Scars of hyperinflation
…top economist floats bold blueprint to rebuild Zim’s shattered savings trust

PHILLIMON MHLANGA
Zimbabwe’s savings culture lies in tatters.
Years of hyperinflation, currency collapses, and abrupt policy U-turns have decimated household wealth, impoverished pensioners and left citizens deeply distrustful of the financial system.
Now, one of Zimbabwe’s most respected economists, Professor Albert Makochekanwa, the Director of Business School at the University of Zimbabwe, is floating sweeping reforms to restore confidence in long-term savings.
He warns that without bold action, Zimbabwe risks condemning an entire generation to retire in poverty, a legacy of the country’s unresolved economic trauma.
Professor Makochekanwa set out a comprehensive blueprint to restore confidence in pensions and savings.
Confidence was shattered after the 2009 dollarisation wiped out more than US$3bn in household wealth, according to the Justice George Smith–led Commission of Inquiry into the conversion of insurance and pensions values.
“Restoring confidence in long-term savings is not just a matter of policy, it is about rebuilding trust in the very foundation of our financial system,” Professor Makochekanwa told Business Times, a market leader in business, financial and economic reportage.
“Without stable institutions and a predictable economic environment, no incentive will be sufficient to motivate savers.”
For many Zimbabweans, the trauma of hyperinflation in 2008 remains raw.
Bank balances vanished overnight. Pensioners who had contributed faithfully for decades saw their nest eggs reduced to worthless paper when the local dollar was abandoned in 2009 in favour of a multicurrency system dominated by the US dollar.
They were left destitute.
The Smith Commission of Inquiry found that the process of converting Zimbabwe dollar balances into foreign currency was opaque, inconsistent, and devastating in its impact.
Pensioners received paltry sums, often unable to cover basic living expenses. That legacy has left a deep distrust of formal savings institutions.
“Hyperinflation wiped out decades of savings,” Makochekanwa said. “While direct full monetary compensation is financially impossible, the optimal response is ensuring economic stability and offering indirect incentives such as tax breaks, government-backed contributions, and pension fund guarantees.”
At the heart of Professor Makochekanwa’s proposals is the pursuit of macroeconomic stability.
“We need economic stabilisation policies, debt restructuring, minimum wage regulations, and banking reforms to restore confidence,” he said.
That call is urgent.
Zimbabwe’s public debt now exceeds US$21bn, with arrears blocking access to concessional funding from international financial institutions.
Without a credible debt restructuring plan and consistent fiscal discipline, savers are unlikely to risk tying up their money for the long term.
Currency stability is another cornerstone.
Inflation remains high, and the Zimbabwean dollar, despite recent reforms and the launch of the ZiG (Zimbabwe Gold-backed currency), continues to face skepticism.
Professor Makochekanwa suggested a range of options, from pegging the local currency to the US dollar, to redenomination, or even introducing a new stable currency.
Professor Makochekanwa was unequivocal that institutional reforms are non-negotiable. He called for a stronger financial supervisory authority and a revamped pension system capable of guaranteeing transparency, accountability, and security.
“Citizens must know their money is safe,” he said.
His recommendations include lowering administrative fees, improving customer service, publishing regular pension fund performance reports, and investing in robust fraud-prevention systems.
Other experts agree.
Professor Sarah Zikhali, a specialist in financial markets, argued that legal and structural reforms were essential.
“Overhauling pension laws, establishing revaluation mechanisms, and ensuring regulatory independence are essential. Without these measures, even the most well-designed incentives may fail to revive long-term savings,” she said.
Another pillar of Professor Makochekanwa’s plan is ensuring that pensions deliver real returns. He urged pension funds to diversify into growth-oriented and inflation-hedged investments such as infrastructure projects, gold, inflation-linked securities, and even selective exposure to international markets.
“Stable economic policies are prerequisites. Profitable corporates can then ensure pensions grow safely,” he said.
This strategy mirrors regional practice.
In South Africa, pension funds have been critical investors in infrastructure bonds and private equity, while in Botswana, the government has allowed pension money to be invested offshore to spread risk and enhance returns. Zimbabwe, by contrast, has often steered pensions into low-yield government paper, eroding value.
A lack of financial literacy compounds the crisis. Many Zimbabweans distrust pensions because they simply do not understand them.
“Citizens must understand investment choices and risks. This is fundamental to restoring trust and encouraging participation in pension schemes,” Makochekanwa stressed.
He proposed rolling out nationwide financial literacy programmes, alongside government-backed guarantees on certain pension products to reassure savers.
Tax incentives, matched contributions, and guaranteed minimum returns could help rebuild confidence in a system tainted by past losses.
Independent economist Dr Tendai Sibanda added another dimension, the behavioural aspect.
“People’s psychology matters as much as policies,” he said.
“Savings behaviour can only normalise when citizens believe the system will protect them from future shocks.”
This is a lesson Zimbabwe has yet to learn. Even in periods of relative stability, savers have chosen to hold US dollars in cash, fearing policy reversals or bank collapses.
Changing that behaviour requires not just policies, but visible proof over time that institutions are safe and credible.
Professor Makochekanwa’s reform proposals resonate with international experiences.
In Ghana, for instance, years of inflation eroded pensions until structural reforms in the 2000s created a multi-tier pension system with better regulation.
In Nigeria, a similar overhaul of pension laws in 2004 restored public trust and significantly boosted long-term savings.
By contrast, Zimbabwe’s pension system remains fragmented and poorly regulated, with weak oversight and limited accountability.
Without decisive reforms, it risks becoming irrelevant, leaving households to fend for themselves in retirement.
Professor Makochekanwa concluded with a stark warning. “Zimbabwe has an opportunity to safeguard the retirement future of millions, but this requires decisive action.
Economic stability, institutional reforms, and transparent governance are non-negotiable if we are to restore trust and rebuild our savings culture.”
The message is clear, without bold reforms, Zimbabwe risks locking itself into a cycle where citizens refuse to save, institutions stagnate, and retirees remain impoverished.
But with credible reforms, it could turn pension funds into engines of growth, as seen in other emerging markets.
As the country struggles to stabilise its economy, the ability to restore trust in savings is not just about pensions, it is about rebuilding the social contract between the state, financial institutions, and its citizens.