The mandatory Pension Law enacted by parliament last year has began paying dividends for insurance companies such as Old Mutual Life Assurance Malawi, which has seen its gross premiums grow by 74% as of December 2012 to rest at 7.8 billion Kwacha, compared to the 4.5 Billion Kwacha realized in 2011.
The firm is a subsidiary of Old Mutual Malawi Ltd, whose parent company is listed on the London Stock Exchange.
This means most companies are now fulfilling their obligation by remitting pension money to the life assurance firm for their employee’s pension scheme.
A statement signed by Managing Director Chris Kapanga and Chairman Jimmy Lipunga predicts that the first quarter of 2013, which has just finished would be characterized by inflationary pressures due to continued devaluation of the Kwacha and the lean season.
The company has made a profit of 1.4 Billion Kwacha for the 31st Dec 2012 period, which shows a slight increase from the 1.2 Billion realized in 2011.
‘Early pension withdrawals cut Old Mutual Kenya assets’
Old Mutual Kenya assets in the first six months of last year shrank by Sh3.9 billion as a result of layoffs by private companies and restructuring of its portfolio.
The decline in the fund manager’s assets reveals the depth of job losses in Kenya’s economy last year, following a downturn in the market and economy that led to cutbacks in operations.
“Most private companies have schemes with us and as they engaged in restructurings we had to pay out those who left,” said Chris Nyokangi head of corporate business at Old Mutual.
He however could not give details of the affected companies on grounds of client confidentiality.
Co-op trust whose assets also declined by Sh1.5 billion concurred that layoffs and withdrawal of 50 per cent of individual contributions led to the decline.
Old Mutual itself engaged in a job cut exercise early this year when it laid off 39 staff members.
The exercise at Old Mutual, an international fund manager, followed implementation of a new operations system and cut across all business units.
Of the affected staff, 19 were declared redundant while 20 fixed-term contracts were not renewed.
“The move follows the introduction of a new cloud-based retail system that has resulted in a number of increased efficiencies,” said the CEO Mr Tavaziva Madzinga of the job cuts.
Layoffs by private companies have been done quietly but the magnitude of the job losses is reflected in the withdrawals from pension schemes.
A lack of comprehensive data on employment in Kenya makes it difficult to measure the impact of austerity measures.
Technological efficiencies and scaling down of business operations due to harsh macro-economic conditions were some of the reasons cited for the job cuts.
Kenya’s business environment was last year convulsed by a double-digit inflation, currency depreciation and a drastic rise in operating costs amid falling disposable incomes.
Old Mutual joined other companies that have laid off staff including Barclays Bank, Co-operative Bank, KCB, Family Bank, Kestrel Capital and Dyer and Blair Investment Bank.
Mr Nyokangi noted that contributors in large pension schemes were less inclined to withdraw their savings as employee skills are relatively transferable.