SOUTH Africa’s savings culture continues to deteriorate with new research showing the savings rate is at a 27-year low.
The Investec Gibs Saving Index, which measures South Africa’s savings rate and the country’s savings behaviour, indicates that country is below what it calls “the pass mark”. The headline index figure for the third quarter of last year was announced last week at 60.5 points. The index measures:
• the performance of the economy in terms of the propensity of the South African environment to encourage and promote savings,
• the consequent flow of savings that fund the required investment and • the accumulated stock of savings that is the result of historical flows. René Grobler, head of Investec cash investments, said for South Africa to achieve the kind of inclusive growth that shapes economic competitiveness, our economy needs a far better investment rate.
“A savings index score of 100 represents a ‘pass mark’ for South Africa in terms of savings to support our economic growth objectives. The latest figure of 60.5 shows we still have a long way to go towards laying the foundation for that kind of growth,” Grobler said.
She told The New Age yesterday that a score of 100 would “represent South Africa’s pass mark for national savings measured against the country’s structural high watermark or the average scores of the ‘savings stars’.” Therefore, South Africa is only twothirds of the way to passing the savings test. This is not a surprising result, Gibs economics professor Adrian Saville said and cited reasons the tough political environment towards the end of last year and the near-recessionary conditions that loomed over the economy.
However, he said, there was a sense that the country was on the cusp of a story that had a silver lining. He said saving and financial education were as important as sound economic policies.
Meanwhile Grobler warned of the impact of financial illiteracy. “Tax-free savings accounts, tax incentives for retirement savings, initiatives like Savings Month and the like are positive means of promoting a savings culture, but they are not enough to reach South Africans who are still financially illiterate,” she said.
She expressed the hope that ANC president Cyril Ramaphosa’s government will recognise the importance of financial literacy for children and find innovative ways to improve basic financial education which could support entrepreneurs and encourage South Africans to save and spend wisely.
“As much as South Africa needs to work on structural elements to repair the organisational make-up of the economy, there is a prospect of near-term improvement.
“Business confidence plays a big role in savings and investment decisions, both for South Africans and foreign investors.” Grobler said.