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SENATE HANSARD 06 JUNE 2018 VOL 27 no 48


Wednesday, 6th June, 2018

The Senate met at Half-past Two o’clock p.m.





          THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA):  Madam President, I move that Order of the Day, No. 1 be stood over until Order of the Day, No. 2 has been disposed of.

          Motion put and agreed to.



          Second Order read: Second Reading: Money Laundering and Proceeds of Crime Amendment Bill [H. B. 4, 2018].

          THE MINISTER OF FINANCE AND ECONOMIC DEVELOMENT (HON. CHINAMASA):  Madam President, it is my honour and pleasure to move the Second Reading of the Money Laundering and Proceeds of Crime Amendment Bill [H. B. 4, 2018].  By way of introduction Madam President, the proposed amendments to our anti money laundering legislation as contained in the Bill currently before this august House, have been informed by deficiencies which were identified by the Eastern and Southern Africa Anti Money Laundering Group (ESAMLAG), through a peer review procedure commonly referred to as the mutual evaluation process.  The evaluation comprises of an analysis of the adequacy of a country’s anti money laundering and combating financing of terrorism, legal and institutional frameworks.  Zimbabwe is an integral participant in this process as it is a founding member of ESAMLAG, which is an 18 member State regional body dedicated to fighting cross-border illicit flow of funds, terrorism financing and proliferation of weapons of mass destruction.

          Madam President, the assessment of Zimbabwe’s legal and institutional framework was carried out against internationally accepted standards referred to as the financial action taskforce recommendations.  The principal objective of the Bill therefore Madam President, is to enhance the country’s compliance to those aforementioned international standards of anti-money laundering and countering the financing of terrorism as developed by the Financial Action Taskforce (FATF), the global standards setting body.  Madam President, Zimbabwe’s latest mutual evaluation report was adopted during the 17th ESAMLAG Council of Ministers meeting in Victoria Falls in September, 2016 and a number of deficiencies were identified.  The country’s laws and institutional arrangements level of compliance with the 40 recommendations was rated as follows:

          We were found to be compliant with 11 recommendations, which meant that there were no shortcomings in those 11 areas.  We were considered largely compliant with eight recommendations, which meant that there were minor shortcomings in the eight areas that were noted.  We were assessed to be partially compliant with 15 recommendations, which meant that there were sufficiently serious shortcomings in 15 areas considered.  Finally, we were not compliant with six recommendations, which meant that there were major shortcomings in six of the areas that were observed.

          Zimbabwe is therefore expected to address all identified legislative deficiencies as a matter of urgency after which focus should be on implementing the provisions of the laws to ensure effectiveness in fighting money laundering and the financing of terrorism.  Madam President, with specific reference to provisions of the Bill, with that background, I shall now proceed to highlight some key provisions of the Bill.

          Madam President, Clause 3 of the Bill will make it mandatory for the Financial Intelligence Unit and competent supervisory authorities to draw up and implement supervision and monitoring programmes taking into account the money laundering and terrorist financing risks related to financial institutions and other designated non-financial businesses and professions.  This will aid in early detection of suspicious transactions being carried out through agency of these institutions and will allow the State to take any remedial actions that may be required timeously.

          With respect to the Financial Intelligence Unit, Clause 4 of the Bill provides for the continued operation of the Financial Intelligence Unit which was initially established under the Bank Use Promotion Act [Chapter 24:24], as the Bank Use Promotion and Suppression of Money Laundering Unit.  The Bill further provides for operational independence of the Financial Intelligence Unit along with the functions of the unit, powers of inspectors, reports of the unit and qualifying criteria for the position of the Director General, specifying the appointing authority and circumstances under which the Director General can be removed from office in order to ensure security of tenure.

          With respect to disclosure on cross-border transportation of currency, bearer negotiable instruments and precious metals or stones, Madam President, the Financial Intelligence Unit currently has no direct access to cross-border cash or currency declaration and disclosure data provided by the Zimbabwe Revenue Authority by travellers.  This has had the adverse effects of limiting the acquisition of financial intelligence and other relevant information that would otherwise assist law enforcement agents to identify potential cases of money laundering and terrorism financing.  As such, Clause 5 of the Bill prescribes timelines for the Revenue Authority to provide relevant information to the Financial Intelligence Unit within 72 hours which will aid in effective monitoring and neutralisation of any cross-border money laundering activities. 

The timeous exchange of information between relevant law enforcement and regulatory institutions is of fundamental importance in addressing crimes related to money laundering.

          Madam President, with respect to accounts identification and correspondent banking, the Money Laundering and Proceeds of Crime Act has no provision that requires financial institutions to satisfy themselves that:

1)   A respondent or associate bank has conducted adequate due diligence on its customers who have direct access to the accounts of the correspondent bank;

2)   That the respondent or associate bank is able to provide the information upon request to the correspondent bank.

Madam President, this has culminated in the termination of existing correspondent bank relationships by international correspondent banks as a part of a security exercise referred to as de-risking.  The de-risking has not just affected Zimbabwe, but a number of African countries including Angola and South Africa among several other developing countries.  For this treason, Clause 10 of the Bill has been introduced for the purpose of addressing the issue of de-risking arising from the country’s failure to satisfy the aforementioned requirements of corresponding banks and more particularly; by obligating a respondent financial institution to provide relevant information obtained about those customers after a process of due diligence is carried out. 

Madam President, the Money Laundering and Proceeds of Crime Act does not require financial institutions to apply an enhanced form of due diligence on business relationships and transactions with natural and legal persons from jurisdictions that are generally considered to be high risk jurisdictions as far as money laundering is concerned. This is an important requirement as prescribed by the Financial Action Task Force which by the way Madam President is an instrument of the Security Council of the United Nations.

          Clause 12 of the Bill places a duty upon the Financial Intelligence Unit to advise various financial institutions of concerns relating to such transactions and the manner in which due diligence ought to be carried out as appropriate when the level of risk associated with the jurisdiction, business or transaction is considered. Under circumstances in which tainted property has been ably disposed of or placed outside of the reach of law enforcement agents, Clause 15 allows a competent court to make an order for the seizure or confiscation of property equivalent in value from the defendant whether or not such property is tainted property or represents proceeds of crime.

          With respect to forfeiture of assets by the National Prosecuting Authority, Clause 17 of the Bill seeks to establish a specialised unit within the National Prosecuting Authority which will aid Prosecutors in the prosecution of crimes related to money laundering activities. The unit shall be manned by prosecutors especially designated by the Prosecutor General, although after obtaining relevant approvals from the Board and responsible Minister, the Prosecutor General may engage any other person with suitable qualifications for the purposes of achieving the desired objectives. The unit shall work in conjunction with Zimbabwe Anti-Corruption Commission, Zimbabwe Revenue Authority, Financial Intelligence Unit and other supervisory bodies in order to facilitate the tracing, identification and recovery of any proceeds of crime.

          With that Madam President, I now move that the Money Laundering and Proceeds of Crime Amendment Bill [H. B. 4, 2018], be now read a second time. I thank you.

          *HON. SEN. MASHAVAKURE: Madam President, there are a few things which I need clarification on. My first question is there a certain limit which can be talked about as laundering. As an example, a minimum of $5 would it constitute laundering or it should be any amount which I may bank with my institution and which may be termed as laundering since it will be dirty money. The second point of clarification I want is now that we are dealing with financial institutions including stock exchange, can I buy shares in these institutions and then take this money out and use it overseas such as in Britain? I wish this Bill would clarify the case of dirty money and how laundering may be prevented.

          We understand that when we talk of laundering, we are talking of an international racket which involves some of these international corrupt people. Therefore, we need to get a law that will protect the country and also create a conducive atmosphere for people so that people feel safe to bank their monies.

          HON. SEN. RTD. BRIG. NYAMBUYA: I rise in support of this very important Bill Madam President. To some people, this Bill might appear abstract, or perhaps not relevant to us here in Zimbabwe and Southern Africa, and perhaps in Africa in general. Let me state that, as we all know we are now living in a global village. This world is very much a global village. what happens in Europe, Asia, America, indeed elsewhere in the world affects us directly or indirectly and where it involves issues of security, I think we need to pay attention. It is not only paying attention, but I think we need to pay very serious attention - because it involves a question of life and death.

          At the present moment, it is common knowledge that we are going through a very difficult situation in terms of security. We have witnessed very serious terrorist attacks in America, Russia, Britain, France and nearer home, Egypt, Kenya, Tanzania and what happens in Kenya or Tanzania can happen here in Zimbabwe. Indeed, anyone of us can be affected by aspects and issues of terror when you are out on business or holiday in Europe, America or elsewhere. That therefore, makes it very important for us as a country to be part and parcel of the effort of the war which is currently being waged to try and ensure that we fight global terrorism which is occurring at this very moment in the world.

