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Extract from uncorrected record of proceedings in the National Assembly on 9th May
2018.

MOTION

REPORT OF THE COMMISSION OF INQUIRY INTO THE

CONVERSION OF INSURANCE AND PENSION VALUES FROM THE
ZIMBABWE DOLLAR TO THE UNITED STATES DOLLAR

THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT

(HON. CHINAMASA): I move the motion standing in my name that:

WHEREAS in terms of Section 2 of the Commission of Inquiry Act [Chapter

10:07], on 24th July, 2015, the President through Proclamation No. 8 of 2015
(Statutory Instrument No. 80 of 2015), established a Commission of Inquiry in the
Conversion Process used in the Conversion of Pensions and Insurance Benefits from
Zimbabwean dollars to United States dollars to provide the Insurance and Pensions
Industry a transparent process for addressing the afore-said conversion;

WHEREAS further to the said Proclamation, the Commission chaired by

Justice (Rtd) L. G. Smith produced a Report of the Commission of Inquiry into the
Conversion of Insurance and Pension Values from the Zimbabwe dollar to the United
States dollar dated March 2017;

WHEREAS the Commission of Inquiry was, in the opinion of the President, for
the public welfare;

Now therefore, The House is requested to take note of the Report of the
Commission of Inquiry into the Conversion of Insurance and Pension Values from the
Zimbabwe dollar to the United States dollar dated March 2017; as tabled by the
Minister of Finance and Economic Development.

The inquiry was conducted over an 18 month period from September 2015 to
March 2017 and covered a 20 year period from 1996 to 2014. A nine member
Commission comprised Mr. Justice L. G. Smith as Chairman, Ms. V. Mutandwa, Mr.
I. Chirume, Dr. G. Kanyenze, Mr. A. Daka and Mr. T. Maswera, Mr. B. Muchemwa,
Mr. M. Tarusenga and Mr. G. Dikinya who is now deceased and, may his soul rest in
peace.

This was appointed by the former President of Zimbabwe and it conducted the
inquiry. With reference to terms of reference of the commission Mr. Speaker Sir, the
Commission was mandated to investigate the following issues among others:
 ·       To establish the total value, nature and type of assets owned by insurance
companies and pension funds;

·       To determine the causes of loss of value of insurance and pension

benefits;

·       To assess the conversion methods and processes of insurance and pension
assets and liabilities to Unites States dollars;

·       To establish the extend of prejudice if any to policy holders and

pensioners;

·       To recommend compensation where prejudice has been established and;

·       To examine instances of regulatory failures and finally;

·       To assess the soundness of the industry and the role of the insurance and
pension sector in the economy.

Mr. Speaker Sir, with respect to the methodology used by the Commission, the
Commission in order to unpack the terms of reference conducted its investigations
through public hearings, meetings and workshops across the country and also
collected data through various means such as interviews, questionnaires and audio
recorded oral evidence among others. The institutions investigated included all
licenced life companies, pension fund administrators, pension funds, funeral assurance
companies, the guardians’ fund, the Government pension system and the National
Social Security Authority (NSSA). I am glad Mr. Speaker Sir, to advise that the report
of the Commission of Inquiry was gazetted on 5th March 2018 through General Notice
Number 149 of 2018, hence is now available for public consumption.

In brief Madam Speaker, let me give some highlights of the report. There were
concerns raised by the public, numerous complaints were raised by the public over a
number of pensions and insurance issues and I summarize these below.

With respect to commutations of the full pension Madam Speaker, upon

dollarisation, a number of occupational pension schemes and NSSA paid once-off
pension benefit to pensioners upon dollarization, arguing that the amounts were too
small to warrant monthly payments. Pensioners were thus paid commutations as small
as a few hundred dollars or one or two thousand in rare cases although life-time
pensions were expected.

