16 June 2017

Zimbabwe: Mines Owe Pension Fund U.S.$100 Million

Photo: Zimplats
(File photo).

Pension funds in the mining sector are owed almost US$100 million in unremitted contributions, mostly by large companies, despite an anticipated recovery in the capital-intensive industry.

Mining overtook agriculture as the largest contributor to the economy more than four years ago, but the industry, like many other economic sectors, continues to default on pension contributions, blighting the retirement plans of many pensioners.

Mining contributes 60% of the country's exports.

According to the Mining Industry Pension Fund (MIPF) annual report for 2016, the collection of pension contributions continued to be a challenge as debtors increased by 2,36% from US$96 389 199 as at September 30 2016 to US$98 662 902 as at December 31 2016, including interest.

The largest defaulters, namely Hwange, AA Mines, Metallon, RioZim, Zimbabwe Mining Development Corporation (ZMDC) and Marange Resources owed 83,59% of the outstanding contributions.

The report shows that Hwange Colliery, which is currently in the doldrums, owes the MIPF US$28 million followed by the country's largest gold producer Metallon Corporation (US$16 million). AA Mines, the report further shows, is a distant third at US$14 million while RioZim is fourth at US$12 million.

On Metallon, the report says: "The fund received US$7 500 in the fourth quarter compared to US$127 500 and US$84 500 received in the second and third quarter 2016, respectively. On 21 February 2017, Metallon's Group management accountant advised that the Metallon Group was in the process of restructuring its operations to ramp up production."

Metallon Corporation, which employs nearly 4 000 workers, said the arrears had accrued when some of the group's mines suspended operations at the height of the country's unprecedented economic crisis.

"During the period from 2008 to 2009, all Metallon mines suspended operations and were placed under

care and maintenance due to economic challenges that affected many businesses in the country at the time. It was, regrettably, during this period that a portion of pension arrears accumulated," the company said in a written response to questions sent by businessdigest. "We are, however, pleased to advise that the new management at Metallon has made the clearance of these arrears a priority. A workable arrears clearance plan, based on our production, has been submitted to the MIPF and regular repayments are being made. Further, and as a sign of commitment to retired members of staff, any retiring member of staff is paid what is due to them. No retiring member of staff is prejudiced in any way."

"RioZim US$12 173 027. No contributions were received from RioZim during the quarter ending 31 December 2016. The group's last payment was US$20 000 received in September 2016. This was contrary to the undertaking made on 18 July 2016 that the group would make payments of at least US$80 000 per month.

"ZMDC US$7 673 268. On 4 October 2016, the fund wrote a final letter of demand to ZMDC and advised the mine that the fund would take legal action if a payment plan was not received by the 14th of October 2016.

On 30 November 2016, ZMDC responded and advised that it was facing cash flow challenges to the extent that it had sent employees on half shifts effective 1 October 2016.

The fund was also advised that the ZMDC group was in the process of restructuring its operations. A proposal to start making payments by end of December 2016 was accepted by the fund."

Defunct diamond miner Marange Resources, the report reveals, is currently owing the MIPF US$3,7 million.

"Fund management is yet to hold a meeting with ZCDC's legal advisor to discuss how Marange's debts will be liquidated by the Zimbabwe Consolidated Diamond Company which took over Marange's operations. Attempts to have a meeting have been unsuccessful as she is always reportedly busy," the report reads.

Meanwhile, gold miner Duration Gold, which owes MIPF US$241 000 in arrears, has committed to a payment plan.

A slowdown in economic activity has resulted in government revenues declining as some companies scaled down operations while others have folded.

Last week the World Bank revised economic growth projections for Zimbabwe to 2,5% from 3,8%.

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