Zim: Hope in the Midst of Uncertainty – Douglas Hoto

September 25, 2009

zimbabwe_zebrasIMAGINE a situation where money suddenly fits into wallets! You do not have a lot of it but you can buy some food from a note or two in your wallet. That is the situation in Zimbabwe since the introduction of multi-currencies”. This is a political term used to mean the official dollarisation of the economy.
There is one buzzword that is common across sectors of the economy. That word is hope, and it is shared by many. However, there are a number of obstacles.
The political situation remains fragile. While basic freedoms have been restored, the confidence of the general population is still very low.
International capital is slow to flow in as there are issues about human rights and rule of law yet to be dealt with. The implementation of the transitional political agreement is fraught with problems.
That said, the situation in Zimbabwe is offering hope. The shops are full of basic commodities. Although the hard currency is scarce, especially the small denominations, anyone who is able to sell labour can get some US dollars to put food on the table.
Across the population there are two different resulting scenarios.
Rural-based government employees who do not have the worries of rentals and urban utility bills are faring better, with their US$150 per month on average.
Their urban counterparts are not so lucky. They still have to contend with bills for electricity and other utilities, which makes their income too low. However, even that is not comparable to seven months ago where a whole salary could not buy a loaf of bread.
Thus the outlook for the country is beginning to brighten. Given this background, there are several challenges facing actuaries.
Pensions schemes are going through the process of converting their benefits from Zimbabwe dollars to US dollars. At face value the conversion looks like a very simple calculation.
One can first take the ratio of a member’s share of assets in Zimbabwe dollars at the conversion rate and determine that member’s proportionate share in US dollars.
But this simple calculation often produces results that are not very practically useful. The allocated benefits in many cases are too small to be significant. Second, the method does not take into account many historical issues in respect of how the assets being shared were acquired.
Most of the assets owned by the funds, in shares and property, were acquired well before the last years of hyperinflation.
However the contributions made recently in hyperinflation when salaries could increase weekly tend to dwarf the contributions made many years earlier. Trustees assume that the scheme actuary has all the tools and skills needed to unravel this puzzle. This is easier said than done.
The approach taken has been to be as pragmatic as possible. Actuaries in Zimbabwe (there are four of them) have continued to give advice based on the situation of each fund and the requirements of the employer.
In a typical defined-contribution scheme, one cannot redistribute the assets once they are apportioned to the members. However, the situation is unique as follows:

  • The asset values have a potential to double or even triple as the economic recovery takes shape and;
  • A final distribution of the assets may now prejudice some of the members, given the potential uplift.

This presents a situation where trustees are making their decisions in small stages. The first stage is to deal with pensions in payment.
In cases where the pensions calculated are too small and the employers cannot immediately fund pension increases, full cash commutations are allowed for those small amounts.
Some of the members do not accept this and are putting together efforts to sue their funds for dereliction of duty. In cases where the employer can fund immediate pension increases, minimum pensions of between Z$20-30 a month have been set.
This is seen as the best way in terms of both the reputation of the industry and the profession and avoiding abject poverty.
The next step is to distribute the assets to active members bearing in mind that some of them are also very close to retirement. One has to make sure that the treatment of such members is not too dissimilar from that of pensions in payment.
The profession is in a very interesting position in Zimbabwe. There is still a fairly large number of students in relation to actuaries. It is my hope that we are beginning to emerge from the woods. –– The Actuary.

Hoto heads Altfin Holdings in Zimbabwe.

By Douglas Hoto

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One Response to “Zim: Hope in the Midst of Uncertainty – Douglas Hoto”


  1. Dear Munyaradzi ,
    What a mighty God we serve , You are very awesomme I am very proud of you , I have life long ambition to stimilate change and growth on the Sub Saharan Continent, Tarting with 4 Great Nations , Ghana , Zimbabwe , South Africa, Botswana, My goal is to positive impact over Imillion young ppeople of African descent , To Educate, Empower, Enable and Entertain , Your wisdom amases me truly God is with you , We will be praying for you and I look forwrad to meeting personally one day , I am speaking in a prayer conference in Holland this weekend , I would have loved to be with you all at the mens conference, ours is in November 09www.menspower.org Keep on winning my son


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