Madam Speaker, with respect to pension contribution arrears, a number of

pensioners raised concern that although their employers deducted monthly pension
contributions from their salaries for all their years of service, the contributions were
not remitted to their respective pension funds. That included the Mining Industry
Pension Fund, the Local Authorities Pension Fund, the National Railways of
Zimbabwe Pension Fund, the Unified Council Pension Fund, the ZUPCO Pension
Fund, the Cold Storage Company Pension Fund and the Fidelity Printers Pension
Fund and some other insurance companies.

Consequently, upon retirement, pensioners could not receive their pension

benefits from the pension funds. As at December 2015, cumulative contribution
arrears for the post-dollarization period amounted to about US$328, 5 million. It is
however sad to note that some of the sponsoring employers who had outstanding
contributions to pension funds have since been liquidated whilst others are no longer
viable. Madam Speaker, with respect to value lost during hyper inflation, pensioners
across all sectors who retired between 2007 and February 2009 lost their pension
lump-sums largely due to the adverse impact of hyperinflation which whipped off
their balances in banks. Upon demonetization of the Zimbabwe dollar, pensioners
only received as little as US$5 as their one third lump-sum benefit.

Madam Speaker, with respect to value lost through conversions on

dollarization, lack of transparency on the conversion methods, processes and formulae
used by insurance companies and pension funds on the dollarization of the economy
in 2009 was cited as one of the causes of loss of value. Most complainants indicated
that their pensions were reduced from several hundreds or thousands of dollars to a
few United States dollar cents. One pensioner showed a pension cheque of US$0,8c
send to him by a life insurance company in 2014 as settlement of a life policy and no
explanation was offered on how such a figure was arrived at.

With respect to insurance policy holders, they were unhappy with the small
benefits which were offered as the total value of the insurance policy paid as final
settlement in lieu of education policies, endowment policies or retirement annuities
which amounted to between US$10 and U$40.

Madam Speaker, with respect to major findings of the Commission, I will start
with total industry assets and their breakdown. The inquiry established that total assets
in the Insurance Pension Industry including NSSA worth about US$5, 13 billion in
December 1996, US$3, 69 billion in December 2008 and US$5, 1 billion in December
2014, have been disposed of. Asset values for the period, 1996 to 2008 are however,
understated due to the fact that big institutions such as Old Mutual, First Mutual, ZB
Life, Fidelity Life and Comarton Consultants failed to provide accurate, consistent
and reliable asset values for the period prior to dollarisation. The assets were mainly
invested in property and listed companies in order to hedge against inflation.

Contrary to the general perception in some quarters of the industry that most
assets were lost through investments in bonds and money market during the high
inflation period, such investments were however, very negligible during the period
2003 to 2008.

The reduction in asset values during the period prior to 2008 was largely
attributed to misappropriation of assets and excessive expense structures as opposed to
hyperinflation.
 Madam Speaker, of particular interest is the revelation that 85% of the existing
assets in the insurance and pension industry were acquired prior to dollarisation in
2009, which implies that the majority of assets survived hyperinflation.

Causes of Loss of Value or Prejudice

The inquiry revealed that loss of value in insurance and pension benefits was
mainly caused by macro-economic regulatory and institutional factors.

Macro-economic causes of loss of value

With respect to macro-economic causes of loss of value, inflation, currency

debasing and the exchange rate used during the demonetization of the ZW$ to US$ in
2015 were identified as major factors that caused pensioner and policy holder
prejudice. Inflation resulted in the loss of benefit values through the erosion of fixed
premiums and pension contributions that were not indexed to inflation.

In addition, negative real investment returns on fixed income securities such as

bonds, Treasury Bills and money market instruments resulted in loss of value, hence,
insurance companies and pension funds divested from such investments during the
period 2001 to 2008.

Madam Speaker, the removal of 25 zeros, that is currency debasing during the
period, August, 2006 to February, 2009 resulted in insurance companies and pension
funds technically extinguishing their obligations to policy holders and pensioners
without any actual payments being made. The industry players duly removed zeros on
promised sum-assured or pension benefits when the ZW$ currency was debased.

This resulted in abnormally low ZW$ benefit values, which upon conversion to
US$ were for some pensioners, as low as 5 cents and in most cases zero, despite
several years of contributing to pension funds.

