HARARE – A parliamentary report has implicated First Mutual Life (FML) in a significant grievance by ZISCO Steel pensioners who claim to have lost US$38.7 million due to currency conversions following the government’s debt assumption for the defunct steel company.
The report, presented to Parliament, details how currency devaluation and alleged governance failures at FML eroded the value of the pensioners’ contributions, sparking a legislative push for compensation and accountability.
The report, presented to the House on Wednesday, has detailed findings from an inquiry into the pensioners’ grievances, highlighting concerns over the government’s handling of ZISCO Steel’s debt assumption and the role of FML as the pension fund administrator.
Zanu-PF Bikita West legislator, Energy Mutodi, who moved the motion to adopt the committee’s report, stated that the inquiry was launched following a petition received in March 2024.
The pensioners implored Parliament to intervene and ensure they receive fair pension payouts with “value retention,” free from prejudice.
The committee’s investigation involved submissions from various stakeholders, including ZISCO Steel pensioners and management, FML, the Zimbabwe Pensions and Insurance Rights Trust (ZIMPIRT), the Insurance and Pension Commission (IPEC), and the Ministry of Finance, Economic Development and Investment Promotion.
Key findings of the report indicated that ZISCO Steel ceased operations in 2008, leading to inconsistent pension contribution remittances. While deductions continued from employees’ salaries until 2016, many pensioners who left after 2009 did not receive payouts.
The government subsequently assumed ZISCO Steel’s debt through the Zimbabwe Iron and Steel (Debt Assumption) Act of 2018, based on a 2016 actuarial valuation of US$39.1 million.
The report, however, highlighted that the actual funding gap was estimated to be US$65.1 million. The implementation of Statutory Instrument 33 of 2019, which converted USD amounts to Zimbabwean Dollars (ZWL) at a 1:1 rate, significantly eroded the value of the pension benefits.
When the Ministry of Finance disbursed ZWL39.1 million in 2021, the prevailing exchange rate was 1:90, resulting in a real value of only US$434,954.80, leaving an outstanding balance of approximately US$38.7 million in real terms.
“The introduction of SI 33 of 2019 eroded the value of the pension benefits. Due to this exchange rate movement, ZISCO Steel pensioners are pleading for payment of their pensions with fairness and value retention.
“Further, since 2009, the pensioners were contributing pension premiums in USD but due to the S.I. 33 of 2019, payment of pensions were to be paid as ZWL in terms of the law. April 2009, Member after SI 33 of 2019 – USD25/ZWL25, Spouse/Widow – USD10/ZWL10, Child – USD5/ZWL5,” read part of the motion.
The committee’s observations directly implicated First Mutual Life. The report noted “poor governance in FML which impacted all pension funds including ZISCO pension fund.”
It further stated that FML failed to implement IPEC’s corrective orders to maintain a separate “Pensions Fund” as legally required.
The committee also pointed out that FML’s investment in long-term income-generating activities should ideally allow for payouts in both USD and the new local currency, ZiG, given the multi-currency economy.
“Further, several governance issues were raised by IPEC on FML, which called for a forensic audit on its operations.
“A forensic investigation of FML concluded in February 2023 revealed poor governance practices by FML which have an impact on its ability to meet claims such as one raised by petitioners.
“Other governance issues raised include violation of asset separation rules outlined in Section 29 of the Insurance Act and Section 16 of the Pension and Provident Funds Act.
“Other issues raised in the report include Management’s failure to adjust to economic conditions,” the motion stated.
Contributing to the debate, Dzivarasekwa MP Edwin Mushoriwa supported the committee’s recommendations for the Ministry of Finance to address the outstanding US$38.7 million and to amend the Debt Assumption Act to reflect the later actuarial valuation.
“As we speak, we have workers who died. If you go to Red Cliff, you will discover that some of the houses where rich people used to stay and the type of life that they are surviving now is not that good. Our Government and we as legislators must work together.
“We have to unite, support and strengthen what was read here from the Committee of Budget. It simply said that the workers from ZISCO Steel who are on pension must receive their dues.
“The funds should actually be channelled from the Minister of Finance, Economic Development and Investment Promotion.
“Firstly, they injected limited money at 1:1 but the rate has actually moved. So, they must ensure that they have to deposit funds using the same rate which we have. Simply to say, if it is 38 million USD, it has to be at 1:30 and be channelled towards those ZISCO Steel workers.
“Secondly, simply because after the actuarial evaluation on the pension for ZISCO Steel, people discovered that there was mismanagement and there is something close to 30 million USD.
“All those funds should actually be taken back and paid back to those workers of ZISCO Steel,” Mushoriwa stated.
The committee’s recommendations also include a call for the Ministry of Finance and IPEC to implement Statutory Instrument 162 of 2023, which aims to compensate for the loss of pre-2009 pension values, by December 2025.
Additionally IPEC was urged to take action against its past “omissions and commissions” and strengthen its regulatory oversight by March 2025.
