Sav­ings is­sue is no joke

‘Boomerang gen­er­a­tion’ needs to come to the party

Finweek English Edition - - INSIGHT -

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

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