The 2017 SASI (South African Savings Institute) July Savings Month was launched today in Sandton by Basil Maseko, Director of Savings at National Treasury, and Sazini Mojapelo, Group Head of Citizenship at Barclays Africa, with a focus on encouraging alternative savings solutions. A panel of industry experts discussed developing alternative mechanisms to help South African consumers, already under pressure and over-indebted, to save.
Absa partnered with the South African Savings Institute (SASI) to launch National Savings Month, joining anchor sponsor the IDC and other long term partners across the financial services industry.
“Our decision to partner with the South African Savings Institute echoes our commitment to Shared Growth through which we use our resources, the talents of our people and our expertise to make a positive difference in society,” Mojapelo said. “One of our commitments in this regard is Financial Inclusion, which includes financial literacy training, and looks to encourage South Africans to recognise the importance of saving and to save.”
SASI Chairperson, Prem Govender, stated that following South Africa’s ratings downgrade and subsequent effects on the economy, consumers will increasingly be under financial pressure and need to improve both knowledge and attitudes to saving. “Savings Month has been designed to remind consumers, via the media and other channels, to strive towards financial freedom or remain continuously vulnerable. Cultivating a culture of savings and promoting alternative savings solutions in all spheres of life is our focus for 2017.”
Employers can also play an important role. “Many South Africans are struggling to save not only due to income challenges, but also the lack of willpower and commitment. In terms of alternative savings solutions, we are involving employers this year and suggesting ways to facilitate or automate the savings process for those with an income, such as garnish savings options and 13th cheques,” she added.
Gerald Mwandiambira, SASI acting CEO, emphasized the importance of people having a savings buffer in tough economic times. “Research shows that savers with a buffer enjoy improved emotional wellbeing, greater resilience to external market shocks and, importantly, an increase in productivity at work. We need employers to get involved in the savings process by assisting with automated savings programmes, especially considering that financially stable employees make productive employees.”
Mojapelo agreed, saying, “Persistent unemployment and the rising costs of living, made worse by historical spatial development patterns, means the average lower income household faces far greater pressures than many of us imagine. For those that can save, it is important that they use all the instruments available to improve their long-term financial sustainability. The responsibility for enacting these critical behavioral changes is a shared one, and we see a role for individuals, financial services providers but also for employers and HR professionals. Employers have a significant role to play in guiding their employees to make those small behavioral changes. HR professionals should be recommending tweaks to employees such as regularly reviewing and adjusting their pension fund contributions. They should also be educating employees to start building a savings buffer in case things go wrong.”
SASI has been dedicated to developing a robust culture of saving in South Africa since 2001. “According to South African Reserve Bank (SARB) figures, in the last 16 years we have seen a decline in our savings rate, reaching a record low of -2.70 in 2013,” Govender stated. “However, we are now seeing small increases off a very low base, with the Household Saving Rate in South Africa increasing to -0.30 percent in the first quarter of 2017 from -0.50 percent in the fourth quarter of 2016.”
Govender further highlighted the fact that we are starting to see an overall reduction in household debt. The SARB bulletin for the first quarter of 2017 shows that, on an annual basis, growth in household debt slowed from 4.6{260be39af7a23245908e2d03f0702cdacbe80916f94cc22d505f2ddb0a022481} in 2015 to 3.9{260be39af7a23245908e2d03f0702cdacbe80916f94cc22d505f2ddb0a022481} in 2016, and the ratio of household debt to disposable income edged lower from 76.9{260be39af7a23245908e2d03f0702cdacbe80916f94cc22d505f2ddb0a022481} to 74.4{260be39af7a23245908e2d03f0702cdacbe80916f94cc22d505f2ddb0a022481} over the same period.
“Recent improvements in the debt rate can be attributed to The National Credit Amendment Act 2016, which has imposed more stringent affordability requirements on borrowers, as well as a Nation that has simply used up all available credit.Young South Africans are increasingly relying on credit to provide for basic needs, and there is a growing culture of people living way beyond their means and getting trapped in a cycle of short-term debt. Financial literacy education from an early age is vital to counteract this trend.”
Govender added that SA needs to move away from negativity around South Africa’s savings rate to developing innovative savings alternatives and reinforcing positive savings behaviour. “Every Savings Month we work with our partners, including the large financial institutions that play such an important role in sharing knowledge, to find ways to educate and empower South Africans to save more. The household savings agenda is a key national priority. We believe that South Africans can save and invest more domestically for the greater good of our economy. As we sit in a technical recession, it is a fact that domestic savings can be a driver of internal economic growth. There has never been a better time to save than now.”
