Spotlight : Financial illiteracy opens the door to corruption
William Gumede
Awise person should have money in their head , but not in their heart .” These words by the Irish satirist Jonathan Swift , could not be truer . Knowledge about money and finances is often the major differentiator not only between success or failure but also between honesty and corruption .
This is where financial literacy comes in . Financial literacy being the ability to understand and effectively use various financial skills , such as personal financial management , budgeting , and investing . The lack thereof not only often leads to personal financial ruin , but also major institutional and governmental financial fallouts .
Nowhere is this more evident than here , in South Africa .
Many South Africans , educated and non-educated , lack basic personal finance management skills , making them unable not only to manage their own money but also the money of institutions they are responsible for .
In my years of teaching , it has become clear to me that many elected and public representatives have little understanding of how to manage their personal finances – making it almost impossible for them to manage public finances as well . This then leads to corruption .
The reason is simple . If people cannot manage their own finances , they often face personal financial ruin . The noticeable financial resources of – for example , government – becomes a temptation and they become corrupt to make ends meet .
Many witnesses at the Judicial Commission of Inquiry into Allegations of State Capture led by Deputy Chief Justice Raymond Zondo , testified how cash-strapped elected and public officials were bribed by corrupt businessmen and women by paying their children ’ s school fees , their utility bills and outstanding car payments .
Even if not corrupt , elected and public representatives who lack financial literacy often also treat public money they are entrusted with poorly , causing poor public service outcomes , financial decisions and waste .
South Africa ’ s history of apartheid is partly to blame for the widespread lack of financial literacy . With many South Africans excluded from the formal economy for many years by not being allowed to own a property or a business , for example , it meant that they were never exposed to a plethora of financial concepts .
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