          We know that people are using proceeds from oil, drugs and so many commodities, some legal or illegal to finance terrorism. People are using ill-gotten resources and laundering those resources to kill human beings. It is in this light that I indeed welcome this Bill which has been brought by the Minister to try and ensure that we are part and parcel of that global effort which is being waged so that we fight these serious acts of money laundering as well as terrorism. What makes this very relevant is the fact that the General Assembly by resolution 1267 of 1999 has actually passed or made this resolution which calls upon member states to ensure that they take all necessary measures which are outlined in the resolution to ensure that we are part and parcel of this very effort which is being made to arrest money laundering and ensure that we fight global terrorism. I therefore commend the Minister for this very noble and timely effort and give him 100% support for a job well done. I thank you.

          *HON. SEN SHOKO: I want to make my contribution on this Bill on money laundering.  The Minister by introducing this Bill into this august House has done something which is very wonderful.  We have known that there has been some illegal movements of monies internationally and this includes in Zimbabwe.

I need some clarification on what has been happening in our country where we have money changers on the streets.  Is that money laundering?  What I know is that these people who are involved in money exchanges on the streets are using money which comes from some corrupt people, the big fish, some of who may be out of the country.  What we know is that monies accumulated in this way can be used for supporting terrorism and I believe that if the Bill does not include the removal of illegal money exchangers on the streets, we will be doing a shoddy job, because these people can be used by drug traffickers and terrorists in money laundering.

The reason I am saying that is that when you go into these streets, the illegal money exchangers have a lot of monies and we are talking of US$100 notes and these are new notes, not old and dirty notes.  What surprises me is these are ordinary people on the streets.  How can they afford to get such monies and yet in our case, we go to the banks and we do not have money from the banks?  We are encouraged to use plastic money.  As a result, I think we need to craft a law which will prevent these illegal money exchangers on our roads because our people will be used in working for these corrupt people.  To tell you the truth, these money exchangers who are on the streets again, if you look at them, they do not look like people who are affluent, like people who are in business.  Then you ask yourself where are these people getting the money that they are using on the streets?  It means they are using dirty money.  This is money laundering.

Minister, this is a very good Bill, but it should be an all inclusive Bill which will include the coverage of the people who are financing these people on the streets and also the removal of these illegal people from the streets.  I was born in 1954, I am 66 years old.  I have worked for five different governments.  When I talk of different governments, I mean different leaders, governors or different presidents.  I was a civil servant before independence and I also worked for the short lived Muzorewa regime.  From there, I worked for the government headed by Cde. Robert Mugabe.  I am now working under the government of the current President Hon. Emmerson Munangagwa.  I have never seen people carrying out money exchanges on the streets.  It is the first time for me and I have a cultural shock.  Minister, may you please inform this august House whether there is a law which is now redundant which aims at controlling money trades on the streets.  Madam President, I seek clarification on these issues. 

THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA):  Thank you Madam President. I want to thank the Hon. Senators who have contributed in support of the Bill.  I will do my best to clarify the legislation.  I will also do my best to address the concerns raised by the Hon. Senators.

Hon. Sen. Mashavakure asked the question whether there is any threshold for monies to fall under the anti money laundering legislation.  There is no threshold.  What I think is important is what is the source of that money.  What the legislation is seeking to fight against is not allowing ill gotten wealth from drugs and crime to be cleaned into our systems.  That basically is the major thrust of the legislation and this is coming.  As I pointed out, it is an initiative of the Security Council which was prompted by the proliferation of drug money, ill gotten wealth and also even lawfully acquired money being used for unlawful purposes, in this case financing terrorism. 

So, in order to kill that menace, to put a stop to that menace, they set up these financial action taskforces which in turn has required that every member of the United Nations must belong to a group and is required to pass legislation that will conform to the standards set by the financial action task force in order to fight corruption, in order to fight financing of terrorism, in order to fight a lot of other ills which are a menace, not only to the global economy, but to the political stability of the world.  So, in a nutshell, that basically is what this legislation is about. 

You then go on to ask whether you can use your money to buy shares and so on.  The short answer is that the legislation which is being put into place is to achieve a paper trail for all the transactions that you do, which is why there is discouragement against cash based transactions.  In other words, cash based transactions where people move with cash in suit cases to buy very high value items.  They want to buy a house, say in Harare, and they come with a load of US$2 million to buy that house.  So, the legislation is basically saying this cannot happen.  You must disclose and there must be transparency so that we are able to detect the source of the money and the burden is actually falling on our financial institutions.  Those that fail to comply end up being delisted and being cut off from the payment system of the world, which basically brings me to the third point that you made, Sen. Mashavakure, whether this stringent requirements – are they a blessing or a burden to Zimbabwe.

To put it frankly they are a burden but we have no choice but to comply.  If we do not comply - we risk as a country, as our financial institution, from being cut off from the financial payment system of the world.  In order to pay, for instance, for our imports whether it is to Germany or to the United Kingdom, we do it, we transact it through the banking system through correspondent banking system.  Now, if we are seen not to be complying, you then find that the correspondent banks will cut off relations with us - a point which I highlighted in my speech.  It has happened in a more serious way than in Zimbabwe in Angola where they were basically cut off because of non-compliance.  So, every effort should be made to seek to comply with those international standards set out by the financial action task-force.  In other words, I am saying it is a burden, but it is a burden we have to carry.  It is a cross that we have to carry, we have no other choice. 

          For instance, some of the requirements – when they started, the requirement was that each bank should know its customer, what they call Know Your Customer (KYC), otherwise, when they do any assessment or evaluation, if they find any transaction where a bank is unable to explain and understand its customer and its businesses and cash streams, that bank will be sanctioned.  They are now going even further to say, you should know your customer’s customer.  In other words, a bank is required not just to know its customer, but its customer’s customer. This is basically explained as, if you receive huge amounts of deposits in your bank, certainly if you know your customer, you would know whether that customer has the capacity to give you $2 million when all along the track record shows that the customer was depositing $10 to $100.  So, when the customer deposits $2 million outside the track record or pattern, you should ask that customer, ‘who is your customer?’ What is the nature of the transaction?  Those are the issues that in fact, we are talking about.

          Hon. Sen. Nyambuya, thank you very much for your contribution.  I agree with you that to most of us, this Bill is not quite relevant but it is very much relevant to anyone in the financial sector.  I am talking about the commercial banks.  Anyone who has to make a remit a payment outside Zimbabwe will know that this legislation exists and you must comply.  If you do not comply, then you are running into problems as a bank, you get cut off from the rest of the global payment system.  I agree that is not quite relevant as of now because currently as a country, we are still very much isolated, we are cut off from the global economy.  Even then, we find that correspondent banking relationships are now being cut off from us, a problem that gives headaches when you want to make payments outside.  As you all know, all payments in US$ all pass through – if they are coming out or coming to Zimbabwe, any inflows into Zimbabwe are approved and pass through the Federal Reserve of the United States of America (USA).  If we make any payments for our imports in US$, again those payments pass through the Federal Reserve of the USA, that is where they actually say, ‘this payment, we will not allow or this one we will allow,’ because they may consider it not complying with the standards.

          We are seeking to become an active member of the global economy both politically and economically.  This issue is very important; it requires that we comply with the legislation.  It also requires that we change our legislation in order to comply with the standards, with the recommendations, which I mentioned in my Second Reading Speech. 

          Hon. Sen. Nyambuya, as you rightly pointed out, we are in a region where there is evidence of terrorist attacks.  You mentioned Kenya and Somalia, so it is very important that we keep the wolf at bay and that we do not get affected here.  Once they find evidence that we are not complying, that there is money that is flowing into Zimbabwe which cannot be explained with respect to its source and purpose, we get into real serious problems.  As you rightly pointed out and I agree with you, we are basically saying, proceeds from lawful sources can be used for unlawful purposes or to finance terrorism.  So, again we need to worry about not just the source of the money, which is lawful, but the purpose to which the money is to be applied. 

          However, there are also instances where drug money, ill-gotten wealth can be used for lawful purposes and that should also be our concern.  Generally, what happens is that those who traffic drugs or things of that nature will want to clean up their money and to do so, they come and buy a house.  Once they buy a house, it is now a legitimate asset, which if they dispose or rent it out, it is now considered lawful money.  Again the legislation deals with those aspects and there is promotion of movement away from cash-based transactions.

          There is encouragement for a cashless society because at least, it builds a paper trail where there can be interventions in inappropriate places.  So, I thank you Hon. Sen. Nyambuya for supporting the Bill.

