eBusiness Weekly
Business Writer
Zimbabwe’s social safety net is facing strain due to high inflation, which has significantly reduced the value of the National Social Security Authority’s (NSSA) assets, general manager Dr Charles Shava has said.
Dr Shava recently disclosed that inflation has eroded nearly half the value of the authority’s holdings from about US$1,1 billion to roughly “half a million” after the Government launched the interbank market were the bond notes and electronic dollars known as Real Time Gross Settlement (RTGS) traded in a managed float against foreign currencies.
Zimbabwe ended the fixed exchange rate of 25 since the scrapping of the 1:1 peg after introducing the foreign currency auction system in June 2019 and since then the value of the Zimbabwe dollar has been depreciating.
“We used to be around US$1,1 billion but we are down to around US$500 million because of inflation,” said Dr Shava.
NSSA is a state-owned pension fund largely responsible for managing social security in the country. Some of its assets include securities in various companies listed in the Zimbabwe Stock Exchange and properties.
It currently offers two schemes–pension and other benefits scheme–a combined effort between employers and employees. Contributions are made during employment, and then benefits are paid out during retirement, invalidity, or death.
Dr Shava said 40 percent of its collection were now in United States dollars and the remainder in Zimbabwe dollars.
NSSA also offer Prevention and Workers’ Compensation Scheme, funded entirely by employers. The scheme provides benefits to employees or their families in case of a workplace accident or death.
Dr Shava said NSSA was looking to offer more social security options for Zimbabwe and is targeting pension benefits for people in the informal sector.
The hyperinflation and economic collapse of the 2000s further fuelled the informal sector in Zimbabwe. Formal jobs became scarce, and people turned to informal activities to make ends meet.
Currently, Zimbabwe’s informal sector is estimated to be massive, contributing a significant portion over 60 percent of the gross domestic product.
However, one of the biggest drawbacks of the informal sector is the absence of a social safety net for workers.
In case of income loss due to illness, injury, disability, or old age, informal workers have no guaranteed support system.
They also lack of security which can lead to massive old age poverty, debt, and hardship, especially for vulnerable groups.
