Zimbabwe's pension crisis: Full compensation for 2008 losses may take 100 years

Zimbabwe's pension funds have sounded the alarm over their inability to compensate retirees who lost their life savings during the 2008 economic collapse, warning that, at current fund levels, full restitution could take up to a century without urgent government intervention.

The stark warning was delivered at the Zimbabwe Association of Pension Funds (ZAPF) annual congress, where industry leaders admitted the sector lacks the capacity to meet the overwhelming liabilities stemming from the hyperinflation crisis and subsequent dollarisation in 2009.

"The reason why they are saying that is because the sizes of their funds are now small," ZAPF chairman Williefaston Chibaya told the Zimbabwe Independent in an interview.

"Besides the size of the funds being small, there is also the challenge around the results that actually came out which showed that some of the pension funds would have to take 100 years to compensate. Hence, the reason why they are now calling for government help."

Veteran financial services executive and pensioner Luke Ngwerume echoed these sentiments during the congress, describing the situation as financially untenable for the industry.

"The reality is that it's unaffordable for the players to do this on their own. It's not possible for pension funds to adequately support or augment pensions that people are earning right now," Ngwerume said.

Citing one example, he noted: "One organisation did a calculation and if they sold all their assets, each active member would get US$2,000 - without even considering pensioners. Another fund has assets worth US$4 million, but to compensate their members adequately, they would need US$6 million."

Ngwerume called on authorities to acknowledge their role in the crisis and provide solutions.

"If a higher level creates a problem for the lower level, the lower level cannot fix that problem. It's impossible with all the best will in the world," he said. "There is a crisis here. We cannot keep burying our heads in the sand."

Livingstone Magorimbo, Group Chief Actuary at First Mutual Holdings Limited, presented a sobering assessment, suggesting that the pension sector's financial hole is too deep to recover using traditional compensation models.

"To be honest, the reality is that we simply don't have the money in our wallets to pay this compensation," Magorimbo said.

He proposed a pragmatic pivot toward rebuilding, using targeted, means-tested support for the most vulnerable pensioners - a model adopted by several South American countries following similar financial crises.

"In Brazil, for example, they raised contribution rates to 30% to 35% over five years to rebuild solvency. You cannot extract from pension schemes what is no longer there. Acceptance is the starting point for progress," he said.

However, not all delegates supported this view. Former Deputy Prime Minister Arthur Mutambara criticised asset managers and insurers, arguing that the money wasn't lost but had been invested.

"Insurance companies, investment companies and banks did not keep money in a vault to be devalued. They spent that money buying bricks, cars. So, money was technically lost, but not destroyed," Mutambara argued. "How are we addressing the issue of honesty and integrity?"

Cuthbert Munjoma, director of pensions at the Insurance and Pensions Commission (Ipec), outrightly rejected suggestions to abandon compensation.

"Dismissing compensation is not acceptable - neither from a regulatory nor a government policy standpoint," Munjoma stated.

Following Zimbabwe's economic meltdown in 2008 and the switch to multi-currency in 2009, millions of retirees saw their pensions wiped out. A Justice Smith-led Commission of Inquiry later estimated that the pension industry's obligations were worth US$5.1 billion - exceeding Zimbabwe's GDP at the time.

Despite the establishment of compensation mechanisms under Ipec's guidance, industry leaders now warn the existing framework is unworkable without state intervention.

As the country continues grappling with economic instability, the long-delayed reckoning over pension losses remains unresolved - with thousands of retirees still waiting for justice.