          Hon. Sen. Shoko, the street vendors, I call them money changers on our street, it is a matter that we have already addressed in the legislation which was enacted here.  We are encouraging the setting up of lawful bureau de change and already, there have been many registered almost countrywide.  We are discouraging and fighting against people who change money on the street.  What remains now is to train the law enforcement agencies, law officers, prosecutors and magistrates so that they understand this kind of crime which tends to be a technical crime.  So, we are in the process of doing that, retraining so that people can get arrested and prosecuted.  If you arrest and the person who has arrested has no clue what the nature of the crime offence is, you can be sure that no prosecution can be successful.  So, essentially, Hon. Sen. Shoko, the legislation is in place and what remains now is training and enforcement.

          Sometimes people wonder where the money may be coming from.  I really do not know, but let me give you some of my suspicions; currently, if you are an artisanal gold miner, we pay them 70% in US$ and 30% in bond notes.  This is to encourage more gold production.  We also do the same with tobacco farmers.  What they do with their money, we really do not know.  So, the point I want to make is we want to deal eventually with these challenges so that we can move more decisively and from a more informed position. Currently I think the information is not adequate in terms of the basis on which we can act. I just gave you two possible sources of where the money you are finding on the streets may be coming from. I really do not know what they do with that money. More-so, I am sure you are aware that in terms of our gold production, infact, we are going to meet our projected targets for this year. As you know from 2012, we were sitting at 12 metric tonnes of gold and by December last year, we had moved to 24, 5 metric tonnes. We think that we can further move it maybe possibly to 30 metric tonnes and now you will find that the contribution of these small scale miners or artisanal miners is now about 54%. They have outstripped the big gold miners and we are paying them as I said, 70% in Unites States Dollars and 30% in bond notes. It is an issue that I think we need to address eventually and with those remarks Madam President, I now move that the Bill be now read for the second time.

          Motion put and agreed to.

Bill read a second time.

Committee State: With leave, forthwith.



House in Committee.

Clauses 1 – 24 put and agreed to.

House resumed.

Bill reported without amendments.

          Third Reading: With leave, forthwith.



          THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Madam President, I now move that the Bill be read the third time.

          Motion put and agreed to.

          Bill read the third time.



THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT: (HON.CHINAMASA): Madam President, I move the motion standing in my name:

THAT WHEREAS in terms of section 2 of the Commissions of Inquiry Act [Chapter 10:07] on 24th July, 2015, the President through proclamation No. 8 of 2015 (Statutory Instrument No. 80 of 2015), established a Commission of Inquiry in the Conversion Process used in the Conversion of Pensions and Insurance Benefits from Zimbabwean dollars to United States dollars to provide the Insurance and Pensions Industry a transparent process for addressing the afore-said conversion;

WHEREAS further to the said Proclamation, the Commission chaired by Justice (Rtd) L. G. Smith produced a report of the Commission of Inquiry into the Conversion of Insurance and Pension Values from the Zimbabwe dollar to the United States dollar dated March 2017;

WHEREAS the Commission of Inquiry was, in the opinion of the President, for the public welfare;

NOW, THEREFORE, the House is requested to take note of the report of the Commission of Inquiry into the conversion of Insurance and Pension Values from the Zimbabwe dollar to the United States dollar dated March 2017, as tabled by the Minister of Finance and Economic Development.

As Hon. Senators will recall, the Commission of Inquiry into the Conversion of Insurance and Pension Values from the Zimbabwe dollar to the United States dollar was established in terms of section 2 of the Commission of Inquiry Act [Chapter 10:07].  The Inquiry was conducted over an 18 months period from September 2015 to March 2017 and covered a 20 year period from 1996 to 2014.  A nine member Commission comprised of Mr. Justice L. G. Smith as Chairman, Mrs. Mutandwa, Mr. I. Chirume, Dr. G. Kanyenze, Mr. A. Daka, Mr. T. Maswera, Mr. B. Muchemwa, Mr. M. Tarusenga and Mr. G. Dikinya (now deceased), was appointed by the former President of Zimbabwe and had conducted the inquiry.

Madam President, the Commission was mandated to investigate the following issues among others:

i)                  to establish the total value nature and type of assets owned by insurance companies and pensions funds;

ii)               to determine the causes of loss of value of insurance and pension benefits;

iii)            to assess the conversion methods and processes of Zimbabwe value insurance and pension assets and liabilities to United States dollars values;  

iv)            to establish the extent of prejudice if any to policy holders and pensioners;

v)               to recommend compensation where prejudice has been established;

vi)            to examine instances of regulatory failure and

vii)         to assess the soundness of the industry, that is the pensions and insurance industry and the role of the insurance and pension sector in the economy.

Madam President,  in order to unpack the terms of reference, the Commission conducted its investigations through public hearings across the country, meetings and workshops and also collected data through various means such as interviews, questionnaires and audio recorded oral evidence among others.  The institutions investigated included all licensed life companies, pension fund administrators, pension funds, funeral assurance companies, the Guardian’s Fund, the Government pension system and the National Social Security Authority (NSSA). 

I am glad to advise that the report of the Commission of Inquiry was gazetted on 5th March, 2018 through General Notice No. 149/2018, hence is now available for public consumption. In brief, let me give some highlights of the report.  There were concerns raised by the public, numerous complaints were raised by the public over a number of pensions and insurance issues as I will summarise just now. There was a complaint to do with commutation of the full pension. 

Madam President, upon dollarisation, a number of occupational pension schemes and NSSA paid once off pensions to pensioners upon dollarisation and they argued that the amounts were too small, that is the complaint, and the amounts were too small to warrant monthly payments.  Pensioners were thus paid commutations as small as a few hundred dollars or US$1 000 or US$2 000 in rare cases although life time pensions were expected.

Complaint number 2 was to do with pension contribution arrears.  A number of pensioners raised concern that although their employers deducted monthly pensions contributions from their salaries, for all their years of service, the contributions were not remitted to the respective pensions fund which include the Mining Industry Pension Fund, the Local Authority Pensions Fund, the National Railways of Zimbabwe Pension Fund, the Unified Council’s Pension Fund, the ZUPCO Pension Fund, the Cold Storage Company Pension Fund, the Fidelity Printers Pension Fund and some insurance companies. 

Consequently upon retirement, pensioners could not receive their pension benefits from the pension fund who had not received the pension contribution from the respective employers.  As at December 2015, cumulative contribution arrears for the post dollarisation period amounted to about $328.5 million.  It is however sad to note that some of the sponsoring employers who had outstanding contributions to pension funds have since been liquidated whilst others are no longer viable.

Madam President, with respect to value lost during hyper inflation; pensioners across all sectors who retired between 2007 and February 2009 lost their pension lump sums largely due to the adverse impact of hyperinflation which wiped off their balances in banks.  Upon demonitisation of the Zimbabwe currency, pensioners only received US$5 as their one-third lump sum benefit payment.  With respect to value lost through conversion on dollarisation, Madam President, lack of transparency on the conversion methods, processes and formulae used by insurance companies and pension funds on the dollarisation of the economy in 2009, was sighted by the Commission of Inquiry as one of the causes of loss of value.  Most complainants indicated that their pensions were reduced from several hundreds or thousands of dollars to a few US cents.  One pensioner showed a pension cheque for US 8 cents sent to him by a life insurance company in 2014 as settlement of a life policy and no explanation was offered on how such a figure was arrived at.

          With respect to insurance policy holders, they were unhappy as reported by the Commission of Inquiry with the small benefits that were offered as the total value of the insurance policy paid as final settlement in lieu of education policies, endowment policies or retirement annuities which amounted to between US$10 and US$40. 

Let me now Madam President, report on the major findings of the Commission of Inquiry.  On total industry assets and their breakdown, the inquiry established that total assets in the insurance and pensions industry including NSSA were worth about $5.13 billion in December 1996, $3.69 billion in December 2008 and $5.1 billion in December 2014.  Asset values for the period 1996 to 2008 are however as reported by the Commission; it feels that they were understated due to the fact that big institutions such as Old Mutual, First Mutual, ZB Life, Fidelity Life and Camaton Consultants failed to provide accurate, consistent and reliable asset values for the period prior to dollarisation.  The assets were mainly invested in property and listed equities – this is as per finding of the Commission, in order to hedge against inflation. 

But, contrary to the general perception in some quarters of the industry that most assets were lost through investments in bonds and money market during the hyperinflation period, such investments were however very negligible during that period from 2003 to 2008.  The reduction in asset values during the period prior to 2008 was largely attributed to misappropriation of assets and excessive expense structures as opposed to hyperinflation.  Of particular interest is the revelation that 85% of the existing assets in the insurance and pension industry were acquired prior to dollarisation in 2009, which implies that the majority of assets survived hyperinflation.

