Cape Times

RAMOS LAMENTS LACK OF SAVINGS

Higher dependency ratio straining ability of South Africans to save

- 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.

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