The Theft of Private Assets

When I left school at the age of sixteen and went to work on a farm, my father sent an insurance salesman to see me and said that I should take out a life insurance policy that would give me a pension when I retired in 49 years time. I forget what the monthly payments were but I signed up and sacrificed some of my meager salary to the Old Mutual.

As I grew older, periodically I revised my insurance cover and took out new agreements - eventually leading me to a situation where I was contributing via a bank stop order to five contracts with the Old Mutual for life cover and pensions of various sorts. By the time I left my last job, I was a Managing Director of a large corporate and had a salary commensurate with my position. I certainly never had to really worry about my familyís basic needs. In that position I had to fund not only my personal policies but also the company pension scheme.

My father retired in 1978 and when he did, his pension was Z$268 a month. After a lifetime of hard work. They could never have lived on this and I was glad to be able to bring them into my own family, build a cottage next to the house and support their basic needs. When he died 17 years later, his pension rights barely paid for his immediate personal needs. But his lifetime medical aid was still valuable.

When I reached the magical age of 65 and my lifelong savings in the form of contributions to the Old Mutual matured, I expected to receive a reasonable pension. The total value of all five contracts was insufficient to pay for the petrol required to travel to the Old Mutual and collect the cheque. I never received a cent for all the years of my contributions and not even a letter of explanation.

One day I will do a calculation of what my total lifelong contributions to the Old Mutual; were worth - but this I know, that until 1980, 24 years into my payments, the local dollar still bought a pound and two US dollars. It was real money. When I started my payments in 1957, the local currency bought two pounds. I would like to know what those sales guys got in the way of a pension when they retired? I bet it was not linked to the local!

We now have many thousands of pensioners here - some 300 000 from the civil service, 16 000 from the railways and many thousands like myself who were in the private sector. They are nearly all totally destitute. Many have to be supported by relatives and friends and even special organisations that have been set up to help.

This is not the only theft of private assets that has taken place. Anyone, whose assets were held in monetary form, is now destitute. I well remember a couple in Harare who when they retired sold their family home and rented a smaller home, putting the money onto fixed deposit in a financial institution (remember those days?). At the time I advised them not to go that route and to buy a smaller home and invest the rest in blue chip equities (do they exist anymore?) - they did not and they now live on small monthly remittances from family abroad. How did this happen and is there a remedy? It happened because the massive cash flows from this myriad of small individual monthly payments went into the pool of national savings and were easy pickings for the major players in the economy. The first heist was in the form of the chunk taken off the top and invested in government bonds (prescribed assets) at low interest rates. Then the companies administering the funds took their share for expenses and overheads.

What was left they invested - not in productive ventures but most often in high rise luxury buildings that even today stand as monuments to our hard work and savings. I am told that 80 per cent of all the buildings in down town Harare are owned by pension funds and insurance companies. It explains how this country - one of the poorest in the world can boast a skyline in Harare that would rival many cities in the richer developed States. After that they invested in equities - so that they had some liquidity in case they needed it to meet the occasional payout after a crisis.

The Old Mutual started out as a Mutual Fund owned by its policyholders, became a major listed public company and gave us all shares - I got 400 or so and sold them to help fund my business. It is now one of the largest investors in the world - certainly in South Africa. But it pays little or no attention to the plight of the tens of thousands of policy holders in countries like Zimbabwe, who have had their lifetime savings wiped out.

The reasons are, of course inflation - in the States right now you will struggle to find an investment that will return you more than the cost of inflation. Dividends from equities are a joke. When you have a spell of hyperinflation like we have are having then cash assets just get wiped out over night. Itís a storm from which there is no protection.

I am told that credit card debt in the USA is bigger than the national debt. It is now clear that the entire developed world have been living so far out front on credit that any loss of confidence will result in just what we have experienced - the collapse of finance houses and the equity markets and the value of real estate. Until savings deals with burden of debt and real earnings in goods and services match incomes, the crisis will persist and real living standards will fall.

At least here in Zimbabwe we have no debt - at least not in Zimbabwe dollars, they were wiped out together with our savings. What we have to do now is get our real assets working again and then make sure that in future we invest our surpluses in real working assets and not in guilded towers that do not produce anything.

One thing is also certain, we must do something to support our pensioners - they after all were responsible for everything you see in modern Zimbabwe. This probably means that we will have to all sacrifice some of our future income to meet the needs of those who supported us in the past.

Eddie Cross
Bulawayo, 17th February 2009