Pensioners sing the blues
http://www.financialgazette.co.zw
Monday, 30 May 2011 12:07
Nelson Chenga, Staff Reporter
THREE years after all their life’s savings vanished from under their noses,
when a nasty twist of fate snuffed life out of the Zimbabwe dollar,
pensioners thro-ughout the country face a bleak future.
The collapse of the local unit has had a devastating effect on pensioners
who are wallowing in abject poverty.
Some of the pensioners have been left ruined psychologically because of the
trauma of losing savings they worked for over the years.
And somewhat still embarrassed by their failure to offer the retirement
cover they had promised, pension fund executives are in a quandary. They
recently met in the resort town of Victoria Falls for a post-mortem of
events of the past decade or so in an attempt to chart a new course towards
regaining stakeholders’ confidence.
After the post-mor-tem, organised by the Zimbabwe Association of Pension
Funds, participants were unanimous that something must be done urgently
about the welfare of their old contributors whose contributions were
swallowed at dollarisation if the industry is to attract new business.
There was also a resonating call among the delegates for a possible
government bailout as one of the quickest ways for the industry to honour
its promises to pensioners and rise from the doldrums.
Despite the common vision on the job at hand many potholes litter the road
to bringing back smiles on the faces of pensioners. Most of these pensioners
are currently receiving a paltry US$10 every month as gratuity, barely
enough for bus fare to and from the bank for the majority of them now living
in communal areas.
With the country’s economy battling to plug a serious liquidity crunch,
spurred by poor performance in all economic sectors, pension funds are in a
dilemma as pressure mounts from pensioners to have their incomes reviewed
upwards.
“It’s going to be a bumpy road,” Doug Mamvura, a seasoned marketer and chief executive officer of African Integrated Group, said.
Describing the pension fund industry as a sector still in crisis after
losing all the savings at the height of the hyperinflationary era, Mam-vura
urged the sector to engage in serious soul searching.
Currently, the industry is facing viability challenges as revenue streams
remain dry while asset values are below the red line: This is against the
backdrop of rising expectations from the eagerly expectant pensioners.
“Stop skirting aro-und issues while people are suffering. You have to be
accountable. If you don’t clean the mess how do you expect to attract the
new clients and markets? Cleanse yourself. Explain what happened.
Communicate with and educate the public . . . Restore the dignity of the
pensioner,” said Mamvura.
In trying to unpack the dilemma facing the industry chief actuary at African
Actuarial Cons-ultants, David Mure-riwa, said: “The stark reality at
dollarisation was that the assets backing liabilities were lowly valued.”
Policies and schemes in Zimbabwe were mai-nly backed by equities, bonds,
property and cash which normally offer good hedges against inflation, said
Mureriwa.
He however added that: “. . . in spite of the high nominal returns prior to
conversion, the underlying value of equities had to reflect the economic
activity of companies on the ground minus hyperinflation. Most companies, if
not all, listed on the Zimbabwean market were operating at below their
capacity because of the low economic activity, hence the low values depicted
by their market price.
“The hyperinflation environment prior to dollarisation rendered government
stocks and corporate bonds worthless.
“At dollarisation, because of the depre-ssed economic activities on the
ground, most properties had no tenants and even up to now there are a lot of
empty offices in towns.
“Also, due to liquidity constraints the demand for properties was quite low,
which resulted in low property values. What this means is that at conversion
most property values were also depre-ssed.
“At dollarisation all cash balances were rendered zero. This means that
there were no cash balances backing policies and schemes at conversion.”
In simple terms, pension funds went bust and very little could be done about
it prompting some pensioners to push hard for litigation against the pension
funds for the massive loss of incomes.
Complicating the whole scenario is the fact that there is no Zimbabwe dollar
to US dollar conversion guid-eline available for pension funds to salvage
something out of the ashes of the dead Zimbabwe dollar, which raises
controversy each time there is debate on whether to resuscitate it or not.
While pension funds seemed to agree that they are comfortable without the
Zimbabwe dollar, Kingdom Fina-ncial Holdings Limited chief executive
officer, Lynn Mukonoweshuro, noted that there was pressure on the government to reintroduce the local currency because it is a national symbol that embodies the country’s national sovereignty.
Despite all the underlying turbulence, pension funds are still relevant in
Zimbabwe because they still provide the only source of income for most low
income retirees and are still one of the few savings platforms available.
Pension funds are also critical for mobilising investment funds in the most
sustainable way. But in order for the pension funds to rema-in relevant,
industry players must explore new ways of doing business.