Madam President, the inquiry also revealed that loss of value in insurance and pension benefits was mainly caused by macro-economic regulatory and institutional factors. 

Let me now turn to the macro-economic causes of loss of value.  Madam President, inflation, currency debasing and the exchange rate used during the demonitisation of the Zim dollar to the US dollar in 2015 were identified as major factors that caused pensioner and policy holder prejudice.  Inflation resulted in loss of benefit values through the erosion of fixed premiums and pension contributions that were not indexed to inflation.  In addition, negative real investment returns of fixed income securities such as bonds, Treasury Bills and money market instruments resulted in loss of value,  hence insurance companies and pension funds divested from such investments during the period 2001 to 2008.  In other words, they moved from money market investments like bonds, Treasury Bills and so forth.

Madam President, the removal of 25 zeros which we call currency debasing – during the period August 2006 to February 2009, resulted in insurance companies and pension funds technically extinguishing their obligations to policy holders and pensioners without any actual payments being made.  The industry players duly removed zeros on promised sum assured or pension benefits when the Zim dollar currency was debased.  This resulted in abnormally low Zim dollar benefit values which upon conversion to US dollars were for some pensioners as low as US 5 cents and in most cases to zero despite several years of contributing to pension funds.  Meanwhile, assets that were supporting insurance and pension liabilities were transferred to shareholders of insurance companies or became surpluses in some defined contribution pension funds.

The exchange rate of US$1 to 35 quadrillion Zim dollars which was used when the Zim dollar currency was demonitised in 2015 prejudiced insurance policy holders and pensions as it reduced the already worthless Zim dollar values that had been deposited in individual bank accounts to just a few US cents or at a maximum of US$5.  Madam President, with respect to regulatory causes of failure, regulatory failure on the part of Government and the regulator for insurance and pensions was identified by the Commission as having contributed to the loss of value.  The Commission feels that Government then failed to guide the industry during hyperinflation and currency debasing and during the conversion of insurance and pension values when the economy was dollarised.

          Furthermore, the delayed demonetisation of the Z$ currency resulted in various entities in the industry applying their own conversion methods which were prejudicial to policy holders and pensioners. On the other hand, IPAC failed to conduct on site supervision and investigate its licensees, allowing arbitrary insurance product terminations by insurances companies, poor investment management practices, poor record keeping and failure to deal with predatory administration expenses, among others.

          With respect to micro or institutional level causes of prejudice, Madam President, loss of value is also attributable to micro or institutional level causes such as failure to index contributions, premiums and benefits to inflation, arbitrary and prejudicial methods from Z$ to US$, arbitrary terminations of products and closures. 

          Pension Contribution Arrears

·       Failure to separate insurance pension and shareholder assets,

·       poor record keeping as most institutions could not account for assets,

·       investment returns and individual contributions records,

·       poor corporate governance practices, unsustainable administration and other expenses of up to in some instances 100 per 300 % of pension contributions.

          Hon. Senators, let me now give a summary of the key recommendations made by the Commission and I highlight the following:

          Compensation of Prejudiced Policy Holders

          The Commission is recommending compensation of prejudiced policy holders and pensioners using assets that survived hyper inflation – [HON. MEMBERS: Hear, hear.] – in order to ensure that prejudiced members of insurance schemes and pension funds get their rightful benefits while maintaining stability and confidence in the insurance and pensions industry. The Commission is recommending a compensation framework which takes into account standardized conversion processes that ensure fairness among providers of insurance and pension services or products and consumers of such services and products and this is being recommended for implementation as part of the post inquiry implementation reforms.

          The compensation framework recommended should take into consideration the following:

·       financial unsound conversion methods and assumptions;

·       absence of standard guidance for conversion from Z$ to US$ when demonetisation was undertaken;

·       there should be quantification of prejudice to individual policy holders.

On implementation of post inquiry reforms, the Commission is

recommending that IPAC (the Commission which supervises the pensions and insurance industry) spearheads the implementation of approved post inquiry reforms. The reforms including enforcing the recommended compensation framework require full time and specialised skills. Hence, IPAC is being recommended on the basis that it is the industry regulator and therefore best placed to assume this responsibility.

          Next is bringing NSSA medical and legal aid schemes under the regulatory purview of IPAC. Currently Madam President, NSSA and medical aid schemes are not prudentially supervised, hence may not be providing value to policy holder or their members. The Ministry of Labour and Social Welfare will remain the parent Ministry for NSSA whilst the Ministry of Health and Child Care will remain the parent Ministry for medical aid schemes and societies. This is as per recommendations of the Commission.

          However, with respect to technical prudential supervision aspects of insurance and pension products, the recommendation is that Zimbabwe follows international best practice as exemplified by other jurisdictions such as Ghana, Kenya and Uganda among others who have placed social security schemes under prudential supervision of their insurance and pension regulators. Furthermore, the recent mushrooming of unregulated legal aid schemes collecting monthly premiums from members of the public also calls for regulation to enhance accountability, transparency and the protection of policy holders. To consolidate the regulation of insurance and pension business under one statutory body, the Commission has recommended that NSSA medical and legal aid schemes be regulated under IPAC.

          With respect to IPAC itself, the Commission made certain recommendations in order to achieve objective decision making, accountability and transparency, as well as to remove regulatory capture, the Commission is recommending enhancement of the operational independence of IPAC from undue political and industry influence through removal of conflicting Board appointments. Serving members, managers of insurance and pension funds used to sit on the Board of IPAC, hence were conflicted. Currently, the Permanent Secretary in my Ministry sits on the IPAC Board. That the Commission felt is not good corporate governance and must stop.

          With respect to record keeping the enquiry observed that entities in the industry do not maintain proper records. Hence in most cases lack data became a hindrance as some issues could not be concluded due to lack of data. In order to ensure mandatory record keeping since the industry is data intensive and requires information to be kept over long periods of time, the Commission is recommending to mandate through legislation the insurance and pension industry a minimum of 100 years for and the commencement of ICT supervision in the sector.

          The Commission in order to protect of insurance and pension services is recommending that the regulator should further be obligated to maintain an independent register of the assets and corresponding liabilities of insurance and pension funds on a product by product basis which is cumulatively adjusted on a year by year basis to take into account changes in the assets and liabilities that happen in each year. In order to safeguard the interests of the pensioners, the Commission is recommending the repeal of the requirement in the Pensions and Providence Funds Act for pension fund assets to be accounted for on a historical cost basis. The recommended legislative amendment is that the accounting should be governed by the Audit Professions Act to ensure that the accounting practices are dynamic and in line with international standards.

          With respect to the appeal process Madam President, the International Organisation of Pension Supervisors to which IPAC is a member, has standards which require that the regulator and regulatory processes be operationally independent from undue political influence.  In line with international best practices and for the purposes of expediency in the handling of appeals, it is recommended that the current appeals process be amended to provide for the establishment of an appeals board, headed preferably by a retired judge or a legal practitioner who is qualified to be appointed as a judge.  The function of the appeals board, it is recommended, will be to handle appeals against decisions of the regulator.  Its determination will be final and can only be reviewed by the high court. 

The Commission further recommends the setting up of the office of the ombudsman of the insurance and pension industry in order to handle all complaints in the pensions and insurance industry coming from contributors, given that current pensioner representative bodies are exploitative. 

With respect to the development of a financial sector development strategy, the Commission noted that the financial sector has operated without a strategic direction over the medium to long term.  In order to guide the strategic direction and developmental role of the financial service industry in the economy, including insurance and pensions banking, securities and micro finance, it is recommended by the Commission that a financial sector development plan which will spell out the role of the sector in mobilising long term capital for national development, confidence building measures and financial skills development and introduction of a skills development levy among others be crafted.

The financial sector development strategy will help promote the emergence of a stable, sound and market based financial system that supports the efficient mobilisation and allocation of resources in particular, and with respect to the insurance and pension industry.  The strategy will help mobilise and promote the investment of long term funds, strengthen and deepen the insurance and pensions industry and its regulation and supervision and develop and deepen the capital markets, their regulation and participation therein.

Madam President, in order to address the industry wide mischief of predatory administration expenses which have averaged 81% of pension contributions and insurance premiums during the period 2009 to 2014, it is recommended that pensions and insurance legislation be amended to empower the regulator to prescribe through regulations acceptable expense types and respective ratios.

Some pension funds, as I pointed out earlier are currently charging administration expenses of up to 300% of contributions.  Madam President, in order to come up with an effective supervisory corrective action orderly exits from markets and policy holder protection on the winding or liquidation of a pension fund or insurance company, it is recommended to legislate for the winding up and liquidation of insurance companies and pension funds in the insurance and pensions legislation. Failed institutions are currently being wound up in terms of the companies Act and the Commission considers this not to be appropriate.

