By Eben Mabunda
This article is a follow-up to last week’s article titled Pensioners in economic bondage of neglect by govt, published in this column.
Zimbabwean pension funds and insurance houses continue to record profits for their shareholders and notable growth in their balance sheet sizes, while policyholders and pensioners languish in poverty, in a classic case of what Karl Marx referred to as “the exploitation of the proletariat”.
In the first half of 2021, pension funds aggregate asset bases grew by 100% in US dollar terms to US$2,32 billion from US$1,16 billion in HY 20. Zimbabwe’s life assurance sector reported aggregate profits to the tune of ZW$34 billion (US$390 million) against asset bases valued at ZW$55 billion (US$632 million).
Zimbabwe has in the past come up with probing commissions on matters of national interest and is infamous for its failure to act on the recommendations thereof.
The Nziramasanga Commission and the Motlanthe Commission of Inquiry are classic examples of scenarios where the government was presented with recommendations that were never followed through. The Justice Smith Commission into the loss of value for policyholders and pensioners is no different.
While there has been loss of value in the economy, no separation was made between policyholder assets and shareholder assets. The net effect, insurance and pension funds “got away with murder” throwing pensioners under the bus.
It now appears as though the loss of value occurred for the pensioner and the policyholder only — far from it! After all, when the loss of value occurred, insurers held onto real assets such as stocks, real estate, et cetera, which retained a measure of their relative value.
A socialite and popular actress @Nyarienhongo in July this year tweeted: “Herein lies my mother’s pension (ZW$64)” in lament of the plight of her mother who had received ZW$64 (less than US$5) for the month of July from First Mutual Life after 45 years of service.
First Mutual is one of the biggest insurance houses in the country, sadly the phenomenon is mirrored across the industry sucking in the biggest insurance players. While the figures outturns may vary from insurance house to insurance house, policyholders are still on the receiving end-fact!
The average medical aid insurance provider is providing a cover that is often less than half the cost of basic care, leaving the policyholder to cater for the rest. The Smith Commission argued that “medical aid society schemes are not prudentially supervised, hence may not be providing value to policyholders or their members”.
Lafarge Zimbabwe made a mark earlier this year when NewZWire reported that the firm was constructing 250 homes for its pensioners, a change of strategy after its pension fund suffered a sheer loss of value in 2008.
Lafarge demonstrated responsibility by the private sector, a stance that could be adopted by the private sector, as the government has clearly resigned from this chronicle.
It goes without saying that the government has, through economic policy, failed pensioners and insurance policyholders as discussed in the previous submission. However, it must be noted that while the private sector is guided by economic policy, it has an obligation to preserve value for its customers in equally the same way as its shareholders.
The recommendations of the Smith Commission remain relevant: “The commission recommends compensation of prejudiced policyholders and pensioners using assets that survived hyperinflation in order to ensure that prejudiced members of insurance schemes and pension funds get their rightful benefits whilst maintaining stability and confidence in the insurance and pension industry …
“A compensation framework which takes into account a standardised conversion process, that ensures fairness among providers of insurance and pension services or products and consumers of such services and products, is recommended.”
- Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — firstname.lastname@example.org