MAJOR mining companies in Zimbabwe are under attack for converting employee pension contributions from United States dollars (USD) to local currency when submitting them to the Mining Industry Pension Fund (MIPF), potentially profiting from favourable foreign exchange rates, the Zimbabwe Independent can exclusively reveal.
This practice has caused a crisis of confidence among MIPF members, especially those receiving salaries in USD.
A document prepared by Insurance and Pensions Commission (Ipec) obtained by the Independent reveals that while many miners pay their employees in USD, larger mining companies are remitting pension contributions in local currency despite making deductions in forex.
Ipec submitted the document in response to questions raised by legislators to the Ministry of Mines and Mining Development.
Specifically, 89 participant employers were remitting pension contributions in Zimbabwe Gold (ZWG), with the largest contributors being Zimplats at 41,72%, Hwange Colliery at 15,33%, Trojan Nickel (7,14%), Renco Mine at (4,92%), RioZim at (4,11%), and others accounting for the remaining amounts.
“There are big mining houses that are deducting pension contributions in forex but remitting ZWG to MIPF, in the process prejudicing their employees and creating an expectation crisis," the document titled Ipec Responses to Questions Raised by Parliament on Payment of Pension Benefits in Foreign Currency by the Mining Industry Pension Fund reads in part.
"Some mining houses are deducting pension contributions in forex but not remitting the same to MIPF, which will impact negatively on the welfare of pensioners if the arrears remain uncleared.”
Zimplats, Hwange Colliery, Renco Mine and RioZim had not responded to questions sent by the Independent at the time of going to print.
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The document stated that the MIPF was currently dealing with a crisis of expectation from members whose pension contributions are deducted in USD but paid out in local currency.
“In such situations, the sponsoring employers are unfairly benefiting from the forex deductions, particularly, the premium between the official and the alternative exchange rate. To this end, MIPF will be incapacitated to pay USD pension benefits to such employees, yet they expect USD benefits.”
As of June 30, 2024, only 61 out of 146 participating miners were remitting USD pension contributions, while 89 were contributing in ZWG. Notably, seven mines contribute 66,8% of the total USD contributions.
These companies include Zimbabwe Consolidated Diamond Company (ZCDC) at 18,85%, Mimosa Mine (13,23%), Blanket Mine (12,65%), Unki (8,5%), and Matabeleland Minerals (5,81%).
The Parliamentarians had sought information about mining companies that were deducting pension contributions in USD but paying out in local currency.
The legislators called on the government to clarify its stance on ensuring that employees who contribute to the MIPF in USD receive their payouts in the same currency.
The document indicated that USD pension contribution arrears totalled US$10,54 million as of June 30, with ZCDC accounting for 51% of this debt.
As a result, beneficiaries from these mines may not access their USD benefits, despite having legitimate expectations.
"We, therefore, implore mining houses in pension contribution arrears to make good the arrears to pension funds,” the document states.
Ipec said it was engaging with employers regarding their obligations under the new Pension and Provident Funds Act, which includes powers to garnish wages if compliance is not met.
The fund has historically received contributions in USD since the multi-currency regime was introduced in March 2009, with all financial dealings reflecting foreign currency until the currency reform in 2019.
“Drawing lessons from the 2009 currency reform, Ipec issued a Guidance Paper on the Conversion of Insurance and Pension Liabilities from the USD to the ZWL (Zimbabwe dollar)," the regulator noted.
The guidance issued by Ipec aimed to ensure equitable benefits for pension fund members following the 2019 currency conversion, although many members have lost value in their USD contributions due to subsequent hyperinflation.
This situation underscores the urgent need for mining companies to rectify their pension contribution practices to protect employees' interests.
"The objective of the Guidance Paper was to ensure pension fund members and policyholders equitably benefit from the revaluation gains on assets that supported their liabilities prior to the 2019 currency conversion,” the document reads.
“Whilst the Guidance Paper assisted in cushioning pensioners from the 2019 effects of currency change and subsequent hyperinflationary environment, monetary assets that converted on a parity exchange rate of US$1:1ZWL lost value.
"These include bonds, money market and cash. Therefore, MIPF members lost some value of the USD contributions and investment returns made during the period 2009 to 2019.”