Madam President, non remittance of pension contributions by pension funds dating as far back as the 1990s has prejudiced pension fund members of their entitlements to pension pay out.  Post dollarisation contribution arrears amounted to US$328 million as at December 2015 and currently stand at over US$500 million.  This is money deducted from pensioners but not remitted to the funds.

Considering the adverse impact and industry wide problem of contribution arrears, there is need to review the pension legislative framework to introduce punitive sanctions on the sponsoring employers and respective directors in their personal capacities for non-remittance of pension contributions.

Madam President, with respect to corporate governance - in order to address poor corporate governance practices in the industry including conflicted board appointments, inadequately skilled boards, poor risk management and internal controls, irregular board meetings, owner managed institutions, poor investment management practices, it is recommended that key elements of the national code of corporate governance be codified in the insurance and pensions statutes.

The Actuarial Society of Zimbabwe does not regulate its members and the regulator has over the years not issued comprehensive actuarial guidelines.  It is therefore recommended by the Commission that IPAC should work with the Actuarial Society of Zimbabwe to come up with actuarial guidelines and evaluation methods for assets and liabilities as well as regulating the professional conduct of actuaries practicing in Zimbabwe.

Demonitisation - the recommendation is a revisit of the demonitisation process to ensure fair compensation of insurance policy holders and pensions.  The exchange rate used in 2015 was prejudicial to pensioners and policy holders.  The maximum an individual could get was US$5 and all insurance companies and pension funds received a combined total of less than US$135 000.  The Commission is therefore recommending that the demonitisation process be revisited in order to ensure a fair compensation of insurance policy holders and pensioners.

In order to address, Madam President, many other deficiencies which were identified during the investigation, the Commission is recommending amendment of the Insurance Act Chapter 24:07, the Pension and Providence  Funds Act Chapter 24:9, the Insurance and Pensions Commission Act Chapter 24:21 and the NSSA Act Chapter 17:4 as follows:

·       The amendments which are being recommended to the Insurance Act entails that the Insurance Act should be amended to provide for a maximum fine of level 14 and or 5 years imprisonment for operating an unregistered institutions, which level is not enough to deter institutions that could abuse millions of dollars in public funds.

·       The Commission is also recommending amendment of the provisions to provide for a maximum penalty to be prescribed by the Minister from time to time.

·       With respect to limitation of certain shareholding in an insurer or insurance broker, current legislation does not prescribe limitation of shareholding in an insurer or insurance broker, hence may result in poor corporate governance.  The Commission is therefore recommending that shareholding limits of 25% be placed on individuals or legal persons investing in an insurer or insurance broker.  A five year transitory period is recommended to allow time for these institutions to comply with the new requirement.

·       It is further recommended by the Commission that supervisory approval be required for proposals to acquire an interest in an insurer or broker.

·       With respect to commencement of business after registration the Commission is recommending that in order to ensure that an institution is fit to underwrite business immediately after registration, it is recommended to oblige all registered entities, that is, insurers and brokers to commence business within 90 days, failure of which the regulator will cancel the licence.  This will also address the challenge of seeking a licence for speculative purposes. 

          Madam President, currently, legislation prescribed a 90-day period within which a society should seek registration after its formation.  The effect of this provision is that a society is permitted to operate for three months without being registered.  The Commission is recommending that this provision be repealed and replaced with a provision that requires IPEC to prescribe the licencing requirements from time to time.

          Madam President, cross-directorship among IPEC licencees is a recipe for incestuous relationships and prejudice of policy holders and pension contributors through inter-related party transactions or businesses.  In view of the challenges associated with cross directorship, it is recommended that restrictions be placed on cross directorship among IPEC licencees in order to avoid conflict of interests.  The current legislation provides that the Commissioner should notify a registered insurer in writing that he/she proposes to cancel its registration.  It is recommended that the word ‘proposes’ be replaced by ‘intense’ since the former has a connotation of begging or seeking concurrence.

Madam President, safeguarding the assets of an insurer is critical for the maintenance of a solvent and stable institution that meets liabilities as they fall due.  In order to avoid instances where assets are abused by shareholders or management which may result in prejudice to policy holders, it is recommended that legislation provides for protection of assets through, among other means, denying an insurer or broker to encumber policy holder assets to cover the insurers’ or brokers’ business liabilities.

The section requires registered insurers to notify the Commissioner of any changes in the organisation within six months of the year end.  As such, the regulator gets to know of changes of significant interests or any such material changes in the institution such as the resignation of a Chief Executive Officer (CEO) well after the event.  It is recommended by the Commission that the section provides that IPEC should be advised immediately of all key developments, including the resignation of key functionaries.  Similarly, changes in key personnel such as the CEO, Compliance Officer or Finance Director should not take place without the approval of IPEC and the regulator who should do a fitness and probity test before such appointments are made.

Furthermore Madam President, the insurer should be required to notify all policy holders in writing, of any changes of significant interests or the rebranding of the institution.  The complaints received from members of the public revealed that policy holders were often not aware of changes in the name of an institution; for example, Southampton, which changed to ZB. Others were not aware, their insurers folded some years back.

Let me now dwell on the recommended amendments to the Pension and Provident Funds Act.  A number of public complaints relating to inadequate communication with respect to major changes in their pension funds such as conversion of values from the ZW$ to the US$, amendment of rules, change of fund administrators, computation of benefits and contribution history were received.  Accordingly, the Commission recommended that; a new section on ‘communication with pension fund members’ be inserted in order to enhance disclosure and accountability to pension fund members. 

On objectives of the Act; the core principles of pension fund regulation as espoused by the International Organisation of Pension Supervisors require objectives of a pension primary legislation to be clearly stated.  The objectives of the Act are not clear, hence it is recommended that they explicitly provide for the registration and de-registration of pension funds, provident funds and fund administrators, management of troubled pension funds, provident funds and fund administrators and their dissolution and to promote and protect pension contributors and the rights of pensioners. 

Currently, Madam President, financial statements for the insurance and pension industry are not standardised and camouflage critical information such as unsubstantiated operational expenses through salaries and insider loans.  The Commission is recommending that every pension fund be required to maintain books of accounts for at least 100 years.  It is also recommended that the time frame within which financial statements should be submitted to IPEC be reduced from the current six months to three months in line with the practice in the banking and security sectors.  In addition, the financial statements must be in a format prescribed by IPEC to ensure enhanced disclosure for transparency and accountability. 

It is recommended that a new paragraph be inserted in sub-section 4, which requires that all newly acquired assets be transferred into the name of the pension fund within three months after payment of the full purchase price.  The mischief is that some pension funds assets are taking long to be transferred and some are not being transferred at all.  It is recommended again by the Commission that current provisions that allow pension fund assets to be registered in a nominee name be repealed.  The basis is that the Financial Action Taskforce Standards on anti-money-laundering and combating financing of terrorism requires identification of the ultimate beneficial owner.  The security sector also outlaws recording of transactions in the name of a nominee.

Madam President, it is recommended also, with respect to actuarial valuation of pension funds, that the provision should empower the regulator to exercise its discretion with respect to exemption of some pension funds from complying with the requirements for actuarial evaluation and that this should be amended.  The criteria for exempting pension fund should be specified in the sub-section as opposed to relying on the regulator’s discretion. 

Madam President, with respect to restriction of investment with related parties, the proliferation of incestuous relationships among inter-party transactions, particularly in institutions within an insurance conglomerate, has resulted in policy holders losing money in a number of shoddy deals.  In view of this, it is recommended that legislation be amended by the insertion of the following provision and I quote, ‘notwithstanding anything to the contrary contained in the rules of a registered fund, a fund shall not directly or indirectly;

1.    Grant a loan to or invest more than 5% of the market value of its assets in a party related to the sponsoring employer;

2.    Issue a guarantee against its assets to the sponsoring employer or any of its subsidiaries or its holding company or any other party which is related to the sponsoring employer or its holding company or a subsidiary;

3.    Grant a loan to a member of the fund or make any of its funds available whether by way of investment or otherwise to be utilised in any manner by the fund or someone else in order to provide a loan to a member;

Invest in shares controlled by an officer or a member of the fund or a director of a company, which is an employer participating in the scheme and, (5) without prior approval of the regulator, directly or indirectly acquire or hold shares or any other financial interests in another entity which results in the fund exercising control over that entity”.