Meanwhile, assets that were supporting insurance and pension liabilities were
transferred to shareholders of insurance companies or became surpluses in some
defined contribution pension funds. Madam Speaker, the exchange rate of US$1 to
Z$35 quadrillion, which was used when the ZW$ currency was demonetized in 2015
prejudiced Insurance, Policy holders and pensioners as it reduced the already
worthless ZW$ currency values that had been deposited in individual bank accounts to
just a few US cents or at a maximum of US$5.

Regulatory causes of loss of value

Madam Speaker, regulatory failure on the part of Government and the regulator
for insurance and pensions was identified as having caused loss of value. Government
failed to guide the industry during the hyperinflation and currency debasing and
during the conversion of insurance and pension values when the economy was
dollarized. Furthermore, the delayed demonetization of the ZW$ currency resulted in
the various entities in the industry applying their own conversion methods which were
prejudicial to policy holders and pensioners.

On the other hand, IPEC, that is the commission responsible for insurance and
pensions, failed to conduct on site supervision and investigate its licensees, allowing
arbitrary insurance product terminations by insurance companies, poor investment
management practices, poor record keeping and failing to deal with predatory
administration expenses among other issues.

Micro or institutional level causes of prejudice

Madam Speaker, with respect to micro or institutional level causes of

prejudice, loss of value is also attributable to micro or institutional level causes such
as failure to index contributions, premiums and benefits to inflation. Arbitrary and
prejudicial conversion methods from ZW$ to US$, arbitrary terminations or products
and closures, pension contribution arrears, failure to separate insurance, pension and
shareholder assets, poor record keeping as most institutions could not account for
assets, investment returns and individuals’ contribution records. Poor corporate
governance practices, unsustainable administration and other expenses of up to 300%
of pension contributions.

Summary of Key Recommendations

Madam Speaker, let me now highlight the key recommendations. With respect
to compensation of prejudiced policy holders, the Commission recommends
compensation of prejudiced policy holders and pensioners using assets that survived
hyperinflation in order to ensure that prejudiced members of insurance schemes and
pension funds get their rightful benefits whilst maintaining stability and confidence in
the insurance and pension industry. A compensation framework which takes into
account, standardized conversion process, that ensures fairness among providers of
insurance and pension services or products and consumers of such services and
products, is recommended for implementation as part of the post-inquiry
implementation reforms. The framework should take into consideration the
following;

1.    Financially unsound conversion methods and assumptions;

2.    Absence of standard guidance for conversion from ZW$ to US$ and;

3.    Quantification of prejudice to policy holders.

Madam Speaker, with respect to implementation of the post-inquiry reforms,

the Commission recommends that IPEC spearheads the implementation of approved
post inquiry reforms. The reforms, include enforcing the recommended compensation
framework, require full time and specialised skills; hence IPEC is being recommended
on the basis that it is the industry regulator and therefore best placed to assume this
responsibility.
 With respect to the oversight over NSSA, medical aid schemes, legal aid
schemes, the recommendation was that, this should come under IPEC. Madam
Speaker, currently, NSSA and medical aid society schemes are not prudentially
supervised, hence may not be providing value to policy holders or their members. The
Ministry of Labour and Social Welfare will remain the parent Ministry for NSSA,
whilst the Ministry of Health and Child Care will remain the parent Ministry for
medical aid schemes and societies. However, with respect to technical prudential
supervision aspects of insurance and pension products, the recommendation is that
Zimbabwe follows international best practice as exemplified by other jurisdictions
such as Ghana, Kenya and Uganda - among others who have placed social security
schemes under prudential supervision of their Insurance and Pension Regulators.

Furthermore, the recent mushrooming of unregulated legal aid schemes

collecting monthly premiums from members of the public also calls for regulation. To
enhance accountability, transparency and the protection of policy holders and to
consolidate the regulation of insurance and pension business under one statutory body,
the Commission recommends that NSSA, medical aid schemes and legal aid schemes
be regulated under IPEC.

