Most South African workers aren’t confident about their financial retirement plans – a situation likely to be worsened by economic uncertainty. If this trend is not reversed, it could further compound the pain that the local economy is feeling.
With only 32% of small and medium enterprises (SMEs) – the country’s largest source of employment, having retirement funding on their agenda, the feasibility of improving the country’s saving rate narrows. This is according to the 2017 Old Mutual Corporate SME Employee Benefits Monitor released in Johannesburg yesterday.
Launched in 2015, the monitor surveyed 460 established SMEs (those in operation of more than five years, with an annual turnover of more than R2m and employing 10+ employees) and 460 staff to investigate trends, perceptions and attitudes towards retirement funding and employee benefits. Malusi Ndlovu, head of Old Mutual corporate consultants, said only 8% of SME decision makers were confident about SA’s economy.
He said if SA is to address the negative economic growth levels, we need to address the national savings level due to the correlation and SMEs were ideally positioned to close this gap. “Established SMEs are both the lifeblood of the SA economy and the providers of the lion’s share of employment opportunities to working South Africans. While putting money aside for retirement should be a worker’s biggest financial priority, it often comes last, if at all. “The 2017 Retirement Monitor shows the dire extent of this, with 30% of working South Africans having no formal retirement savings at all. SMEs should be looking at measures to implement that will afford employees longterm financial security,” Ndlovu said.
Prudence Thipe, general manager for the SME segment, said that while 86% of SME decision makers agreed that retirement funding should be a priority for SMEs and while both SMEs and staff acknowledge that it is a shared responsibility in terms of contributions, these attitudes aren’t translating into action due to perceived barriers,” Thipe said.
“As SMEs’ business confidence and prospects also become increasingly strained, this has the potential to compound their financial pressures. “Only 27% of SME decision makers strongly agree debtors are paying on time a decrease of 5% when compared to 2015. There is also a strong agreement among decision makers that the cost of business has increased (64%) and that SMEs are operating in a more competitive environment (58%).
“Furthermore, in terms of their business’ profitability, only 41% of SMEs reported healthy profits – down from 48% in 2015.” From a staff perspective, 45% feel a large percentage of their salary goes to paying off debt and of these, almost half (48%) said it is more than 50% of their salary. Thipe said staff’s ability to afford employee benefits was listed as one of the reasons for decision makers not offering it.
Many SMEs are also having to comply with the same regulations enforced on corporates due to their tax threshold, yet they don’t have the support that a large business would,” Thipe said. “Just 7% of SME decision makers agree that the government is supportive of SMEs and that legislation has made it easier to do business in SA.”