          Madam President the current legislation empowers the Commissioner to vary or exempt any fund from the reporting obligations or regulatory requirements set out in the Act. Hence the Commission is recommending that the circumstances under which such exemption is granted be prescribed in regulations, for transparency purposes. The section stipulates that the Commissioner shall, at the end of each calendar year, submit to the Minister, a Report on the Pension and Provident Fund Business in Zimbabwe during that calendar year. It is therefore recommended that the provision should empower the Minister to prescribe in regulations, the minimum disclosure requirements in an annual report that is filed by IPEC and should provide guidelines on the key parameters to be included in the report. The mischief is that the current annual reports are skeletal and their contents are determined by the regulator. It is therefore in addition recommended that the period within which annual reports are lodged with the Minister should be reduced from six to three months after the end of each financial year.

With respect to offences and penalties, the highest level of penalty for noncompliance by the Fund is level six. The challenge is that the standard scale of fines is on the lower side, given that level fourteen attracts a fine of five thousand dollars. In this regard, the cost of noncompliance can be very low compared to the cost of compliance and it is accordingly recommended by the commission that the provision be amended with a view to coming up with deterrent sanctions. A cue can be taken from the 2014 amendments to the Money Laundering and Proceeds of Crime Act in which penalties of up to two hundred and fifty thousand dollars are clearly stipulated. The Commission is of the view that the pensions sector is unique in that it touches on people’s life savings; hence, the need to put in place deterrent sanctions for noncompliance within the provisions of the Act or regulations.

With respect to reporting of non remittance of contributions Madam President, for the purpose of monitoring and ensuring compliance, a new section is being recommended and proposed. That will oblige the principal officer of the fund or any authorised person to submit reports to the regulator; reports of the contributing employees on any changes or reasons for non remittance of contributions. The employer, company, executive director or officer who is regularly involved in the management of the company’s overall financial affairs should be personally made liable for remitting those pension contributions. The recommendation is that all these officers/officials should be made accountable for remittances or pension contributions.

In conclusion, overall Madam President, the Inquiry is recommending that every category of complaints raised by the members of the public during public hearings at a policy, regulatory or institutional level should be quickly addressed. This will restore confidence in the Insurance and Pensions Industry. Currently public confidence in the sector is very low yet the insurance and pensions industry has a key role to play in the social protection and mobilisation of long term capital for development. This august House is therefore being requested to go through the Report of the Commission which is quite bulky. I think it comes in two volumes and I tried to summarise it but you can see I have not done quite a good effort of it. I did not want us to lose the essence of the Commission’s Report but I think I have captured the major highlights of the Commission of Inquiry Report. Hence I would want to urge the Hon. Senators to go through this report and make their views regarding the report known. I thank you Madam President.

HON. SEN. SHOKO: Thank you Madam President and let me thank the Minister for putting through the summary of the Report. I remember asking a question to the Minister regarding when we were going to get results of the Report. He promised me in this House that it was going to be ready in two weeks time and certainly, it was ready within the two weeks’ time. That is why I want to thank him for the diligence that he has shown.

Having said that, there is a person that I am going to thank here and he is not here. He is at home. I want to thank His Excellency Robert Mugabe for pushing through the process of setting-up of this Commission that we are talking about. He is the one who did it and it therefore means to say the ball is now with us. He is at home and he is resting but I must appreciate the role that he played on this particular issue.

Madam President, when this issue is raised I always feel some pain in my heart. I feel the pain in my heart because I was a trade union leader - leading workers - yet they are the people that lost a lot of money from their insurances and pensions savings. There are big pension and insurance companies that we have talked about. They have benefited from the proceeds of the hard working workers of Zimbabwe and they paid-out nothing of that. If you still remember in this House, I said I had an insurance cover that was supposed to give me about two point something million Zimbabwean dollars but when I went there they gave me US$18. The person who handed the US$18 over to me actually ridiculously congratulated me saying Mr. Shoko, you are very lucky to get a payout of US$18. Look at how bad it is when people are used to poverty. How can someone congratulate me for handing over a paltry $18 out of my long time savings? It is very bad; but, having said that, I have read the report including its recommendations. Madam President, I am sorry can I switch to another language?

THE HON. PRESIDENT OF THE SENATE: No. It is impossible and I trust you have read through the rules of debate.

HON. SEN. SHOKO: You advised us Madam President and I never read the rules on my own but I remember you said if I start my debate in English, I should finish that debate in English. Therefore I will certainly complete the debate in English Madam President. I thank you very much.

Having said that, I do not want to continue talking about a lot of issues because I will be repeating what we have read and talked about. I want to agree with the Minister that we need to make amendments on all the laws that he has noted. We need those amendments because we believe with those amendments, the pensions and insurance companies are going to be overseen and supervised. The present scenario is that they are doing what they want willy nilly. We thank the Minister or in particular the Commission for bringing that up.  I said so because what we are being told by the Minister are results of the Commission’s work. It is the Commission that has recommended that we need to have amendments of all the laws that he mentioned about. 

Madam President, I will also want to ask from the Minister to say, who will pay the pensions and the insurance money that were lost by people for companies that are no longer there?  I picked from the Minister’s discussion that there are companies that have been liquidated.  It therefore means, if Senator Shoko had a pension insurance with company A and it is liquidated, who is going to pay for that money because certainly, Senator Shoko needs that money because he had invested in that particular company.

Number 4 Madam President, if you read the report carefully, on the conclusion, there is some conclusion that says, it is recommended that a Committee be set up to now look at how these payments are going to be done.  Presently, they are just statements.  I am talking about myself, when am I going to ZIMNAT, when am I going to Old Mutual and First Mutual and say, you have my money.  I need my money because I had an insurance obligation with you.  When are we going to do that?  Madam President, are we going to get a Statutory Instrument that is going to detail up all the things that the people that have been deprived of their pensions of the assurance can now stand on and go and claim the proceeds that they lost.  Madam President, with those few contributions, I want to thank you. 

+HON. SEN. NCUBE:  Thank you Madam President.  I want to thank the Minister for tabling this report.  I am very happy today for when something is good, we have to acknowledge and thank the person who has brought it.  All I want to do is thank the Minister for bringing the issue of pensions.   I love this issue and I second what Senator Shoko said.  When he was contributing, I was saying, maybe he will take some of the points that I wanted to contribute.  I was also part of the trade union though I had a lower position.  It pains me for those who lost their contributions and they never got to know what happened to their contributions towards pensions.  Minister, it is a very good report that you tabled.  I want to ask, when people were....

+THE HON. PRESIDENT OF THE SENATE:  We have a little problem.  The Minister does not understand Ndebele fully and Honourable Senator, you want the Minister to respond to you appropriately.  What is he going to do if he does not understand? 

HON. SEN. NCUBE: I just want to ask, Minister, do you not understand my language?  I think... 

THE HON. PRESIDENT OF THE SENATE:  That is what I am advising, that is why I am saying so.  It is not out of the blue.

HON. SEN. NCUBE:  I think he will respond.

THE HON. PRESIDENT OF THE SENATE:  He cannot say it.  That is my business.  He advises the Clerks at the Table and they advise me.   This is why I am bringing this to your attention.

HON. SEN. NCUBE:  But I know very well that the Minister understands isiNdebele, that I know very well Madam President.

THE HON. PRESIDENT OF THE SENATE:  Aaah angazi ukuti uthini. 

HON. SEN. NCUBE:  Yes, I know.  He understands me very well.  I think I feel good when I speak in my mother’s language.  Anyway, Minister, I just wanted to say I am happy for the report that you have brought in this Senate.  I think it is long overdue.  Many people lost their money during the period of 2001 to 2008 and I am one of the victims.  I had insurance with ZIMNAT.  Honestly, as Hon. Sen. Shoko has said, these companies should guard against whether it is pension, insurance company or anything that somebody is contributing to.  These companies should guard against people’s monies.  I understand that when these monies are contributed, they are not put into a company; they are put into the banks.  I think it was done purposely so that the people just do not get their money in time because when the money is put into the bank, they should be accruing interest during that time.  What happened to that money?  Hon. Minister, I would like to say, I support this report being brought in so that those who lost their money are going to benefit through the crafted law that you have to this House.  I thank you.

*HON. SEN. SHIRI:  Thank you Madam President for according me this opportunity.  I want to say to the Minister, thank you because we were waiting for this, out there people are crying.  Some have departed in their poverty because their savings are no longer there.  The insurance companies invest the money paid by people and they buy assets but people given peanuts.  I am very happy and thankful because many people will be relieved because of this investigation.  These insurance companies would take valuable money and many pensioners got their money around 2008. 

I came across some who said, they were only able to buy 750ml cooking oil bottle with their money.  If you look at the way that they are living, it is very sad because when they are engaging in life saving, they would think that in future they would be able to live well.  Most of them are saying they burnt some of the documents because of anger and some threw them away.  Some of the shares for those that changed the names some will get 5 cents.  From Old Mutual, I got less than $100 when I was contributing a lot of money and to all other insurances.  I am thankful that at least our Government is showing care and compassion on what happened to the people.  I want to thank you but many people no longer have confidence in insurance companies.  It is now frightening for people to join insurance companies.  There is need to build confidence and this will help people to understand that insurances are not supposed to take advantage or steal from people.  I want to thank you Minister and I support you.

