|
|
|
|
|
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 family's 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. It's 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
|