Operational Independence of IPEC

Madam Speaker, in order to achieve objective decision making, accountability

and transparency, as well as to remove regulatory capture, the Commission
recommends enhancement of the operational independence of IPEC from undue
political and industry influence through removal of conflicting board appointments.
Serving members, managers of Insurance and Pension Funds used to sit on the board
of IPEC, hence were conflicted. Currently, the Permanent Secretary in my Ministry
sits on the IPEC board.

On record keeping Madam Speaker, the inquiry observed that entities in the
industry do not maintain proper records, hence in most cases, the lack of data became
a hindrance and some issues could not be concluded due to lack of data. In order to
ensure mandatory record keeping since the industry is data intensive and requires
information to be kept over long periods of time, it is recommended to mandate
through legislation the insurance and pension industry a minimum period of 100 years
for the commencement of ICT supervision in the sector.

Madam Speaker, in order to protect consumers of insurance and pension

services, the regulator should further be obligated to maintain an independent register
of the assets and the corresponding liabilities of insurance and pension funds on a
product by product basis which is cumulatively adjusted on a year by year basis to
take into account changes in the assets and liabilities that happen each year. In order
to safeguard the interests of the pensioners, the Commission recommends the repeal of
the requirement in the Pension and Provident Funds Act for pension fund assets to be
accounted for on a historical cost basis. The recommended legislative amendment is
that the accounting should be governed by the Audit Professions Act to ensure that the
accounting practices are dynamic and in line with international standards.
 Madam Speaker, with respect to the appeal process, the International
Organisation of Pension Supervisors to which IPEC is a member has standards which
require that the regulator and regulatory processes be operationally independent from
undue political influence. In line with the international best practices and for the
purposes of expediency in the handling of appeals, it is recommended that the current
appeals process be amended to provide for the establishment of an Appeals Board
headed by a retired judge or a legal practitioner who is qualified to be appointed as a
judge. The function of the Appeals Board will be to handle appeals against decisions
of the regulator. Its determination will be final and can only be reviewed by the High
Court.

The Commission further recommends the setting up of the office of the

Ombudsman of the insurance and pension industry in order to handle all complaints in
the pensions and insurance industry coming from contributors, given that current
pensioner representative bodies are exploitative. Madam Speaker, the Commission
noted that the financial sector has operated without a strategic direction over the
medium to long term. In order to guide the strategic direction and developmental role
of the financial services industry in the economy, including insurance and pensions,
banking, securities, micro-finance, it is recommended that a financial sector
development plan which will spell out the role of the sector in mobilising long term
capital for national development, confidence building measures and financial skills
development and introduction of a skills development levy among others be crafted.

The Financial Sector Development Strategy helps promote the emergence of a

stable sound and market based financial system that supports the efficient
mobilization and allocation of resources, in particular and with respect to the
insurance and pension industry. The strategy helps mobilise and promote the
investment of long term funds, strengthen and deepen the insurance and pension
industry and its regulation, supervision to develop and deepen the capital markets,
their regulation and participation therein.

Madam Speaker, to address the industry-wide mischief of predatory

administration expenses which have averaged 81% of pension contributions and
insurance premiums during the period 2009 to 2014, it is recommended that pensions
and insurance legislation be amended to empower the regulator to prescribe, through
regulations, acceptable expense types and respective ratios. Some pension funds are
currently charging administration expenses of up to 300% of contributions.

Madam Speaker, in order to come up with an effective supervisory collective

action, orderly exits from markets and policy holder protection on the winding up and
liquidation of a pension fund or insurance company, it is recommended to legislate for
the winding up and liquidation of insurance companies and pension funds in the
insurance and pensions legislation. Failed institutions are currently being wound up in
terms of the Companies Act.

Madam Speaker, non-remittance of pension contribution by pension funds

dating as far back as 1990s has prejudiced pension fund members of their entitlements
to pension pay outs. Post dollarization contribution arrears amounted to $328 million
as at December 2015 and currently standing at over $500 million. Considering the
adverse impact and industry-wide problem of contribution arrears, there is need to
review the pension legislative framework to introduce punitive sanctions on the
sponsoring employers and respective directors in their personal capacities for non-
remittance of pension contributions.

