Macroeconomics and Pensions Industry

(Last Updated On: December 2, 2021)


One interesting discussion topic at the Zimbabwe Association of Pension Funds (ZAPF) Conference held in November 2021 was on the implications of poor macro-economic performance on the Pensions Industry in Zimbabwe. The paper was presented by Prosper Chitambara, a Development Economist with the Labour and Economic Research Institute of Zimbabwe (LEDRIZ).

The key take-away was that the Covid-19 pandemic worsened the poverty and inequality situation in the country. Estimates from the World Bank show that the number of extremely poor Zimbabweans reached 7.9 million – almost 49% of the population in 2020, up from 42% in 2019. In addition, inequality is on the rise.

According to the mini-PICES from ZIMSTAT, the Gini index rose from 44.7% in 2017 to 50.4% in 2019. The richest 10% of the population consumes 40% of the total national consumption.

While GDP growth is expected to recover in 2021 and 2022, the economic outlook remains highly uncertain. Rising government indebtedness also represents a significant downside risk for the economy given the huge pressures on the government’s balance sheet.

There is also limited social protection coverage and investments. That said, pension funds play a very pivotal role in the economy by channelling current pension savings into investments.  According to the Insurance and Pensions Commission (IPEC) 2020 Annual Report, the total asset base of the industry increased in nominal terms by 273.06% from ZW$29.55 billion as at 31 December 2019 to ZW$110.24 billion as at 31 December 2020. This was against an annual average inflation rate of 557%, implying a decline in the industry’s assets in real terms.

About 47% of the total industry assets are investment property, followed by quoted equities at 34%, and prescribed assets at 6%. The money market continued to offer negative real returns as the average return on 30-day money market investments was -75%. This demonstrates the negative impact of inflation on savings and the pensions industry at large.

Another important observation is that the Zimbabwean pension system suffers from low coverage. This low coverage results not only from informality in the labour market (low formal sector employment) but also from low income levels (most low income people are not part of the pension system) and high unemployment. Moreover, there is also a problem of low saving rates, which needs to be addressed.

All in all, the constraints facing the Zimbabwe Pension Fund industry date back to the pre-dollarisation era. The country experienced almost a decade of hyperinflation which led to the abandonment of the Zimbabwe dollar in 2009. However, pension funds’ investments were denominated in the local currency; hence the multi-currency system resulted in a mismatch between pension fund assets and liabilities.

This led to a myriad of issues in this sector. In addition, Zimbabwe’s pension industry is affected by growing contribution arrears. Most sponsoring employers are facing viability challenges and therefore they are unable to remit monthly contributions to the pension funds. In conclusion, there is need to restore confidence in the pensions industry in Zimbabwe. This will call for the need to maintain price stability by controlling money supply growth in the broader economy.

However, given the huge demands on the expenditure side and the limited fiscal space, there is a possibility that government may be forced to seek recourse to monetary financing or borrowing.  In the outlook, annual inflation is expected to drastically slow down but risks remain elevated in the face of pandemic-driven headwinds.


Batanai Matsika is the Head of Research at Morgan & Co, and Founder of He can be reached on +263 78 358 4745 or /



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