of SI 162 of 2023, prompting Ipec to push for the current amendments to operationalise the compensation process.
Ipec Commissioner, Dr Grace Muradzikwa reported that, to date, two pension funds have had their compensation frameworks approved, resulting in US$522 000 already disbursed out of an approved US$750 000.
She acknowledged that previous delays may have stemmed from challenges related to a lack of “granular data” and challenges in “asset separation” during the investigation period.
“Now, we have come up with a number of interventions so that we can close this; hence, instead of insisting on granular data and proof of asset separation, we have been using the financial statements, and I also want stakeholders to know that we are now aligned with the industry in terms of closure,” she said.
“We have now agreed on a once-off shareholder levy to compensate pensioners, and I want to say that compensation is not restitution. I am on record as saying that it is impossible to compensate pensioners for what they lost.
“We are also looking at the available funding options, but we will definitely make sure that pensioners get something towards the loss that they experienced.
“In the proposal, we have also proposed some minimum floss amounts that the pensioners will get and some maximum amounts that the pensioners will get,” she said.
Dr Muradzikwa added that there is a strong commitment from the industry to finalise pre-2009 compensation. “We just need our stakeholders, the Ministry of Finance and the Attorney General’s Office, to come on board,” she said.
She added that the Government is ready to disburse its portion towards pre-2009 compensation, as are Ipec and the industry.
The insurance and pensions industry continues to suffer due to legacy issues whereby pensioners lost value due to hyperinflation before 2009.
Dr Muradzikwa said the pensions industry penetration rate was around two percent, but there was scope for growth should industry players develop products that meet clients expectations.
“We are challenging the industry to develop products that are relevant. In fact, for the Life Assurance industry, we have actually recalled some of the products because we want them to rethink whether these products are still relevant, and should they come up with relevant products, we would definitely have growth in the industry,” she said.
Minister Ncube, on the other hand, said the Government is keen to see the insurance and pension industry playing a key role in climate-proofing agriculture, particularly through the insurance of smallholder farmers, investment in irrigation infrastructure and renewable energy solutions.
He said the Treasury was in the process of developing a financial sector plan for the next five years. “One may wonder what a financial sector development plan will be when we are also wrapping NDS1 and coming up with NDS2,” he noted.
“It is that the financial sector is the lifeline of the economy, giving it a unique characteristic of harnessing resources for financial intermediation and funding the real sector of the economy,” he explained.
“A holistic approach to financial sector development is critical in viewing the blurring of distinctions between the banking and non-banking financial sectors, all in order to complement co-operation and funding for both sectors,” he said.
He added that, in that regard, there was need for enhanced, cautious, and clear strategic direction for the financial services industry.
“Just like NDS 2, it is our expectation that IPEC and its regulated players will provide useful insights and proposals on how best we can develop financial services over the next five years,” he said.
Minister Ncube also said the Government expected that the insurance and pensions industry would continue to play its role in supporting financial development through investment.
He said Treasury was ready to grant prescribed asset status to public and private sector investments, provided they were aligned with financial development strategies, priorities, and create value for policyholders.
