PHILLIMON MHLANGA IN VICTORIA FALLS
More than 80% of the country’s population have no active formal pension plans, and face a bleak future upon retirement.
Giving an overview of Zimbabwe’s pension sector,the Insurance and Pension Commission (IPEC) acting commissioner, Blessing Kazengura, told Business Times on the sidelines of the Zimbabwe Association of Pension Funds annual congress in the Resort town of Victoria Falls that the absence of social safety nets and the disintegration of social fabric of extended families results in the risk of old age poverty becoming a reality.
Millions of Zimbabweans are self employed in the informal sector and are excluded from pension schemes.
Long suffering Zimbabweans are faced with a plethora of economic challenges including inflationary pressures, which has resulted in the pension industry losing value, for the second time in a decade in a way reminiscent of the losses suffered in 2009 when the country ditched its own defenseless currency to multi-currency due to hyper inflation pressures.
The effects of the recent Monetary Policy Statement, has seen inflation soaring to 75,8% in April from 60,8% in March.Consequently, this has resulted in the erosion of the purchasing power, adversly impacting the country’s pension industry. The RTGS dollar pricing model based on implied parallel exchange rate, continues to play havoc on the general stability of the economy and in particular on pension values.
These, Kazengura said have further dampened confidence levels in the pensions industry. As a result it has brought to question the relevance of pensions.
“Estimated pension coverage is less than 20%, implying that of the working population 80% are without formal pension plans,” Kazengura said.
He,however, indicated that the Commission was working on a micro-pensions framework in a bid to capture the informal sector, which is currently excluded from the pension schemes.
“You might be aware that a National Task force for financial inclusion has been put in place which consists of a number of authorities including the Reserve Bank of Zimbabwe, IPEC and many other regulators. We are trying to work on initiatives to capture those in the informal sector catered for in terms of having pension savings.
He added:”IPEC is working on a micro-pensions framework to promote financial inclusion by targeting the informal sector workers to participate in the formal retirement plans.”