THE first draft report on the conversion of pension and insurance values during the transition from the Zimbabwe dollar to the multi-currency system was submitted to Government last week, raising expectations that the findings will be made public soon.
Though details of the 18-month probe by the Commission of Inquiry set up by President Mugabe on August 19, 2015 are still tightly held, independently sourced information suggests policyholders and beneficiaries were heavily prejudiced through insignificant payouts by insurance firms at the time of conversion in 2009.
Commission chair Justice George Smith told The Sunday Mail Business that the Finance and Economic Development Ministry would assess the report before presenting it to President Mugabe.
“After hard work and dedication, we submitted the official report last week to the Finance and Economic Development Ministry. We have carried out a number of strategic meetings in and out of Harare, especially in Mutare, to finalise the report and get the overview of how pension funds were used during the period under discussion.
“The report will be examined and cross-checked at the Finance and Economic Development Ministry’s office, which will also make its own findings and observations before putting it forward to the President,” said Justice Smith.
In compiling the report, the eight-member commission combed through data from more than 20 insurance firms, 15 brokerages, self-administered pension funds, the Public Service Pension Fund, the National Social Security Authority Pension Fund and other benefits schemes.
There was, however, resistance.
Submissions by Zimbabwe Pensions and Insurance Rights Trust (ZimPIRT) – an independent organisation which represents aggrieved members of the schemes – conclude that pensioners, pension fund members in general and insurance policyholders were credited with less than their rightful benefits as a result of deliberately flawed calculations.
There were also several alleged irregularities in management and regulation of pension and insurance contracts.
The value of US-dollar assets at conversion was calculated from the implied value of the Zimbabwe dollar at the time.
But the Zimbabwe dollar was the asset that suffered most during hyperinflation prior to conversion to the multi-currency system.
ZimPIRT argues that before hyperinflation peaked in 2008, most assets were immoveable properties such as land and buildings which do not depreciate with inflation.
Regardless, several firms claimed pension and insurance values had been completely eroded.
“Yes, some pension funds lost their monetary value during the 2008 era but we have to bear in mind that most assets we see in town are a result of the pension funds invested during the Zimbabwean dollar era and their value haven’t been eroded up to now.
“And one other thing is that most of our business people in town bought some companies without realising that pension fund is separate entity from the company and should be left to run things on its own.
“This resulted in most of the prejudice of the pension funds as new owners wiped away all benefits at the expense of beneficiaries,” read part of ZimPIRT’s submissions.
Also, there were inconsistencies in conversion of policies, especially for contracts signed before 2006, as the Zimbabwe dollar was rebased in July 2006, August 2008 and January 2009.
ZimPIRT also alleged that some of the miscalculations were attributable to irregular investment management practices, misleading actuarial advice, overcharging of pension and insurance funds, poor corporate governance and a flawed implementation framework.
Annual reports from the then Registrar of Pension and Provident Funds – which has evolved into the Insurance and Pension Commission – show that the value of pension fund assets under the administration of insurance companies fell 30 percent from US$3 billion to US$800 million in the 17-year period from 1992.
In essence, the US$800 million value recorded in 2009 represents the total value of funds held by the ten life insurers operating in Zimbabwe at the time.
The figure has been questioned because pension contributions for 2012 alone stood at US$175 million. Also, pension fund membership rose from 720 000 in 1987 to 1,2 million by 2001; while the schemes that these members belonged to rose from 1 500 to 2 700 over the same period.
ZimPIRT says the value of pension fund assets should have grown significantly to well over US$10 billion considering that the contributions made by members of various schemes averaged US$230 million yearly between 1987 and 1998.
Government is expected to act on the recommendations of the commission’s report to restore trust and confidence in the sector.