HON. SEN. MASHAVAKURE:  Thank you Madam President.  I would like to extend my thanks as well to the Minister.  I think I had a question with these issues that ended up lapsing last year after staying on the Order Paper, I suspect for more than six months, if not twelve months.  Finally, at least the answer is around. My concern is that the Minister has already talked about the regulators more or less sleeping on the job and failing to direct and guide what was going on in the insurance and pensions sector. My worry now is that for instance, I know for certain that other players have come in – the mobile telephone services are now also providing insurance of some kind of funeral cover for instance.  Some stores where I go to buy clothes also provide some kind of insurance where they say if you join a club and you go into a hospital for two or six days you will get $600 or something.  Can the Minister please help us and make sure that the regulators come in very quickly and start putting order into some of these things – regulating these people so that one of the days we also do not get cheated. 

I am also thinking that before 2000 or around that time, you could get a funeral policy which said you pay for ten years and then you only wait to be buried on the day but when the US dollar came, I know of companies which changed and said just go on paying until we tell you to stop.  When I came to Parliament, they had not told me to stop but somehow it just stopped on its own - which means that probably I lost my funeral cover and you may have to bring a 50kg bag of mealie meal on my funeral.  Thank you Madam President.

            *HON. SEN. MAVHUNGA:  Thank you Madam President.  I am also one of the people who are thankful because of the report that the Minister has presented here.  It is painful for some of us who have worked for a long time.  Our money just disappeared at First Mutual.

I would like to talk about the recommendations where it says that there is going to be an appeals board and the office of the ombudsman that one can approach.  When the money was eroded by inflation, many people died and some are in homes.  Some are depressed because of the loss of their money.  I have a lot of relatives who are living in a sorry state at home because they have lost their pensions.  I think something must be done so that all these people get their money. 

On the issue of non-remittances, I think people should be punished because when you are getting your money, it is because you would have paid.  Now when you are due you cannot get your money.  You find that your company was not remitting any money.  I thank you Minister for the report that you have brought in which will enable people who worked for a long time and were prejudiced to get something so that poverty is alleviated.

+HON. SEN. KHUMALO: Thank you Hon. President….

+THE HON. PRESIDENT OF THE SENATE:  May you please speak in English.

HON. SEN. KHUMALO:  Minister, next time learn isiNdebele so that we debate in isiNdebele because the issue is not easy.  Personally, I feel very disappointed with what happened.  May be for the reason that you are coming back to ask us, we may get some reasonable compensation. 

Before the rolling up of the insurance, particularly with Old Mutual, I was no longer contributing anything but I was getting R2 000 per month as remittance which was converted into Zimbabwean dollars.  At the moment, I am getting close to nothing.  I am now getting $10 or $12 per month.  You can see the pain that I have. I should have done what my friends did.  They sold their shares and bought houses. 

Secondly, I would like to thank the Minister because he highlighted that there is a possibility of people getting something from their contributions from the insurance companies.  That would be very helpful.  I know of people who had heartaches and died.  We buried them because of what had happened.  They sold their houses and converted their money into shares.  Those who did that thought that they had bought houses in low density areas and they sold their houses in the high density.  When this became nothing, those people died and some of them are ill because of the diseases they got after the disappointment of what happened. 

I think that this should be speeded up so that we can get something out of our pension or contributions that we made to Old Mutual. I will talk about Old Mutual because that is the company I dealt with.  They even reduced our assurances at the end.  We had 300 packs – they said there is no money and you better have less.  Why reducing my contributions?  Let them stay as they are than reducing.  You do not know how painful it is when you think about the contributions we have done to Old Mutual.  We hope the Minister will really help so that we get at least something reasonable because at the end of it, I was given $12 yet I had 300. 

When I bought the shares at that time, it was said I had money because I had worked at United Nations. I paid US$56 for each of them.  When I bought the second lot, it was US$100.  I cannot say much.  Honestly, it was a lot of money.  You cannot think of what happened to a lot of other people with all these losses they had.

I had money when I came from the United Nations.  I was able to buy a lot of these shares but now I am given $10 a month yet that time as I am saying, I was getting R2 000 a month.  You can see how painful the difference is. I hope the Minister is going to help and make us get at least something not what we ended up getting.  I thank you.

          HON. SEN. MAKORE: Thank you Madam President.  Most of my points that I wanted to put across have been mentioned though I stood close.   I would want to thank the Minister over this presentation of this particular report.  Firstly, that it represents the truth in an honest manner and that is true representative of the people of Zimbabwe in terms of their loss.  The loss was drastic and we all suffered heavily, you can see we have now grown gray hair, meaning to say we now suit to be Hon. Senators which expresses the elderly age. 

          The fact that we worked in various companies and we were very senior people in those particular companies, the last one that I did work for was Zimbabwe Congress of Trade Unions where I was a director in that particular company.  This was also mentioned by my colleague here Mr. Shoko who was also one of the senior officials – [HON. SEN. SHOKO: Very soon I will be Hon. Shoko] – [Laughter.] – thank you very much Hon. Shoko. 

          THE HON. PRESIDENT OF THE SENATE: But it is pronounced as Shoko.

          HON. SEN. MAKORE: Thank you very much for all your corrections.  Now, that we had showers of such claims which has a director answer from the report that we have just read. Quite a number of people lost as a result of the inflationary conditions that we had, and this was mentioned by the Minister here.  Also failure to transmit the collected pensions by those other companies is a grave mistake. To me it is criminal that even if the inflation was so high, it was so much criminal for those companies.  They may have been liquidated now as is mentioned but some do exist; the fact that they were not honest in the submission of the deducted amounts that were supposed to be remitted, to me is really a grave mistake.  I want to thank the Minister on the basis of this particular report, it covers everything, I do not want to repeat but I saw exactly that you are introducing the Insurance and Pensions Commission (IPEC), I do not know whether my pronunciation is correct.

          It is very important that companies must ensure really that they do remit these pensions they deduct for people, as a result there is wide poverty that is prevailing currently, especially amongst the elderly people.  When you have trust at this particular age that you shall get your money and if you do not get it you will die.  The worst enemy amongst the diseases that I know is stress.  If you get stressed, you die.  In other words if you have hope you will live longer but if you do not have hope you die easily.  I want to advise people that they must have hope for the best all the time so that they survive.  Hon. Minister, I want to thank you very much as a veteran trade unionist and also with a number of experiences in the past.  I thank you for the report that you have submitted.  I hope really that it is going to work or will be implemented.  I thank you very much.

          *HON. SEN. MUZENDA: Thank you Madam President.  My contribution to this is a question to the Minister but before I ask my question, I am very grateful for what he has done in this Bill.  My question is what will happen to those people who lost out on the documentation regarding their pensions and insurances.  We have had lots of people in our constituencies coming to ask about the documentation where the papers have been lost.  They are asking if they are going to lose out, is there a way of retrieving these documents? 

In my capacity as an individual I went to Old Mutual making inquiries on these pensions and insurances and I got the impression that many people were wrongly treated by Old Mutual.  They told me that they did not have anything in my file and there is nothing there could do for me.  From their searches and data collections, they said there was nothing which shows that I was a contributor to their funds and this is very painful to me.  One of their agents had come to me trying to convince me so that I could take another policy with this company.  I told this agent that I lost money through your organisation and I cannot rejoin again.  Therefore, there is need for a retrieval system of all transactions which were made before with this organisation.  I thank you Madam President.

          THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): I want to appreciate Madam President the contributions made by Hon. Senators. What I have tried to do is to present as far as I can the recommendations of the Commission and I want to say something that I did not say in my main presentation, Cabinet went through these recommendations and accepted all of them except one and I will come to it.

          The one which Cabinet did not accept is where the Commission recommended that NSSA should come under the jurisdiction of IPEC, I was felt that NSSA is a workers’ organisation which has its own regulation within the Act and that what may have been missing in the past was enforcement of those regulations, for instance the NSSA Act provides for actuarial evaluations of the benefits and also of the contributions, so that any benefits must match the contributions.  You cannot promise higher benefits when the contributions are actuarially considered not able to support what you are promising; so all that is embedded already except that it was not being enforced. So for that reason, Cabinet felt that given the unique nature of NSSA, it should keep and remain outside the purview of IPEC.  Otherwise, all the recommendations which were made by the Commission were accepted and will be implemented.  Now, with respect to how we go forward, I think everyone accepts that there was prejudice to the policy holders and pension contributors.  The question is what to do as we go forward.  I think it has to be accepted that some loss is now irretrievable I think it has to be accepted.  Like I pointed out they are some insurance or pension funds which are no longer existing and because there was no appropriate legislation to regulate the winding up of those companies, they just wound up.  Clearly, there is no record as to what happened to the assets and so on.  It is something that the Commission is recommending that there should be legislation to govern and regulate troubled institutions such as we have in the banking sector.  It is not currently in the pensions and insurances sector and that has to be sorted out.