Madam Speaker, in order to address poor corporate governance practices in the

industry including conflicted board appointments, inadequately skilled boards, poor
risk management and internal controls, irregular board meetings, owner-managed
institutions and poor investment management practices. It is recommended that key
elements of the National Code of Cooperate Governance be codified in the Insurance
and Pensions Statutes.

ACTURIAL GUIDELINES

Madam Speaker, the Actuarial Society of Zimbabwe does not regulate its
members and the regulator, over the years, has not issued comprehensive actuarial
guidelines on these matters. It is therefore recommended that IPEC should work with
the Actuarial Society of Zimbabwe to come up with actuarial uidelines and valuation
methods for assets and liabilities as well as regulating the professional conduct of
actuaries practising in Zimbabwe.

Revisiting the de-monetisation process to ensure fair compensation of

insurance policy holders and pensioners

Madam Speaker, the exchange rate used in 2015 for converting for
demonetisation was prejudicial to pensioners and policy holders. The maximum an
individual could get was $5 and all insurance companies and pension funds received a
combined total of less than $135 000.00. The Commission therefore, recommends
that the demonetisation process be revisited in order to ensure a fair compensation of
insurance policy holders and pensioners.

Additional Proposed legislative Amendments

Madam Speaker, in order to address many other deficiencies identified during

the investigation, the Commission recommended amendment of the Insurance Act,
Chapter 24:07], the Pension and Provident Funds Act [Chapter 24:09], the Insurance
and Pensions Commission Act [Chapter 24:21] and the NSSA Act [Chapter 17:04]as
follows:-

Proposed Amendments to the Insurance Act [Chapter 24:07]

With respect to our proposed amendments to the Insurance Act Chapter 24;7,
the Insurance Act provides for a maximum fine of level 14, or 5 years imprisonment
for operating an unregistered institution, which level is not dissuasive enough for
institutions that could abuse millions of dollars in public funds. The Commission
recommends amendment of the provision to provide for a maximum penalty to be
prescribed by the Minister from time to time.

Limitation of Certain shareholding in an Insurer Insurance Broker

With respect to limitation of certain shareholding in an insurer or insurance

broker, current legislation does not prescribe limitation of shareholding in an insurer
or insurance broker, hence may result in poor corporate governance. The Commission
is therefore recommending that shareholding limits of 25% be placed on individuals or
legal persons investing in an insurer or insurance broker. A five year transitory period
is recommended to allow time for these institutions to comply with the new
requirement. It is therefore recommended that supervisory approval be required for
proposals to acquire an interest of an insurer or broker.

Commencement of Business after Registration

Madam Speaker, with respect to commencement of business after registration,

in order to ensure that an institution is fit to underwrite business immediately after
registration, it is recommended to oblige all newly registered entities (insurers and
brokers) to commence business within 90 days , failure of which the regulator will
cancel the licence. This will also address the challenge of seeking a licence for
speculative purposes.

Application for Registration of Society as an Insurer

Madam Speaker, currently, legislation prescribed a 90 day period within which

a society should seek registration after its formation. The effect of this provision is
that a society is permitted to operate for three months without being registered. It is
recommended, Madam Speaker that this provision be repealed and replaced with a
provision that requires IPEC to prescribe the licensing requirements from time to time.

Restriction of Cross-Directorship

Madam Speaker, Cross-Directorship among IPEC licensees is a recipe for

incestuous relationships and prejudice of policy holders and pension contributors
through interrelated party transactions or businesses. In view of the challenges
associated with cross-directorship, it is recommended that restrictions be placed on
cross directorship among IPEC licensees in order to avoid conflict of interest.

Cancellation of Registration of Insurers

Madam Speaker, the current legislation provides that the Commissioner should
notify a registered insurer in writing that he proposes to cancel its registration. It is
recommended that the word ‘proposes’ be replaced by ‘intend’ since the former has a
connotation of begging or seeking concurrence.

