Savings issue is no joke
‘Boomerang generation’ needs to come to the party
SOUTH AFRICA FACES an out and out savings crisis unless it’s able to take meaningful steps towards developing a savings culture in the country. “Of the 18,6m credit active consumers nearly half have impaired credit records and are battling to service their debt. The number of local consumers with impaired records increased by 20 000 to 8,63m in the March 2011 quarter from 8,61m in the December 2010 quarter. That’s happening despite the fact that interest rates are at their lowest in about 30 years,” says Obed Tongoane, manager at the National Credit Regulator.
We need to stop and consider the impact of that on SA’s broader society. Interest rates may now be favourable but can’t stay this low indefinitely.
Though savings tend to be treated as one of the “softer” issues facing South Africans, it’s gaining increasing recognition from some of the most senior people in Government, including Finance Minister Pravin Gordhan. In a recent speech given at the South African Savings Institute, Gordhan noted: “Compared with our peers internationally, SA’s savings rate hasn’t performed well. The 2010/2011 Global Competitiveness Report notes SA’s gross savings rate equated to 16% of gross domestic product in 2009 compared with China’s 52%, India’s 37% and Russia’s 22% in the same year.”
Gordhan pointed to the example of Japan, which had aggressively rebuilt itself following the Second World War based on the capacity of its strong savings regime. That was again demonstrated after it was hit by a string of environmental disasters over recent months that had damaged important infrastructure.
As economists have previously pointed out, a country such as Haiti has battled to rebuild itself following a devastating earthquake, while Japan was almost immediately able to deploy resources after being rocked by natural disasters.
Another issue raised by Gordhan was that SA’s skewed unemployment