Higher de­pen­dency ra­tio strain­ing abil­ity of South Africans to save

The Star Early Edition - - BUSINESS REPORT - Siseko Njobeni

HIGHER de­pen­dency ra­tio is strain­ing the abil­ity of many South African house­holds to save, amid ris­ing un­em­ploy­ment and the cost of liv­ing, Bar­clays Africa chief ex­ec­u­tive Maria Ramos said yes­ter­day.

Speak­ing at the launch of na­tional sav­ings month in Jo­han­nes­burg, Ramos said, as at the end of June last year, the Na­tional Credit Reg­u­la­tor es­ti­mated that about 40 per­cent of the 24.08 mil­lion credit con­sumers in South Africa had im­paired credit records.

“In ev­ery na­tional bud­get that I re­call, there is al­ways an in­cen­tive for peo­ple to save and in­vest for a more se­cure fu­ture, but this is not the re­spon­si­bil­ity of the min­is­ter of fi­nance alone,” said Ramos. “The fi­nan­cial ser­vices sec­tor has a duty to en­cour­age and to help peo­ple to save, and we take this very se­ri­ously.”

Ramos said the World Bank and the SA Re­serve Bank agreed that South Africa’s na­tional sav­ings stock ac­cu­mu­lated from house­hold sav­ings had been trend­ing down­wards for the past 35 years, with con­sumers tend­ing to bor­row rather than save. This was true for house­holds in lower in­come brack­ets, where sav­ings were of­ten can­celled out by debt and far too lit­tle of the bor­row­ing was used to ac­quire long-term as­sets like hous­ing, she said.

“Ac­cord­ing to Asisa (As­so­ci­a­tion for Sav­ings and In­vest­ment South Africa), res­i­den­tial hous­ing as a sav­ings as­set in our coun­try is con­sid­ered low for a de­vel­op­ing na­tion at 24 per­cent of the house­hold bal­ance sheet,” Ramos said.

“While it is easy to con­clude that this is caused by a poor cul­ture of sav­ing, the rea­sons are far more com­plex. In many sit­u­a­tions, peo­ple are not able to save be­cause house­holds have a higher de­pen­dency ra­tio than they should. Per­sis­tent un­em­ploy­ment and the ris­ing costs of liv­ing, made worse by his­tor­i­cal spa­tial de­vel­op­ment pat­terns, mean the av­er­age lower in­come house­hold faces far greater pres­sures than many of us imag­ine.”

Inkunzi Wealth Group chief ex­ec­u­tive Owen Nkomo said many peo­ple earned too lit­tle to save. “Many peo­ple can­not af­ford to save. When you have a min­i­mum wage of R3 000… you think about the rent that per­son is pay­ing, the num­ber of chil­dren they have and (the fact that) they need to pay for trans­port. The land­scape is very com­pli­cated,” said Nkomo.

Na­tional Trea­sury’s chief di­rec­tor for fi­nan­cial in­vest­ments and sav­ings, Olano Makhubela, said there were 800 000 stokvels in South Africa, sav­ing about R49 bil­lion a year. “Are al­ter­na­tive sav­ings in­vest­ment in­sti­tu­tions fo­cus­ing any at­ten­tion on these in­for­mal in­sti­tu­tions? Are these stokvels knowl­edge­able about the al­ter­na­tives?” he asked.

Makhubela said about 60 per­cent of stokvels were in­vest­ment-fo­cused, while 18 per­cent were in­vest­ment clubs. “The re­main­ing 22 per­cent are gro­cery stokvels and burial so­ci­eties. In­vest­ments in eq­ui­ties by groups of in­di­vid­u­als through stokvels or in­vestor clubs are be­com­ing a pop­u­lar way of build­ing up sav­ings and in­vest­ments. This is en­cour­ag­ing. Govern­ment has also played its part in en­abling al­ter­na­tive sav­ings and in­vest­ment prod­ucts,” he said.

He cited the in­tro­duc­tion of the RSA Re­tail Sav­ings Bonds in 2004. “We’ve also pro­vided an en­abling mech­a­nism for house­holds to save and in­vest in more prod­ucts tax-free. Fi­nan­cial in­sti­tu­tions have placed a sig­nif­i­cant and com­mend­able role in mar­ket­ing tax-free sav­ing ac­counts,” he said.

Makhubela said trans­fers be­tween tax-free sav­ings ac­counts will be en­abled with ef­fect from March next year. The an­nual con­tri­bu­tion had been in­creased from R30 000 to R33 000. “Em­ploy­ers should en­cour­age their em­ploy­ees to take this tax free sav­ings ac­count, es­pe­cially us­ing their bonuses,” he said.


Bar­clays Africa chief ex­ec­u­tive Maria Ramos says higher de­pen­dency ra­tio is strain­ing the abil­ity of many South African house­holds to save.

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