Prohibitions of Concerning Assets and Certain Liabilities

 Madam Speaker, safeguarding the assets of an insurer is critical for the
maintenance of a solvent and stable institution that meets liabilities as they fall due.
In order to avoid instances where assets are abused by shareholders or management
which may result in prejudice to policy holders, it is recommended that legislation
provides for protection of assets through among other means, denying an insurer or
broker to encumber policy holder assets, to cover the insurers or brokers business
liabilities.

Notification of Regulator of key Development in Licensed Entities

Madam Speaker, the section requires registered insurers to notify the

Commissioner of any changes in the organisation within 6 months of the year end. As
such, the regulator gets to know of changes of significant interest or any such material
changes in the institution such as the resignation of a Chief Executive Officer well
after the event. It is being recommended by the Commission that the section provides
that IPEC should be advised immediately of all key developments including the
resignation of key functionaries. Similarly, changes in key personnel such as the
Chief Executive Officer, Compliance Officer and Finance Director should not take
place without the approval of IPEC and the regulator who should do fitness and
probity test before such appointments are made.

Furthermore, Madam Speaker, the insurer should be required to notify all

policy holders in writing of any changes of significant interest or the rebranding of the
institution. The complaints received from members of the public revealed that policy
holders were also not aware of changes in the name of an institution, for example
Southampton which changed to ZB. Others were not aware that their insurers folded
some years back.

Recommended Amendments to the Pension and Provides Funds Act

Madam Speaker, with respect to the fund’s communication with Pension Fund
members, a number of public complaints relating to inadequate communication with
respect to major changes in their pension funds such as conversion values from the
Zimbabwean dollar to the United States dollar, amendment of rules, change of fund
administrators, computation of benefits and contribution history were received.

Accordingly, the Commission recommended that a new section on

communication with pension fund members be inserted in order to enhance disclosure
and accountability to pension fund members.

Objectives of the Act

Madam Speaker, the core principles for Pension Fund Regulation as espoused
by the International Organisation of Pension Supervisors require objectives of a
pension primary legislation to be clearly stated. The objectives of that are not clear,
hence it is recommended by the Commission that they explicitly provide for the
registration and deregistration of pension funds, provident funds and fund
administrators; regulation of pension funds, provident funds and management of
troubled pension funds, provident funds and fund administrators and dissolution; and
to promote and protect pension contributors’ and the rights of pensioners.

Account and Holding of Assets

Currently, financial statements for the insurance and pension industry are not
standardised and camouflage critical information such as unsustainable operational
expenses through salaries and insider loans.

It is recommended that every pension fund be required to maintain books of

accounts for at least 100 years. It is also recommended that the timeframe within
which financial statements should be submitted to IPEC be reduced from the current
six months to three months in line with practice in banking and securities sectors.

In addition, the financial statements must be in a format prescribed by IPEC to

ensure enhanced disclosure for transparency and accountability. It is recommended
that a new paragraph be inserted in subsection (4), which requires that all newly-
acquired assets be transferred into the name of the pension fund within three months
after payment of the full purchase price. The mischief is that some pension fund
assets are taking long to be transferred and some are not being transferred at all.

It is recommended that current provisions that allow pension fund assets to be

registered in a nominee name be repealed. The basis is that the Financial Action Task
Force Standards on Anti-Money Laundering and Combating Financing of Terrorism
requires identification of the ultimate beneficial owner. The Securities Sector also
outlaws recording of transactions in the name of a nominee.

Actuarial Valuation of Pension Funds

It is recommended that the provision which empowers the regulator to exercise

discretion with respect to exemption of some pension funds from complying with the
requirements for actuarial valuation, be amended. The criteria for exempting a
pension fund should be specified in the subsection, as opposed to relying on the
regulator’s discretion.

