ECONOMIC REALITIES
A low domestic savings rate means
the country must rely on foreign
money to finance growth.
She is convinced that working down high debt levels, while interest
rates are still low, is the first step towards financial freedom.
ACROSS THE BOARD
Some analysts argue that it isn’t only those earning low incomes
who battle to save. John Field, CEO of FedGroup, comments: ‘Highincome earners are usually overburdened with hefty income tax
levels. This leaves very little in their pockets for saving.’
Field maintains that South Africa has become a consumerist
society – with people in all income brackets extending their debt to
acquire what they desire. ‘Instead of saving for big purchases, South
Africans look for the quickest way to get what they want,’ he says.
It’s a topic that Tobie van Zyl, the CEO of Moneysmart, feels
passionately about. Together with co-founder Zulfiq Isaacs, he’s
developed a free online tool that enables individuals to keep track of
their spending and find ways to invest. ‘Unfortunately many people
use their disposable income to calculate the amount of credit they
can access to fund a lifestyle that keeps up with the Joneses,’ Van Zyl
says. ‘In the short term, these people become part of the 13 million
credit-impaired South Africans, 94% of which cannot retire in the
long term.’
As emerging markets go, South Africa does not compare
favourably when it comes to savings. ‘According to the Institute of
International Finance, South Africa’s gross national savings rates
have averaged about 15.5% of GDP since 1994, as compared to
24% for emerging countries,’ states Mantshimuli. ‘This is primarily
because of the differences in the rate of household saving.
In 2008, for instance, household saving in China amounted to 28%,
while that of India was 32%. Here at home, household saving as a
percentage of GDP was just 1.5% during the first quarter.’
An underlying cause could be the country’s low life expectancy.
‘Globally, one of the biggest incentives for individuals to save
money is to provide for their old age,’ says Krugel. ‘However, South
Africa is one of the few countries in the world to have experienced
Continued »
John Field says
high-income
earners are usually
overburdened with
hefty income tax
level ̰