Parly blocks insurance players from sitting on the IPEC board
Legislators in the National Assembly have blocked insurance sector players from sitting on the Insurance and Pensions Commission (IPEC) board, arguing that they cannot be both players and referees.
Speaking during the Committee Stage of the Insurance and Pensions Commission Amendment Bill, Harare East legislator Tendai Biti said the government must ensure there is no conflict of interest.
He said people cannot be active players in the insurance business and then go on and be a regulator at IPEC.
Below is the full text of what Honourable Biti said during the debate of Section 2 on the Bill and the responses that followed.
HON. BITI: Thank you, Mr. Speaker. Section 2 does not capture the concerns that were highlighted in the Second Reading speech. What is the fundamental illness and weakness of the regulator in Zimbabwe? The fundamental weakness of the regulator which was identified by Justice George Smith in the Smith Commission of Inquiry of 2017, is that you have got actors regulating themselves.
You have got industry players regulating themselves. So the only thing to address that mischief is to ensure that IPEC members, whether board members or directors if you follow Hon. Mushoriwa’s submission which is the Committee submission, they cannot be active players in the market and then go and be a regulator. So, you can own an insurance company, but you cannot own and have shares in an insurance company and then go to IPEC and become a regulator, it is not possible, there is incest.
We would like to see in Clause 2 if you look at the second section 2 (b), it refers to an independent director. We would like to see all of them being independent directors. They should not be insurance players.
This business that actors or retired actors supervise themselves, it does not work. The Smith Commission Report is very clear about the misdeeds, the omission of the players paying themselves excessive salaries, buying houses, mistresses you name it, eating the capital base, you name it, and failure to maintain records in the case of Old Mutual and First Mutual and failure to preserve value. We need independent people to be at IPEC to regulate the pensions insurance and assurance industry.
We ask the Minister to put in Clause 2 a clear prescription that makes it very clear that you cannot be on the board if you sit as a director, or you have had a prior interest. They are so many Zimbabweans; the population of Zimbabwe is 14 million and it is going to double by 2045. We have got accountants and so many professionals, they can sit on the board of IPEC to kill and address the mischief. I thank you, Mr. Speaker.
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. MTHULI. NCUBE): Thank you very much Mr. Chairman, I thank the Hon. Members for this contribution. This clause is very simple. The issue of blaming an appointed director, this is a director who is appointed by the Minister, it has to be clear and it is just an issue of clarification to make sure there is no confusion between that kind of director and any other members. Also right through the document, there is a reference to a member of this and a member of that.
For example, you have got a member annuity fund, we just want to be sure that the word member is appropriately used and that when it comes to a director who is appointed by the Minister, this is an appointed director and there is no confusion – that is all.
On the issue of dealing with the conflict of interest, I agree with Hon. Nduna and Hon. Biti that we want to make sure that members of the board or appointed directors should not be actors in the industry then they are regulating themselves. What we have done in this Bill is, we have taken care of that. It is in Clause 6, I would like to urge Hon. Members Nduna and Biti to look at that clause and then maybe we can wait and see if we can get there, and if this is adequate enough to deal with the mischief and conflict of interest. If they take a look, we will get there, just take a look and see what I mean. So their issue will be taken care of and let us leave it on Clause 6 under the conflict of interest, the issue around the disqualification of the director of IPEC.
I really feel that in terms of interpretation, the idea of an appointed director is appropriate. There is no confusion and the issues of conflict of interest be reserved for Clause 6 where we just check whether this clause is adequate and all-encompassing. I stand ready to have any revisions or addition to make sure that we have a water-tight disqualification provision for our directors. I thank you.
HON EDWIN MUSHORIWA: Thank you, Hon. Chair. I think the Hon. Minister was going to respond. He said he was going to refer to this. If you check Clause 6, you find that this clause and as you go by that board of directors, the word is ‘member’ and it is not directors. Now, if the bulk of the Bill refers to the board members, then the inclusion of this definition of directors does not make sense unless you are going to say that where the word ‘member’ appears as we go by, you are going to change all those to directors.
It should resonate, you cannot put a definition but in the entirety of the Bill, that definition is ‘member of the board’ but here in Clause 2, you have started by the definition.
HON. TOGAREPI: I have been directed by the Minister that the issue of membership of the board in terms of their being not members of any insurance company or pension fund would be dealt with when we get to Clause 6.
HON. PROF. M. NCUBE: I think let me give comfort to Hon. Mushoriwa and concur with him. I think that there is no harm in really agreeing with him here just to make sure we have the consistency right through the document. We will remove “appoint a director” and refer to a member of the board, it will still work – there is no difficulty.
HON DEXTER NDUNA: On Clause 2, the Hon. Minister talks about giving comfort to us by appointing a director. I also ask that it also be included within that appointment, that pecuniary interest, the director that he would be appointing should, in a way, be as clean as a whistle in so far as it relates to that industry so that we do not have a square plug in a round hole.
So, there is a danger in getting comfort in that the Minister is going to appoint a referee or a director who, in some instances, might also be having some pecuniary interest.
In the second reading, the Hon. Minister agreed that immediately, even before the enactment of this Act and amendments on this Bill, there will be a cleanup exercise in the existing status quo which I believe we need to agree with you now to avert and completely eradicate further hemorrhage and instill immediate financial discipline.
The Chairperson of the current IPEC Board has not only pecuniary interest but has an incestuous relationship. Mr. Chikono who is also a referee has also got a very big interest. How can you have your cake and eat it? Once you clean up the sector now, money will start flowing to other sectors. Mind you, that insurance is the backbone of the economy because they hedge a lot of their funds on infrastructure development. So, I am pleading with you to clean up the sector immediately, irrespective of the fact that we are still going to pass this Act.
HON. PROF. M. NCUBE: I concur with Hon. Nduna that we should clean up and examine every director on the current IPEC Board to make sure that no one has such a conflict of interest that they are both a player in the industry as well as a referee. We will just make sure that that is cleaned up immediately – I commit to that. Thank you.
Parly blocks insurance players from sitting on the IPEC board
