I GOT a phone call from a man in Bulawayo who said he wanted to see me on a personal matter. We arranged to meet and he told me that he had worked for a major and well-known company for 40 years. The company in question is a US multinational selling a leading brand of a consumer item.
Guest column: Eddie Cross
He told me that he had received a letter saying that when he turned 65 he would be retired and the letter included the details of his pension right from another well-known pension company in Zimbabwe. He also showed me his payslip. After 41 years of service, this man was receiving a salary of just under $500 a month. But after all deductions totalling over $200 his actual take home pay was $300. His pension benefit was to be a cash payment of $8 900 and a monthly pension — not transferable to his wife, of $91 for the rest of his life.
The company has medical aid — but charged him for the benefit. I assume the pension contribution was matched by a company contribution, but his medical aid ceased once he retired. He told me that he was still renting accommodation — two rooms in a local township but had managed to buy a stand and put in the foundation and the floor for a home.
The State-run pension scheme will supplement his pension with a monthly payment of about $75. He has a wife and two children, none of whom are working.
He will probably have to leave town and return to his rural home where at least he will have a roof over his head and a bit of land. His children will finish school in a rural environment and get a very limited education in the process.
This is a major problem, exacerbated by the macro-economic nonsense played by the State which has destroyed savings in all forms and rendered pension schemes worthless. There has been an excellent commission of inquiry into the pension industry, but its complex report of over 500 pages has not yet received attention at government level.
My own experience is that after leaving school at 17 years of age and taking out an insurance policy at the age of 18 when I started work, I have worked for over 50 years — often in a very senior chief executive officer position and after maintaining five private insurance policies and a company-managed pension scheme and the State-controlled pension plan — I get $94 a month and they tell me it runs out in 10 years. Fortunately, I own my own home but when I left my last job, they would not even let me keep a five-year-old company car. We have no such thing as a State-funded health benefit scheme.
As I said to this man, this is a national problem, not just his. The question is how do we, a country with a tiny budget, massive fiscal deficit and one of the lowest incomes per capita in the world, solve this problem?
First, we have to thank our lucky stars that our culture supports a family-wide social support network, which while it still operates, ensures that the whole family supports each other. An appeal to a family member for help is almost never refused and those in the diaspora are a frequent source of help. Secondly, we have to thank our forefathers for the so-called communal or tribal areas where almost all Zimbabweans and even a number of aliens, can find refuge in a small plot of land, a few goats and cattle and are able to build a simple structure out of local materials to live in.
Foreigners will be astonished to know that there are white farmers living in absolute poverty in our urban townships where families have taken them in because they were destitute.
I know of few other cultures where such a thing might be possible among the very poorest people in the country.
But it is not good enough and our very low life expectancy is testimony to the very real problems facing the majority after 38 years of former President Robert Mugabe’s oligarchy. So what can be done?
First, we should stop pouring money into our so-called pension schemes. NSSA is a complete waste of time in its present form. Private pension schemes are useless and I would never advise anyone to invest in one — keep your money in your pocket and accumulate assets. Secondly, we as a nation have to make permanent, free hold shelter an absolute priority. When I was the chief executive of a company employing thousands, I borrowed money from the banks and building societies and employed an architect and we built houses for our staff. Not little boxes with no character — real homes. We made sure they were affordable and when complete we sold them to our staff on decent terms over an extended period.
Even our lowest income employees were able to buy a home from us on these terms. The city made the land available, we bought it and put in the services and built the homes.
Nothing fancy — they could add those touches themselves once they were ensconced. I think that was one of the best things I ever did, it changed lives, did not cost us money in the end and gave our staff permanent accommodation, close to work and on a freehold basis. It was in many ways a real pension.
Then I think we have to change the way we pay a pension in cash to those who are lucky to have a job like my friend from the local factory. We do not have to invent the mechanism — almost everything has been tried elsewhere in the world so it’s just a question of choice. My choice is the German system. In Germany they have used this system for many years, it requires each sector of the German economy to create a worker/employer fund to pay pensions to former employees at the rate specified in the agreements between the two partners.
The fund pays a pension — usually about 60% of the salary on which the individual retired from employment. The fund is supported by a deduction from the salaries of those in employment with a matching contribution by the employers. The funds are not allowed to accumulate more than three months’ expenditure and the levy is raised and lowered depending on the demand for funds. In industries which are dying — the State assumes the responsibility.
In this way pension rights are not eroded by inflation and pensions are fixed at a level that is sustainable and reasonable in relation to the needs of the pensioners themselves. Partners receive half a pension after the death of the pensioner. Already State pensions are on such a system except that they have no accumulated funds and the system is administered by the civil service. Quite frankly, if we tallied all the charges currently being levied on salaries they would probably more than cover the needs of the new system. In our case the accumulated assets of the pension industry could be levied to help pay for the system.
Medical aid could be built into the system and pensioners outside the system would be covered by a social grant scheme. Some form of national medical aid with insurance cover would need to be established to make sure that everyone had access to medical services when required.
Our historical system worked well for a small elite, but it’s not working now for anyone. Like so many things in this country it is time for change. Fundamental changes that will create a system that works for everyone.
Eddie Cross writes in his personal capacity