Volatile economy derailing actuarial sector: Makwanya


Loreen Makwanya

THE actuarial profession is unique in Zimbabwe, and there are only as few as 15 actuaries to date. However, they make a valuable contribution to the country’s economy. Just like any other profession, they have their own achievements to celebrate as well as their challenges and failures. Our business reporter Melody Chikono (MC) spoke to the Actuaries Association of Zimbabwe (ASZ) president Loreen Makwanya (LM) ahead of the organisation’s 5th annual congress. Below are the interview excerpts:

MC: Last year, you indicated that you were working on strengthening actuarial education in Zimbabwe and you were in the process of registering an education trust that will support actuarial education in universities. How far have you gone in achieving this?

LM: The Actuarial Development Trust will have a bigger mandate than supporting actuarial education in universities; its mandate is to increase the number of qualified actuaries in the country and ensure that actuarial knowledge remains current. To that end, it will cover university education, support through the professional exams phase, ensure students get the necessary skills from work experience, and development of material to ensure that professionals provide cutting-edge advice that is relevant to the Zimbabwe environment.

During the year we have made significant progress towards achieving our goals. On the education trust, we have finalised the paperwork required for registration and the paperwork is in the process of being signed. We project that the trust will become operational this year.

We have also developed a practice module for actuaries operating in Zimbabwe which will be available to stakeholders very soon. The aim of the document is to provide local context such that actuaries have a firm understanding of the local environment as they do their work. This will enable the profession to better meet the expectations of consumers of their work and is particularly important for actuaries that live outside Zimbabwe and those who have recently qualified. We will start piloting the implementation of this module very soon.

To further strengthen continuous professional development, we are prioritising sharing of knowledge and thought leadership. The annual convention is one platform we are continuing to use. Beyond that, we host events to discuss topical issues in the market such as International Financial Reporting Standards (IFRS 9 and 17), monetary and fiscal policy, preservation of value in financial services, among other issues.

During the year 2019, we had six students qualifying as fellows. This indicates that despite our challenges, there is traction in ensuring higher qualification rates. We are working to provide more support so that in 2019 and beyond we have more qualifiers.

MC: What can you say have been the major setbacks in the past year towards attaining your goals?

LM: The key challenge we have been facing is a volatile economic environment which has affected our planning and ability to implement. For example, budgets have been outpaced by increase in inflation, which means we haven’t been able to meet expenses of some of the planned events. The shortage of foreign currency has also led to a number of students failing to access funding to pay for professional exams and reading material. This means that the number of students studying towards fellowship becomes reduced and our qualification rate is also affected.

MC: How does the current economic situation and policies alike affect the actuarial profession in Zimbabwe?

LM: Like every participant in the market, we have been affected by the current economic situation and policies. Most impact has been in the areas of our work. As actuaries we use economic assumptions in our work, for example interest rates and inflation rates. The relative stability of the different economic variables is important for the work we do and the certainty of the contracts that we value. There has been uncertainty on a number of issues, for example, estimating long-term interest rates. Various stakeholders have their estimation and outlook and actuaries often have had to make a judgement on assumptions.

Beyond making assumptions, interpretation of results has been quite challenging which then has also affected giving advice to our clients. There is a current challenge in valuation of assets and liabilities. In interpreting values, regulation and the market practice are often conflicted, thus complicating recommendations one could make to clients.

More importantly, we worry about the impact of these issues on consumers of financial products, particularly long-term savers. We have been concerned that consumers continue to lose value when there are significant policy shifts. We believe more could be done to create a softer landing to investors, particularly given their contribution to the economy.
This industry, if appropriately supported, has the capacity to change the face of the economy. We will continue to engage to put this message across.

Growth of the profession is also significantly compromised if foreign currency shortages persist. Students are having challenges to pay for their professional exams and employers have also been facing challenges in providing the appropriate study support. Early indications are also showing that a number of students have migrated to other markets due to the economic challenges in the country. This means the investment in education support is not recouped if the students move to other markets and benefit those markets.

MC: What key issues do you think Zimbabwe needs to address to enhance your practice in the country?

