Retrenchments, unemployment affecting the insurance, pensions sector

 

Lazarus Sauti

For a decade, Perkins Matara worked for a timber processing company in Msasa in Harare.

He was retrenched in 2011 when the company downsized and ultimately closed in October 2015.

“After my retrenchment, I ventured into street vending and I am earning a living,” Matara told insure263.co.zw. “I started street vending after realising that I could not get a new job due to the high unemployment rate in the county. I also terminated my medical insurance scheme since I was no longer employed.”

For Mavis Godho, a Bachelor’s degree in Philosophy holder from a local university, baking and selling buns in the city centre is her way of surviving.

“I am a graduate, but I never had a formal job. Remember, unemployment is the new normal in Zimbabwe as the government has failed to stimulate the economy and to foster employment creation,” she said. “My products are not insured, and I don’t have a funeral or medical insurance cover.”

The Confederation of Zimbabwe Industries (CZI), the umbrella body of the manufacturing industry in Zimbabwe, revealed in its 2016 study that industry is operating at 30 percent of its capacity.

“Since 2011, more than 6 000 companies have closed shop, and unemployment now hovers around 85 percent,” noted the study.

Economist, Kudzai Manyanga said most people lost their jobs since 2000 and “while some ventured into the informal economy, others migrated to neighbouring countries, particularly Botswana, Namibia, South Africa and Zambia for greener pastures.”

Insurance and Pensions Commission (IPEC) Commissioner, Grace Muradzikwa said the insurance and pensions sector – one of the largest sources of domestic financing in Zimbabwe – has been hit by a low uptake of insurance and pension due to retrenchments and high unemployment levels.

While addressing journalists during the 2020 Insurance and Pensions Journalists Mentorship Programmes (JMP) organised by IPEC and the National Social Security Authority (NSSA) recently, Muradzikwa said a recent baseline survey by her organisation revealed that only 34 percent of the population in the country have insurance of some sort, 76 percent of which are in respect of funeral insurance policies.

She added that the prevailing low uptake of insurance products stems from retrenchments, company closures, high unemployment levels, hyperinflation, high levels of premium debtors, liquidity challenges, and insurance fraud.

“In spite of its potential to stimulate sustainable socio-economic development through massive injection of cash into the market, the insurance and pensions sector is facing a lot of challenges, especially around product relevance, viability, and low confidence levels,” she said.

“These factors have reduced disposable income.”

Financial intelligence expert, Precious Santana said colossal jobs cuts and business closures due to the Covid-19 pandemic are also threatening the survival of the insurance and pensions industry in Zimbabwe and other countries.

“Companies are closing due to the global Covid-19 pandemic and, without a doubt, the insurance and pensions sector in the country is likely to shrink as incomes are likely to be strained,” she said.

“By now, some insurance companies are feeling the impacts, especially on underwriting.”

The International Monetary Fund (IMF) also noted that Covid-19 interrupted business operations in Africa and this also slowed down the uptake of insurance and pensions products.

“More than 60 percent of Sub-Saharan African (SSA) countries have imposed quarantine measures or lockdowns, and in most cases, this prevented insurers from accessing their offices and engaging physically with staff and clients,” noted IMF.

A research paper, ‘Never waste a crisis: How sub-Saharan African insurers are being affected by, and are responding to, COVID-19’, published in July 2020 by Lucia Schlemmer
Kate, Rinehart-Smit, and Jeremy Gray also noted that unemployment, retrenchments, and restrictions on movement interrupted physical sales.

“Containment measures severely affected new business generation, as insurers rely heavily on face-to-face sales methods. In many African countries, insurance was not deemed an essential service, and agents and brokers could not operate,” noted the research paper.

Despite retrenchments, company closures, unemployment, and other challenges, Muradzikwa said the insurance and pensions industry has remained resilient.

“Albeit the macro-economic challenges and the global Covid-19 pandemic, the insurance and pensions sector remains resilient as signified by the ability to continue operating and paying claims and benefits even during Covid-19 induced lockdown,” she said.

“The insurance sector paid about Z$726 million in claims from April to June 2020, while the pensions sector paid benefits worth Z$483 million for the same period.”