Restriction of Investment with Related Parties

The proliferation of incestuous relationships among inter-party transactions,

particularly in institutions within an insurance conglomerate, has resulted in policy
holders losing money in a number of shady deals. In views of this, it is recommended
that legislation be amended by the insertion of the following provision:-

“Notwithstanding anything to be contrary contained in the rules of a registered

fund, a fund shall not, directly or indirectly:-

·       grant a loan to, or invest more than 5% of the market value of its
 assets in a party related to the sponsoring employer;

·       issue a guarantee against its assets to the sponsoring employer or

any of its subsidiaries or its holding company or a subsidiary;

·       grant a loan to a member of the fund or make any of its funds

available whether by way of investment or otherwise, to be utilised in any manner

by the fund or someone else in order to provide a loan to a member;

·       invest in shares controlled by an officer or member of the fund or a

director of a company which is an employer participating in the scheme; and

·       without the prior approval of the regulator, directly or indirectly

acquire or hold shares or any other financial interests in another entity, which results
in the fund exercising over that entity”

Power of the Commissioner to Grant Exemptions

The current legislation empowers the Commissioner to vary or exempt any

fund from the reporting obligations or regulatory requirements set out in the Act. It
is recommended by the Commission that the circumstances under which such
exemption is granted be prescribed in regulations, for transparency purposes.

Annual Reports by the Commissioner

The section stipulates with respect to annual reports by the Commissioner that
the Commissioner shall, at the end of each calendar year submit to the Minister a
report on the pension and provident fund business in Zimbabwe during that calendar
year. It is recommended that the provision should empower the Minister to prescribe,
in regulations, the minimum disclosure requirements in an annual report that is filed
by IPEC and should provide guidelines on the key parameters to be included in the
report. The mischief is that the current annual reports are skeletal and their contents
are determined by the regulator.

In addition, it is recommended by the Commission that the period within which

annual reports are logged with the Minister should be reduced from six months to
three months, after the end of a financial year.

Offences and Penalties

 With respect to offenses and penalties, the highest level of penalty for non-
compliance by a fund is level six. The challenge is that the standard scale of fines is
on the lower side, given that level 14 attracts a fine of $5 000. In this regard, the cost
of non-compliance can be very low compared to the cost of compliance. It is
accordingly recommended by the Commission that the provision be amended with a
view to coming up with deterrent sanctions. A cue can be taken from the 2014
amendments to the Money Laundering and Proceeds of Crime Act, wherein penalties
of up to $250 000 are clearly stipulated.

The Commission is of the view that the pension sector is unique in that it
touches on people’s life savings, hence the need for deterrent sanctions for non-
compliance with provisions of the Act or regulations.

Pension Contribution Arrears

For the purpose of monitoring and ensuring compliance, a new section is being
proposed to the principal officer of the fund or any authorised person shall, at the
times and in the manner and format prescribed, submit reports to the regulator and the
contributing employees.

Personal Liability on Non-Remittance of Pension Contributions

With respect to personal ability on non-remittance of pension contributions, it

is recommended that every employer/company, every director or executive officer
who is regularly involved in the management of the company’s overall financial
matters be personally liable for compliance with the requirement to remit pension
contributions.

Conclusion

In conclusion, overall, the Inquiry is recommending, that is the Commission,

that every category of complaints raised by members of the public during public
hearings at a policy, regulatory or institutional level be addressed. This will restore
confidence in the insurance and pension industry. Public confidence in the sector is
very low yet the insurance and pension industry has a key role in social protection and
mobilisation of long-term capital for development. Parliament is hereby requested to
go through the Report of the Commission of Inquiry and provide its views on the
report. I thank you Madam Speaker.

HON. DR. CHAPFIKA: Thank you Madam Chair. I rise to propose that the
debate be adjourned on this topic. I say so because we met as a Committee, following
the submission, we met with the Chairperson of the Commission, Justice Smith and
his team who briefed the Committee on this issue and we have lined up other affected
stakeholders and we are treating this issue as urgent to ensure that we solicit their
views after which we will submit a response to the Hon. Minister’s presentation. I
therefore, propose that the debate be adjourned. Thank you.