ZIMBABWE’S tepid economy has seen most companies delaying pension remittances resulting in arrears amounting to 73% of total contributions in the full-year to December 2015, an insurance sector report says.
By Bernard Mpofu
The country’s insurance regulator, Insurance and Pensions Commission (Ipec), has raised the red flag over the liquidity crunch that has seen firms deferring insurance payments. Pension contributions also took a knock last year following massive job cuts and company closures owing to a July 17 2015 labour ruling that empowered employers to sack staff on three months’ notice.
Ipec said while total fund membership rose by 12% to 344 000 during the period under review, an underperforming economy has seen most firms failing to meet their pension obligations.
According to Ipec’s fourth quarter report for self-administered funds, active members contributed 61% or 210 000 (December 2014: 65% or 201 000), deferred pensioners rose from 19% or 68 878 at the end of 2014 to 28% or 97 744 at the end of 2015
The report further shows that the number of pensioners increased to 25 643 from 20 664 in prior year.
“Employers contributed US$52 million or 16% of total contributions (December 2014: 19% or US$59 million) whilst active members paid US$36 million or 11% of total contributions (December 2014: 16% or US$50million),” Ipec said in a report.
“The commission, however, noted that 73% of total contributions or US$236 million was made up of arrears (December 2014: 65% or US$208 million) which employers attributed to liquidity challenges in the economy. Ipec will continue to engage stakeholders in an effort to rectify this challenge which has been worsening over the years.
Furthermore, professional administrators realised a 32% decrease in contributions to close the reporting period at US$83 million (December 2014: US$122 million).Similarly,43% or US$36 million of the contributions were in arrears (December 2014: 23% or US$29 million).”
Turning to investment portfolios of pension funds, the report shows that the sector reduced its exposure in the property and equities market.
“For the year ended 31 December 2015, Standalone pension funds’ investments were distributed in properties (46% or US$601 million: December 2014: 51% or US$543 million), equities (10% or US$132 million: December 2014, 15% or US$157 million), money market (US$78 million or 6%: December 2014: 4% or US$40 million) and other assets (33% or US$425 million: December 2014: 27% or US$283 million. The balance of US$62 million or 5% was in prescribed assets,” the report reads.
Headwinds headlined the performance of the Zimbabwe Stock Exchange (ZSE) in 2015 with most institutional investors such as pension funds reducing their exposure to equities. Earnings were lower as revenue declined on the back of weakening demand.
Interests in ZSE blue chips waned and as time progressed foreign participation took a knock. Heavyweight counters lost significant value of their share prices only worsening the attractiveness of the ZSE as selling pressure mounted on investors.
ZSE market capitalisation plunged to US$3 billion as at December 31 from US$4,3 billion in January. The benchmark industrial index which opened the year at 167,16 points, dropped to 114,85 points. The resources index on the other hand dropped to 23,72 points from 55,38 points.