In February the government told the National Social Security Authority (NSSA) to lend it $40-million because it was unable to fund the referendum. That move left the already struggling fund in deep financial difficulties.
Banking sector sources said the decision to raise pension contributions was made to curb "a financial disaster" at the NSSA, which also has to raise about $70-million by the end of next month to recapitalise at least four banking institutions in which it has interests.
The NSSA, constituted and established in terms of the National Social Security Authority Act of 1989, is the statutory corporate body tasked by the government to provide social security. All employed citizens, including civil servants, are compelled to contribute to it.
At present employees contribute 3% of their basic salaries to the fund, up to an amount of $200. Employers contribute the same amount making a total of 6%. Both the employees and employers contributions have been increased to 3.5% each, bringing the total to 7%. The government has also increased the maximum monthly salary on which contributions are payable from $200 to $700.
The increase for those who earn $200 or less is minimal. For a person earning $150 a month, the employee contribution goes up from $4.50 to $5.25, and the employer must pay an equal sum to the NSSA. A worker earning $200 will have his pension contribution increased from $6 to $7. Audited financial statements for the year ended December 31 2011, the latest publicly available financial results for the NSSA, indicate that contributions amounted to $147.4-million in the year, up from $137.6-million in 2010.
Funding of elections
Though it was not immediately clear how much the NSSA would mop up from beleaguered workers and businesses through the latest hike, the Mail & Guardian has been informed by banking sector sources that the increase would also leave room for funding of elections later this year. Finance Minister Tendai Biti has said that the government does not have enough money to fund elections after conducting a national census and referendum.
"If you do the maths you will realise the windfall to the NSSA is far greater than what they will pay out in pensions. This will leave the government with space for further borrowings to finance electoral costs," said a banker who did not want to be named.
To forestall anger from unions, the government said pension payouts would be increased two months later – in August – from a minimum retirement pension of $40 a month to $60. Minimum survivors' monthly pensions would go up from $20 to $30, the same level as the minimum invalidity monthly pension. The funeral grant will be increased from $200 to $300.
Unions say they are not opposed to the increase if it is matched by increases in pension payouts, but fear the funds will be abused. Japhet Moyo, the Zimbabwe Congress of Trade Unions (ZCTU) secretary general, said he welcomes the increase in contributions if they result in increases of pension payouts.
The ZCTU is powerless to stop the government from using the fund for electoral processes again.
Moyo said: "We have a representative on the NSSA board, but unfortunately the board has limitations in terms of how it contributes to fundamental decisions made by the NSSA. Decisions are made somewhere else and the NSSA board is given recommendations to rubber stamp."
Huge financing obligations
NSSA board chair Innocent Chagonda was not answering calls to his cellphone, and general manager James Matiza was in meetings.
"It's a sad situation. It [the increases] hurts the workers. The government always knew there would be elections and they should have budgeted for that," said Moyo.
Moyo said that in the past an International Labour Organisation evaluation had established that the NSSA could sustain its operations profitably without dependence on other investments.
NSSA insiders said the body was facing huge financing obligations, particularly related to recapitalising the recently acquired Capital Bank, which only has $7.5-million capital, against Reserve Bank of Zimbabwe rules that all banks had to have $25-million by December last year and $50-million by June this year.
In the same period NSSA's commitment to its investments in other financial institutions would be as follows: FBC Bank ($4,9-million); FBC Building Society ($12,4-million); ZB Building Society ($13,4-million); ZB Bank ($6,6-million); and Capital Bank ($35,2-million).
All these institutions will need to be recapitalised to meet the Reserve Bank of Zimbabwe's (RBZ) new capital levels, which are $100-million apiece by 2014.
NSSA executives have been trying to secure concessions from the RBZ with the assistance of the ministry of finance, which initially borrowed the $40-million, and the ministry of labour and social welfare, which oversees the NSSA's operations.
Alternatively, the executives want to force a merger of all banks in which it has a shareholding.