By Edward Makuzva
THE best way to eat an elephant in your path, is to cut him up into little pieces.
This is an African proverb which implies that the best approach to solving a problem is to take it bit by bit or one at a time.
The adage tells the story of the Insurance and Pension Commission (IPEC) which has over the years been saddled by the woes of the industry that has faced decades of neglect and betrayal from the economic turmoils.
That the insurance and pensions economic subsector, was severely affected by the record breaking hyperinflation era of 2007/2008 goes unchallenged ,even by any fringe imagination.
Series of hyperinflation has dealt a heavy blow on the industry with the lack of confidence creeping in.
Consequently,low penetration ratio has bediviled the industry with less and less business being underwritten.
As the country was still recovering from the shock of the 2008 hyperinflationary era,2019 currency changes also heavily impacted on the sector especially the Pensions.
At the moment the country is facing yet another episode of value erosion as hyperinflation soars eroding the incomes of gullible pensioners.
That the industry is yet to make compensation for the 2008/2009 losses is a story for another day ,but how far has the regulator moved to protect the pensioners,? How far has it gone in trying to restore confidence in the sector?
Through regulation and engagements,Ipec has been able to implimented a raft of measures to ensure that sanity prevailed in the industry providing a safe environment for the beneficiaries and a stable operating environment for the industry players.
The regulator has also been making frantic efforts to ensure that the industry becomes a level playing ground with awareness campaigns being periodically carried out.
These efforts have not been in vain as the pensions industry heartly recognise them.
In an interview, Zimbabwe Association of Pension Funds(ZAPF) outgoing chairperson, Rutendo Magorimbo told The Observer that post dollarisation in 2009, the regulator has been on the front spearheading the sector ‘s revival as one of the key economic sub sectors globally.
Magorimbo revealed that this has been through rebuilding a nations’ saving’s culture by professionalism,public education of insurance products particularly the pension scheme,heightened regulation,strategic investments of pension funds,accountability and communication.
“The regulations on minimum disclosures and Treating Customers Fairly also assist in the removal of the asymmetry of information.As part of diversifying the Fund assets from the country risk, the regulator now gives green light for offshore fund investment up to 15% in assets.Whilst it can be argued that the country needs the Forex to rebuild its own economy- we commend IPEC for allowing Funds to invest offshore as it goes a long way in rebuilding confidence in the sector,”Magorimbo said.
” The necessary checks and balances to ensure that policyholders are protected have also been put in place.Prescribed assets – we have often said that pre-2009 the industry lost a lot of value through prescribed assets which were monetary in nature mostly long-term fixed interest bonds.”
As a result, she said, post 2009 ,Industry was not willing to invest in long term fixed interests – given the experience that it had with such assets during the hyperinflation era, whilst at the same time legislation requires 20% of pension assets to be invested in fixed prescribed assets.
Under normal circumstances she said these are what would be used by the government to invest in infrastructure and other assets that would drive economic growth in the long term.
Magorimbo added that there has been an overhaul in the regulation of the industry to boost its capacity and vision thus guaranteeing security of assets acquired through public savings.
She said openness to the public on how savings were erased during the particular period, during the pre_dollar era of unprecedented insurance and pension devaluing including adopted measures to prevent reoccurence of the fiasco was critical in rebuilding public hope in the sector.
The ZAPF outgoing boss highlighted that IPEC was fully behind ongoing awareness campaigns to enhance open communication amongst service providers , policyholders and trustees of pension funds.
She added that a key development that was pushed by the regulator was to give Industry flexibility space to come up with assets that provide a hedge to inflation over the long term whilst still contributing the government’s development agenda.
“This has seen fruitful products in assets and investment such as Zimcampus – a project looking at student accommodation and Solgas-an investment into green energy, respectively among others.
“The regulator support and oversight remain vital in guaranteeing the strategic relevance of the sector in national society economic progress; being industry’s voice when National economic policies are crafted.
“This was observed as a critical in safeguarding businesses interests of players thus guaranteeing required results of client satisfaction hence guaranteeing public confidence in formal insurance, pension and banking channels.” She said.
Magorimbo added that for correct conversations-with sufficient challenge to service providers to take place, IPEC had guidelines on the minimum qualifications that are required for one to become a Trustee of a pension Fund.
“This will ensure that the Trustees have a breadth of experience between them to be able to execute their fiduciary duties.In recognition of the fact that the pensioners were at the receiving end of the economic events of the last two decades – IPEC has been spearheading a medical outreach program in conjunction with the industry players,”she said.
“The programme targets pensioners and provides primary free consultations with medical practioners and the dispensing of some over the counter medicines.Circular 4 of 2021 – which saw IPEC start to payout the initial dividend from the Kuvimba mininig asset which was provided by the government to compensate the Pensioners for the unintended consequences of the 2019 currency reforms, which saw the value of pensions in payment being eroded in real terms – a situation that continues as the Zimbabwean dollars continues to depreciate”.
Magorimbo added that the Regulator has also been tasked with bringing closure to the 2009 hyperinflation issues by coming up with a compensation framework as recommended in the Justice Smith report.
In coming up with the Framework ,she said, the Commission was making it clear that this will not be indemnification as this can only happen if the economy is back to where it was in the ninety’s – before inflation became an issue.
In his presentation at the NSSA/IPEC /Journalism Mentorship Program for the 2023 second season recently IPEC director – pensions, Mr Cuthbert Munjoma indicated that the regulator was working extra time to sanitize the industry.
He said it was thus important for industry to know and understand the regulators’ work.
Munjoma said IPEC had a number of regulations which included market regulation, consumer protection protection as well as prudential supervision for soundness and vibrancy of the industry.
“The key priorities of IPEC are informed by our strategic outcomes namely, improving pension benefits, enhancing compliance and soundess, improved regulatory capacity and image as well as industry growth”, said Munjoma.
Munjoma highlighted that reasons for regulation were numerous, including asymmetry of information, potential moral hazard, imperfect
markets, regulation of competition and protection of pension scheme members and policy holders.
An ordinary pensioner, Stephen Moyo (57) of Manhize plots, Chivhu appreciated the regulator’s efforts.
Moyo,a former loss control officer of 13 years with the Zesa holdings, left to seek greener pastures beyond Zimbabwe borders.
Moyo was looking forward to his pension to be valuable when he comes back with his diaspora spoils to complimenting each other.
But the pension he had tucked away during that time soon became worthless, thanks to hyperinflation which overtook his planning just like many others.
“I am more than glad for pensions can now be payable in forex as it will cushion pensioners from currency votality as some rogue elements might take advantage of the festive season to hike rates”,Moyo added.
Moyo said companies should comply with Insurance Pensions Commission (IPEC) regulation that seeks to cushion pensioners” welfare.
Industry Statistics revealed that as at 31 March 2023, 977 registered Pension Funds and 568 were active while 409 were inactive while membership was 952 4444 including beneficiaries.
Asset base of the pensions industry as at 31 December 2022 wasZW$1,95 trillion(US$2.1 billion) number Of Funds Membership Asset Base.
As the economy once again slides into the murky waters of doubt,the industry is pinning it’s hopes on the regulator to save it once again.