ZIMBABWE’S pension funds have revealed it could take a century to fully compensate retirees who lost savings during the 2008 economic collapse, citing severely depleted reserves.
With fund sizes now too small to cover the liabilities, industry leaders are urgently appealing for government intervention to avert what they describe as an impossible repayment timeline.
“The reason why they are saying that is because the sizes of their funds are now small,” Zimbabwe Association of Pension Funds (ZAPF) chairman Williefaston Chibaya told the Zimbabwe Independent in an interview.
“Besides the size of the funds being small, there is also the challenge around the results that actually came out which actually showed that some of the pension funds would have to take 100 years to compensate, hence the reason why they are now calling the government to try and help them.”
Luke Ngwerume, financial services veteran and pensioner, concurred with this notion during the ZAPF annual congress held in Victoria Falls recently, adding the industry was too broke to effect compensation.
“You want to see the impact of this current framework of compensation? The reality is that it’s unaffordable for the players to do this on their own. It’s not possible for pension funds to actually compensate and adequately support or augment the pensions that people are earning right now,” he said.
“One organisation did a calculation and if they sold all their assets, each active member would get US$2 000. That’s without even starting to think about pensioners. Another fund did a calculation. Active members own something like US$4 million worth of assets.
“For them to adequately compensate their pensioners, they need US$6 million. It’s time for us to look at this very differently and start a totally different approach.”
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He said authorities should fix the challenge which they created for the pension sector.
“Normally you create a problem at a certain level. If you want to resolve that problem conclusively, you have to find a solution at a higher level,” he said.
“Conversely, if the higher level creates a problem for the lower level, the lower level cannot fix that problem. It’s impossible with all the best will in the world. There is a crisis here. We cannot continue to put away this problem and do the proverbial burying of the head in the sand.
“We can’t do that because people are suffering out there and that’s reality. From where I sit, I think your industry is deeply troubled and I think the platform is burning and you cannot wish away the problem.”
Livingstone Magorimbo, group chief actuary at First Mutual Holdings Limited, told delegates at the congress the country’s battered pensions sector cannot deliver the long-promised compensation.
He drew parallels with South American countries that, after similar hyperinflation shocks, ultimately abandoned attempts to reimburse their members and instead focused on rebuilding.
Thousands of pensioners saw their retirement savings obliterated in 2009 as authorities mishandled the transition between currencies on dollarisation. Following the crash, the Justice Smith-led Commission of Inquiry into pension losses estimated that the industry’s obligations amounted to US$5,1 billion — greater than Zimbabwe’s US$4,5 billion gross domestic product at the time of the carnage.
Government later instructed the Insurance and Pensions Commission (Ipec) to work with funds to establish compensation mechanisms.
But Magorimbo offered a stark reassessment.
“To be honest, the reality is that we simply don’t have the money in our wallets to pay this compensation,” he said.
Instead of pursuing retroactive compensation, Magorimbo proposed a recovery strategy that includes means-tested support targeting the most vulnerable pensioners.
Drawing on case studies from Brazil, Argentina, and Venezuela, he noted that these countries accepted the loss of pensions value during hyperinflation as irrecoverable and focused on structural reform.
“In Brazil, for example, they raised contribution rates to 30% to 35% over five years to rebuild solvency,” Magorimbo said.
“You cannot extract from pension schemes what is no longer there. Acceptance is the starting point for progress.”
Responding to this submission, former deputy prime minister Arthur Mutambara said insurance companies, investment companies and banks did not keep money in a vault to be devalued. They spent that money buying bricks, cars, he hit back.
“So, money was technically lost, but not lost. How are we addressing the issue of honesty and integrity? Surely the money wasn’t destroyed.
Cuthbert Munjoma, Ipec’s pensions director, dismissed Magorimbo’s proposal to scrap compensation.
“Dismissing compensation is not acceptable — neither from a regulatory nor a government policy standpoint,” Munjoma said.
