Online Reporter
Nelson Gahadza
ZIMBABWE’S pensions industry has been challenged to confront its collective sins, amid mounting concerns over low payouts, weak public confidence and delays in the 2009 compensation exercise.
The compensation programme for pension and insurance policyholders affected by the 2009 currency reforms has largely stalled, with the industry regulator, the Insurance and Pensions Commission (IPEC), having approved only two compensation schemes — Mimosa and Amzim — both in the mining sector.
Many pension funds continue to struggle with incomplete records and data gaps, slowing progress on compensation for thousands of pensioners and policyholders.
Speaking at the annual conference of the Zimbabwe Association of Pension Funds last week, Deputy Minister of Finance, Economic Development and Investment Promotion Kudakwashe Mnangagwa described the hyperinflationary period that culminated in the 2009 currency reforms as one of the darkest chapters in Zimbabwe’s financial history.
“That loss was not merely financial. It was a loss of trust in institutions, in financial products and in the long-term value of saving itself,” he said.
“Rebuilding that trust is not optional. It is essential to the future of the insurance and pensions industry.”
He said completion of the compensation exercise remains one of the Government’s priority targets in restoring confidence in the financial sector and urged IPEC and industry players to accelerate the process.
Industry executives participating in a candid panel discussion warned that pension funds risk losing relevance unless urgent reforms are implemented to improve retirement outcomes and restore public confidence.
Fidelity Life Assurance of Zimbabwe managing director Reginald Chihota acknowledged the deep structural weaknesses facing the sector after years of economic instability eroded retirement savings.
“The industry needs to address its collective sins,” he said, adding that the pensions industry had failed many contributors and now needed to rebuild trust through meaningful reforms and sustainable retirement solutions.
Mr Chihota said pensions should no longer be treated as a routine administrative function, but as a strategic pillar of employee welfare and long-term financial security.
“Pensions are central to the provision of employee benefits,” he said. He proposed consolidating administration systems across the sector and increasing the use of artificial intelligence (AI) to lower operational costs.
“If we adopt AI tools in terms of how we operate, that should bring down administration and investment costs,” he said.
The panellists said restoring confidence would require coordinated action involving regulators, the Government, employers, pension fund managers and capital markets players to ensure pension systems deliver dignified retirement incomes.
Minerva Risk Advisors managing director Ms Lydia Tanyanyiwa said many pensioners were surviving on shockingly low monthly payouts, raising questions about whether the sector was fulfilling its mandate.
“. . . some are getting US$30 a month,” she said.
“That goes beyond pensions. It talks to the business leader. What is their culture towards employees once they retire? How much is the employer contributing towards the pensioner?” Ms Tanyanyiwa argued that prevailing contribution rates of between 5 and 6 percent were too low to sustain meaningful pensions.
“A person cannot retire on those contributions,” she said.
She criticised the high cost structure within the pensions ecosystem, saying administration fees, levies and advisory costs were consuming already inadequate pension contributions.
“The cost of compliance, IPEC levies, trustees’ fees, administrators, investment managers and asset managers — we are all feeding off that small contribution that people are making,” she said.
“We have got to do things differently.”
Ms Tanyanyiwa said the industry should shift its focus away from excessive compliance requirements towards building sustainable long-term investments capable of delivering stronger returns for pensioners.
She said the adoption of AI and technology-driven systems within investment management could help reduce operational costs and ultimately lower investment fees charged to pension funds.
WestProp Holdings chief executive officer Mr Kenneth Sharpe said pension funds were failing to use long-term savings effectively to support productive sectors of the economy, particularly housing finance.
He noted that Zimbabwe’s mortgage market remained severely underdeveloped despite an estimated housing finance deficit exceeding US$20 billion.
“How many pension funds can actually say they have invested even one dollar into mortgages?” Mr Sharpe asked.
“I would have expected them to invest at least US$100 million into mortgages.”
Mr Sharpe said pension funds were naturally suited to financing mortgages because pension savings are long term by nature.
“By definition, pensions are for when you get old, for a time in the future,” he said. “So, pension funds should be the ones pulling money out of their pockets and putting it into mortgages.”
He argued that unlocking long-term mortgage finance could significantly stimulate economic growth.
“For every dollar of mortgages, you can generate up to US$3 of economic activity. That means with just US$20 billion, we can unlock up to US$60 billion in GDP (gross domestic product) within a few years,” he said. Mr Sharpe criticised smaller pension funds for directly undertaking property development projects instead of partnering with experienced developers capable of delivering stronger investment returns.
“They should leave the work to professionals who know how to execute developments and maximise returns,” he said.
Imara Edwards Securities managing director Mr Sebastian Gumbo said reforms within the pensions sector and broader capital markets need to happen simultaneously if pension funds are to play a greater role in financing productive sectors.
“Unfortunately, I don’t think we have the luxury of choosing what goes first. A lot of these things need to happen concurrently,” he said. “There’s a lot of reform that we can help with in the financial services sector, particularly by way of product innovation to help overcome the risks and concerns that our constituents might have.”
Mr Gumbo said financial institutions also depend heavily on policymakers to create a stable macroeconomic environment capable of attracting long-term capital.
“The elephant in the room is something that the Government has done reasonably well over the past 18 months, which is to provide currency stability,” he said.
“However, that position remains as fragile as long as our debt position remains as fragile as it is.” Mr Gumbo said while recent stability measures were encouraging, Zimbabwe needed a durable long-term solution capable of restoring investor confidence and enabling financial intermediaries to develop suitable long-term investment products.
“We need a longer-term solution to provide the confidence from the funders, which will then allow us, as the financial intermediaries, to come up with suitable products that then meet the needs and interests of all concerned,” he said.
Mr Gumbo said although pension fund assets, estimated at about US$3,1 billion, appeared small relative to Zimbabwe’s annual investment requirements, they could still play an important catalytic role in economic development when combined with private capital formation initiatives.
“To sustain five percent GDP (gross domestic product) growth, given a US$52 billion economy, I think you are looking at about US$10 billion of investment that is needed annually,” Mr Gumbo said.
“I know it appears like US$3,1 billion relative to US$10 billion is small, but it’s still something. And if we combine with other efforts — private capital formation — I think we can actually pull it off.”