LM: Actuaries are of great importance to the country and, as such, there is need for stakeholders to also support the profession. The regulators and government can provide support to the profession by making the roles statutory in a number of industries including banking, insurance and pensions. We appreciate the measures that have already been put in place. We will continuously engage the relevant stakeholders for more support.

Policy consistency is also an area that the government can greatly assist in. Our work, as previously mentioned, involves making long-term assumptions. We need relatively stable policies that allow for long-term stability as well as make financial products worthwhile for the population. Frequent changes to policy mean long-term assumptions become inaccurate and reported results become volatile.

A stable environment will also enable us to retain talent in the country and nurture the talent to be among the best professionals in the country. Mass exodus of talent has led to periods of dormancy of the profession. Since 2009, we have grown the profession from two fellows in the market to over 15 fellows practising in the market as we speak.
Worsening economic conditions may trigger another exodus which will threaten the current membership numbers.

MC: You will be hosting your 5th annual conference soon, what key issues do you seek to address?

LM: As usual, the purpose of the convention is threefold:

* It seeks to impart technical knowledge to our membership;

* It provides a platform for actuaries to engage on areas of interest; and

* It also seeks to enable the profession to engage with other professions and different stakeholders including employers of actuaries, regulators and government.

The programme is still under construction, but I have no doubt we will maintain our reputation for hosting excellent conventions.

MC: What has been your role in shaping the country’s economy?

LM: In the financial services sector we have played a critical role towards supporting its growth and stability. Some of our roles include:

* Product development and pricing of financial services products: we have aimed to balance affordability of products and financial soundness of the products. Through product development, our goal has been to ensure that the products meet customer needs and are relevant to this environment.

* Valuation of policyholder liabilities; we have assisted in ensuring that insurance companies and pension funds set aside the appropriate value of assets to support the financial benefits due to their customers. This is very important because it ensures that policyholders get their benefits when they become due and don’t lose value due to lack of reserving by companies.

* Investment advice: we provide companies and funds advice on how best to invest their funds without taking more risk than budgeted for. Higher investment returns are also shared with policyholders and shareholders also get higher profits. This has ensured that both parties benefit from sound investment strategies;

* Treating customers fairly: as part of our work, we ensure that customers are treated fairly at each stage of their relationship with insurers, pension funds and banks.
Regulators have required us to ensure that we ensure all our recommendations ensure that customers are treated fairly; and

* Decision-making and information provision: through our work we have assisted clients to make decisions from an informed position by providing detail on the consequences of various decision options.

Through these roles we have ensured stability of the financial services sector. Stability of the financial services has far reaching benefits for the economy and the population.
MC: What key policies does the government need to put in place for the betterment of the actuarial profession?

LM: The government plays a part in addressing the issues we have highlighted above in terms of enhancing our profession. We are confident that once such issues are addressed, the profession will also show value and benefit of their support.

MC: What is your outlook for 2019?

LM: In 2019, we are targeting to make the education trust functional. Once the education trust is functional, we are looking to mobilise funding for the trust. We hope that we will have many well-wishers as we strongly believe it is an important profession for the development of the country. The ability of actuaries to manage risk and the custody role that they play in the savings mobilisation industries of the economy is really important for taking our country forward.

We also are looking forward to hosting our annual convention. Our goal is to get more audience from non-actuarial professions and get to share and transfer knowledge. Through the convention, we will also discuss the key issues affecting our economy and our profession, and areas of cooperation with different stakeholders. We therefore expect members and non-members to significantly benefit from the convention.

The society’s strategy for 2019 is anchored on the following pillars:

* Building the ASZ brand;
* Strengthening our finances;
* Supporting education;
* Ensuring good market conduct by actuaries;
* Building strong partnerships; and
* Facilitating thought leadership.

We want our brand to be positioned strategically in the economy. As a profession we believe in public good, we therefore want to ensure that the public understand what they can expect from us. Through building our brand, we also are targeting to attract the young minds to the actuarial profession.

Thought leadership is a key area we expect to scale up in 2019. This includes research and analysis of the key issues affecting Zimbabwe and beyond for the consumption of our members and stakeholders. Therefore, expect us to be publishing a number of papers, guidance notes and commentaries on a number of issues that affect us and the public.