Insurance industry bombshell

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network and intertwined structures which includes 20 insurers, 28 insurance brokers, and 893 agents. All this value chain will be negatively affected by a government takeover of the book.

“The move will wipe 77% of motor insurance premium from the industry and 31,87% of market insurance revenue. This will cripple the industry’s contribution to National Development Strategy 1 in the key areas of economic growth and employment. At least eight insurance companies will close shop, and this will lead to loss of confidence in the industry and lead to loss of jobs across the industry,” CZI added.

Warning government to stay away from insurance, the paper said Zimbabwe’s southern African peers had left insurers to run third party insurance, while they administer road accidents (RAF) funds.

Still, these funds have struggled, the report noted, citing South Africa’s RAF, which recorded a R28,8 billion deficit last year alone.

“The budget introduced a motor insurance statutory levy of 20% of each dollar of premiums paid pursuant statutory motor insurance policies, with claims ratios 75% and below. The government already collects 20% of foreign vehicle third party insurance premiums. The funds are mainly used by the civil protection unit to help accident victims that are not insured. However, computation of the introduced levy will start from January to December 2023, which will negatively impact insurance companies since 80% of the Road Traffic Act policies for 2023 have already run their course. The levy was not budgeted for and imposing the levy in retrospect will affect the solvency of insurers,” the paper added.

Starting January 1, 2024, the measures compelled millions of informal sector players – estimated by the IMF to be making up 60% of Zimbabwe’s economy – to register with authorities in order to start paying taxes.

“(A sustainable taxation system) should be comparable with the region. VAT is already a great tax and avoids the pitfalls of sales tax. In other words, we are already taxing the informal sector which has a very small value add. We should promote the growth of the formal sector where more value is.

“The total expenditure for 2024 is expected to be about ZW$58,2 trillion, to be financed from an expected revenue of about ZW$53,9 trillion, with a targeted budget deficit of ZW$4,3 trillion (1,5% of GDP (gross domestic product). The budget deficit is less than 3% of GDP, which is in line with Sadc targets.

“However, the concern is largely that despite the economy being 80% dollarised, the 2024 National Budget was prepared in ZW$ rather than the USD. Thus, there are huge possibilities that the expected revenue and expenditure mix are not realistic, given that no one can adequately anticipate currency volatilities to be witnessed in 2024,” it noted.

The Treasury chief disclosed last week that following weeks of backlashes, he was forced to ask CZI to undertake a study detailing the extent of damage likely to be inflicted on business by policymakers’ missteps.

He toned down some of the policy changes, but said in a statement the new measures would be important for the economy.

“The (CZI) committee undertook an impact analysis on the implementation of some of the measures introduced through the 2024 budget, in particular with regards to tax compliance on route to the market, mitigation of consequences of the sugar on health through a special surtax, and a few tariff lines that were omitted on exemption from Value Added Tax, in order to cover the whole value chain that includes cotton and soya seeds to cooking oil,” Ncube said two weeks ago.