          Also not to be retrieved is any loss that may have occurred because of hyper inflation, which is why any initiative in the future to retrieve for policy holders will come from assets that survived hyper inflation.  What do I mean?  As has been pointed out Madam President, and I need to repeat that – when we pay premiums as policy holders or we pay pension contributions as pension holders, the pension fund or the insurance company is obliged to invest our premiums and our contributions in assets.  Generally, they invest those premiums or contributions firstly in real estate/buildings.  Sometimes they invest on the stock exchange in companies that are publicly listed, that is, they buy shares/equity in those companies.  Sometimes they invest in portfolio – they make portfolio investments in private sector companies which are not listed on the stock exchange.  Sometimes they invest in bonds issued by the Government or in Treasury Bills.  Sometimes they invest their money in bank deposits.  Now, what hyperinflation wiped out completely was money in the banks. 

I think we all recognise and accept that that was completely wiped out.  Investment on the Stock Exchange – in some instances where the listed company collapsed completely, it means that investment was wiped out, but also their investments in listed companies which at that time performed very poorly and the value of the share tumbled.  However, since the recovery of the economy, there has been a revaluation of that same share.  So, this is what actuaries would have to go into.  Yes, at that time the value fell but overtime, it has again been revalued and it is worth much more than perhaps it was before it first lost its value.  Again, there is not much loss and there was a loss I think in money invested in bonds, through the debasing. 

When we knocked off at that time the 25 zeros over time, that basically meant that if you had a mortgage bond, it meant that you woke up and you had a feel good effect that the mortgage bond has been settled.  I think those who had bonds have gone through that experience because of the knocking off of the zeros.  So, where for instance you owed a million dollars to a building society, and they were knocking off these zeros, it means in some cases, you ended up owing nothing and that is what happened.  So, some people lost and some people benefitted from what actually was happening, with the result that Zimbabweans hold assets which are unencumbered.  The majority of assets that we hold are unencumbered and that came about largely because of the hyperinflation where through the knocking off of zeros, people ended up without any obligation and they owned the assets.  So, that is the impact of the hyperinflation that happened in our economy.

          So Hon. Sen. Khumalo, I share the same pain with you because any one of my generation and you could be younger than me – anyone of my generation lost all the assets, especially the pensions and the insurance and the money in the bank.  Those who survived were those like you pointed out who when they got the cash went and bought a house.  At least even where it loses value, you can point to a house and say this is my asset – it is real because you can touch it.  And like all real estate, overtime, it can recover in terms of value.  So, what yesterday was worth a million could now be back to ten million.

          In the real estate, there was no loss except the rental value of the real estate and we have not fully recovered it.  An investment in a building is an investment to the extent that it has a rental value.  If it has no rental value and it is not occupied, it can actually become a liability because you have to maintain it and so on.  So, overtime especially during the hyperinflationary period and I think we are still in that period, the rental value fell and once the rental value falls, it means also that the value of that real estate has also fallen.  The only hope with any real estate is that, when things turn around, it will probably be that you can recover the value overtime.

Now, all those complications can only be deciphered by actuaries and they are the people who are skilled enough to understand the industry and also the loss, gain and be able to make adjustments which can satisfy the policy holders or the pension contributors.  Also as we go into the future, the recommendations are that, IPEC should spearhead the recovery of loss or prejudice on a company by company basis.  Like I said where the company collapses, that loss is irretrievable - but where like you are mentioning Old Mutual, IPEC is now obliged and it is being recommended to go company by company – whether it is Old Mutual or Fidelity and basically say, these were your pensioners.  You paid them five cents and we want to understand at the point where you paid each one of the five cents - what were your assets which survived the hyperinflation and through that enquiry and investigation, they should be able to see prejudice or the value which was not passed on to the policy holder or the extent of the prejudice to the policy holder or the pension contributor. 

That is what the exercise is going to be.  It will be company by company and looking at the assets which survived hyperinflation and in this respect, there will be a Statutory Instrument or legislation to oblige those companies to provide data and information.  Otherwise, without that data and information, there will be no basis to make a judgement on whether or not there was a prejudice to the policy holder or pension contributor or not.  So, I thought I should clarify that point.  I agree that you want this process to be speeded up but to be honest, I must be fair with you, I think this can only be undertaken after elections.  Clearly, the technical work, the technical will be done but I think it will be more vigorous after the elections.

Already we have started trying to put IPEC, building its capacity to be able to do this work but it will require some legislation, and I do not see it coming between now and elections that legislation being put in place. All technical work and preparatory work will certainly be undertaken so that as soon as we finish the elections, we will not lose more time. Let me emphasise, the inquiry or investigation is on a company by company basis, pension fund by pension basis and that is where the inquiry will be made by competent people and actuaries who, after they have made their own assessment, can make a determination which must then oblige the company to honour retrospectively.

You did mention, of course I was not sure I got your point that you were receiving it in Rands. If the source of the pension is coming from outside, that should not be a problem. You lost nothing except maybe by way of an exchange rate. When your pension is coming from the UN or wherever, it is really now a question of what exchange rate but otherwise I do not think that in that particular case it will be applicable. Those people who contributed a lifetime savings have only got a pittance. Some $0,05c, $0,10c, $10 or $30 and that is what the Commission is recommending should be looked into. If they were any losses due to hyper inflation, again that loss is irretrievable but through the revisiting of the demonetization, maybe Government can be called upon to make some contribution to meet the loss generally. That I think can also be looked into, which is why the Commission is recommending revisiting the demonetisation, essentially saying the rate which was used of US$1 to something like Z$35/130 quadrillion clearly meant that no one will get anything.

Hon. Sen. Makore, I understand. Essentially, when you look at the pension contributions or premium deductions which were made from an employee and not passed on, you find that the companies themselves were struggling. I am sure that when you go through those companies which were guilty of non-remittal of pension contributions, you may find that they no longer exist because they were struggling, which is a point I also made earlier in another setting that because of our legislation, with liquidation of companies, it was not an easy procedure. A lot of companies could not down size or reduce their size of operations. In the end, they just drift into this situation where even when they said they were deducting, there was nothing to deduct because they could not even afford to pay the basic salary. It was now just paperwork.

If they could afford for instance, an employee is receiving $200 and deduction is about $30. The employer could not afford to pay the $200 so he will make a paper entry to say I have deducted $30 which in fact was non-existent and would then pay something physically of $170 but the $30 was not afforded. Over time, the employer also failed to pay even that $170 and on it went until the company just closed. These are issues that we sought to tackle especially as we go into the future. We cannot help and correct it retrospectively.

I agree with you that stress kills more people and that is the source of high blood pressure, I am sure but you must learn how to handle pressure. That is the advice I give. If every stress stresses you, clearly your life expectancy will be shorter. There are many ways that people are taught to handle stress. I would recommend that to the Hon. Senators to find out and learn how to handle stress. I agree with you that a lot of people were stressed following the loss of their pensions.

Hon. Sen. Muzenda, you asked a question to which I am not sure I have got an answer. How do we reconstruct the past if records are missing. Let me start from this angle that clearly, the policy holder should have some document to show that – otherwise, if you have no proof that you were contributing to Old Mutual, there is no starting point. It is better for you to have the proof that you were a contributor and for the company to say we no longer have the record. At least we can try to sort out a solution which may not be entirely fair to the company but at least some solution because you will have demonstrated you were contributing but the company has failed to come up with record. So, it has its fault and we can find or we can legislate for some solution but if you do not have any paper to prove you were contributing and Old Mutual also does not have, that to me becomes very difficult to construct the past.

It took me a long time to read the report. It is in two volumes and quite thick. It is very technical and it will require technical people to implement its recommendation. That is the capacity we are now seeking to build within IPEC so that they can carry out and we can bring closure to this issue which has caused so much pain and suffering to a vast number of members of the public.

Once again Madam President, I want to thank all those who have contributed and I accordingly move that the motion be withdrawn from the Order Paper.

Motion; With leave, withdrawn.

On the motion of THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA), the House adjourned at Twenty Minutes past Five o’clock p.m.


Last modified on Thursday, 14 June 2018 09:01
Senate Hansard SENATE HANSARD 06 JUNE 2018 VOL 27 no 48