The Voice of Life’s view of how value was lost in 2009

To understand the dynamics of value loss in 2009, we need to rewind to a time when our investment options were like a buffet—diverse but fraught with pitfalls.

Back then, members had four primary avenues for maximizing their benefits, but the reality was far from rosy.

First up were property investments, where regulatory guidelines permitted a generous allocation of up to 45% of assets.

Historically, properties had been seen as a safe haven for preserving value. However, the catch was that the realizable value of these properties hinged on rental income.

Fast forward to 2009, and many properties were operating at only 50% capacity. While the potential for value was there, the reality presented a stark contrast—an empty promise echoing through vacant buildings.

Next, let’s talk about cash reserves, typically kept in banks to fulfill maturing obligations. While the life insurance and pension industries often bear the brunt of blame for value loss, a closer look reveals a different narrative. Approximately three to four years after 2009, monetary authorities decided to demonetize existing money balances.

Regardless of how much you had stashed away, everyone received a mere US$5 in return. Yes, you read that right—five dollars! The erosion of value was staggering, yet the losses incurred within banks often go unnoticed in the grand narrative of financial woes.

Shifting our focus to equities traded on the Zimbabwe Stock Exchange, we find another layer of turmoil.

After a transitional hiccup in 2009, equity trading was briefly halted. When it resumed a few months later, shares were revalued to a shocking US$0.01. Talk about a wake-up call! Many equities struggled to regain their previous worth, and some counters have yet to reclaim their pre-dollarization levels. This lasting impact of devaluation looms large, leaving investors scratching their heads and wondering what went wrong.

We cannot forget about bonds—both privately issued and government-issued. These financial instruments didn’t escape the clutches of value erosion either. The value of bonds plummeted, adversely affecting investment portfolios and leaving many feeling like they were holding onto scraps of paper rather than valuable assets.

Taking all these factors into account, The Voice of Life posits that the transition from the local currency to the US dollar in 2009 was nothing short of a national disaster. This event deserves recognition akin to any declared national calamity. Just as we mobilize for support in times of drought or natural disaster, we must acknowledge that pensions post-2009 represent a similar crisis. Our pensioners are facing extraordinary difficulties, and it’s time we collectively recognize their plight. By framing this issue within the context of a national disaster, we can begin advocating for the necessary aid and support from relevant authorities and stakeholders. Addressing the challenges faced by our pensioners should be a shared responsibility, just like responding to any other calamity that befalls our nation.

The downward spiral of the Zimbabwean dollar began in the 1990s, culminating in the dollarization of 2009. This turbulent journey didn’t end there, though.

The reintroduction of the local currency in 2018 and its replacement with the ZIG in 2024 are further chapters in an ongoing saga.

But have we truly learned anything from these currency conversions? Unfortunately, The Voice of Life believes we are still grappling with the inability to effectively manage our currency.

This chronic mismanagement has had far-reaching consequences, particularly regarding long-term investor confidence in pensions and insurance policies.

The value losses experienced in 2009, 2018, and 2024 related to ZWL business have left retirees with little more than a hollow promise in their retirement portfolios.

The launch of the ZIG was expected to herald a new era of prosperity. Yet, economists are concerned that insufficient resources have been allocated to adequately support this new currency. The Voice of Life is anxiously observing the performance of the ZIG—its success or failure will ultimately dictate the fate of the pensions and insurance industry.

Now, let’s pivot to the pensions replacement ratio, a critical measure that indicates the income a retiree receives upon retiring compared to their pre-retirement income.

For example, if someone’s last working month yields $100, and their retirement income is $60, their replacement ratio stands at 60%.

Ideally, a replacement ratio of 60% is deemed acceptable, but many developed nations boast ratios exceeding 100%, meaning retirees enjoy a higher income in retirement than during their working years. So, what’s the average replacement ratio in Zimbabwe?

The Voice of Life fears that as a nation, we might not even know this crucial figure, primarily due to the lack of a comprehensive study on the subject.

Who should undertake this vital research? Perhaps the industry, the Actuarial Society, the regulator, or the government should take the lead. Without a clear understanding of our replacement ratio, we are making decisions and strategies in the dark.

The Voice of Life believes our national replacement ratio could be alarmingly low—possibly as low as 30%. This dismal reality underscores why we have labeled this industry a national disaster.

In conclusion, shedding light on the average replacement ratio in Zimbabwe is imperative. Conducting a thorough study to determine this figure will provide valuable insights for policymakers, industry stakeholders, and individuals planning for their retirement.

By addressing this critical issue, we can work towards mitigating current challenges and ultimately reshape the landscape of pensions and insurance in our nation. It’s time we stop treating our pensions crisis as an afterthought and start recognizing it for what it truly is: a national disaster that requires immediate attention and action.

Let’s rally together, advocate for change, and ensure a secure financial future for our pensioners. After all, their well-being is a reflection of our collective responsibility as a society.

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Physical Address: 7 Lloyd Close, Ballantyne Park, Harare

Website: www.loa.co.zw
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