In January this year, we reported that about eight insurance companies could fold after the government’s drastic tax moves in the 2024 national budget precipitated disquiet from sections of the economy.
Quoting a comprehensive analysis of the budget by an industrial lobby, we warned that the carnage could affect 930 firms in related industries, with 77% of motor insurance premiums under threat as the government muscled into third-party insurance.
For a sector being confronted by many headwinds, taking away the third-party insurance was a sure way of destroying what’s left of Zimbabwe’s brokerage sector, along with a sea of tech start-ups operating as agents for big insurers.
With a stroke of a pen that afternoon in November 2023, Ncube plotted the bankruptcies of the small to medium-scale enterprises, which the government claims is trying to build into future corporations.
He unsettled the big players, too.
It is public knowledge that the economy has been hit hard by currency fragilities and rampaging inflation.
State revenues have been compromised.
But it is reprehensible for a whole Treasury boss to pile up misery on bleeding firms through a budget that should encourage investors.
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In this case, as the report warned, the new regime would drain up to 32% on insurers’ revenues, which would be redirected to the government’s own pockets.
The list of grievances against that budget was too long.
Beverage producers said last week demand has been battered by a hefty sugar tax imposed through the same budget.
“Over the years the (insurance) industry has established a strong distribution network and intertwined structures which include 20 insurers, 28 insurance brokers, and 893 agents. All this value chain will be negatively affected by a government takeover of the book,” the report warned.
The propensity to score high marks in Cabinet at the expense of companies was misdirected.
However, Ncube pressed ahead, with minute adjustments to some of the taxes.
But we only learnt last week that about six months since the new regime came into force this January, government is yet to spell out the modus operandi.
Naturally, as one big player told reporters last week, a wave of uncertainty pervades the sector today.
This government is full of surprises when it comes to policy shifts and missteps – which only work in its favour but inflict damage to companies.
Who knows, by the time requisite guidelines are announced, insurers would be slapped with heavy backdated fortunes to pay.
We saw government attempt to chart this direction with the Sugar Tax early this year.
The uncertainty created by government’s delays in giving guidelines is counterproductive.
The Insurance and Pensions Commission must smell the coffee.
It must move with speed to protect an industry under its watch.
