Treasury confronts legacy of lost pensions

LIVINGSTONE MARUFU

Treasury is pressing the insurance and pensions industry to accelerate compensation for policyholders and pensioners who lost billions of dollars during years of hyperinflation and currency turmoil, as authorities seek to rebuild trust in a financial system scarred by decades of wealth destruction,Business Times can report.

Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said restoring confidence in long-term savings institutions had become “non-negotiable” after repeated episodes of economic instability wiped out retirement savings and undermined confidence in pensions and insurance products.

The renewed push comes as the government attempts to revive a savings culture that collapsed after policy reversals, hyperinflation and currency changes eroded household wealth and left many pensioners impoverished.

According to findings by the Justice George Smith-led Commission of Inquiry, pensioners and policyholders lost more than US$3 billion when insurance and pension values held in Zimbabwe dollars were converted into United States dollars.

Speaking at the recent Insurance and Pensions Commission (IPEC) 20th Anniversary Gala Dinner last week, Professor Ncube acknowledged that the issue remains one of the darkest chapters in Zimbabwe’s financial history.

“One of the most important responsibilities before us remains the restoration and strengthening of public confidence in long-term savings institutions,” Ncube said.

“The issue of pension value erosion remains one of the most difficult chapters in Zimbabwe’s financial history. Many Zimbabweans lost value in their pensions and long-term savings during periods of economic instability and currency transition.

“This was not merely a financial loss. It was also a loss of confidence.”

Professor Ncube said the government remained committed to resolving pre-2009 insurance and pension value erosion and urged regulators and industry players to ensure the smooth implementation of the compensation framework once amendments to Statutory Instrument 162 of 2023 are gazetted.

“We call upon IPEC, pension funds, insurers and all industry stakeholders to work collaboratively and diligently towards the successful implementation of the compensation framework,” he said.

The Treasury chief stressed that the exercise was about more than compensating victims.

“It is fundamentally about restoring public trust and confidence in insurance and pensions as reliable instruments for long-term financial security and dignity in retirement,” he said.

Rebuilding confidence in the sector, he added, was essential for deepening long-term savings, expanding financial inclusion and supporting broader economic development.

The challenge facing regulators remains formidable.

IPEC Commissioner Dr Grace Muradzikwa said the regulator’s history had unfolded alongside some of Zimbabwe’s most turbulent economic periods.

“Like many institutions within the financial sector, IPEC and the industry had to navigate periods of economic volatility, hyperinflation, currency transitions and evolving market dynamics,” Muradzikwa said.

“These experiences were difficult, but they strengthened the Commission’s resolve to improve regulatory oversight, strengthen consumer protection and contribute towards restoring confidence in long-term savings institutions.”

The regulator is now placing greater emphasis on data-driven supervision, digital systems and regulatory innovation as it prepares for a rapidly changing financial landscape shaped by artificial intelligence, climate change and cybersecurity threats.

Authorities also want insurance and pension products extended beyond formal employment to reach informal workers, women, youths, farmers and small businesses.

“Financial protection must not remain the privilege of a few but must become accessible to all Zimbabweans,” Ncube said.

The government’s reform agenda has also expanded IPEC’s mandate to include oversight of the National Social Security Authority (NSSA) and medical aid societies, a move authorities say will strengthen accountability and governance across the wider social protection system.

“Strong regulation is not an obstacle to institutional growth,” Ncube said.

“On the contrary, strong regulation builds credibility, strengthens confidence and promotes long-term sustainability.”

As Zimbabwe struggles to attract sufficient external financing, Treasury is increasingly looking to pension funds and insurance companies as a source of long-term capital to finance infrastructure, housing, energy and agricultural projects.

Professor Ncube described the insurance and pensions sector as one of the strategic pillars underpinning Zimbabwe’s Vision 2030 and National Development Strategy 2.

“Insurance enables businesses, farmers and households to manage uncertainty and recover from shocks. Pensions provide dignity and financial security in retirement,” he said.

“Together, they mobilise long-term savings and generate patient capital required to finance infrastructure, housing, energy, agriculture and industrial development.”

But officials acknowledge that the success of the sector ultimately depends on macroeconomic stability.

“We recognise that without stability, long-term savings cannot retain value. Without stability, pension systems struggle. Without stability, confidence in financial institutions weakens,” Professor Ncube said.