|Savings in South Africa, Sharon Smulders|
Savings in South Africa, Sharon Smulders
Request: I am writing an article on how to boost SA's savings rate for the April issue of kulula's inflight magazine, khuluma.
I am looking for economists and other financial experts to respond to the following questions by next Friday, 22 February.
Here are the questions:
Before discussing South Africa’s current savings rate, it is essential to understand why saving is so important to a country and its citizens.
Why is saving important
A savings culture would achieve important goals for the South African economy and its individuals. A high savings rate would ensure that South Africa meets its investment needs domestically without having to borrow from other countries that could ultimately expose our emerging volatile economy to unnecessary risks. Savings also provide individuals with a decent retirement and also allow individuals to protect themselves against unforeseen events.
So how does South Africa fare with regards to its savings?
According to the World Economic Forum’s “The Global Competitiveness Report 2012–2013” South Africa's gross national saving rate was 16.5% of gross domestic product, compared to China’s of 51%, India’s of 31.6%, Russia’s of 28.6% and Brazil’s of 18.4%. Thus compared to other emerging economies, South Africa scores very low on domestic savings levels. Most worrying is that since 2005, local households in South Africa have had a negative net savings rate.
Various reasons can be attributed to this low savings rate:
As mentioned above, South Africa’s savings rates are lagging behind our emerging counterparts. This reduces South Africa’s capability to attract foreign investment. Attracting foreign investment allows the transfer of expertise and technology to a country, things that South Africa is in dire need of.
The following should be considered to boost savings:
5. How can we counteract the influences which are eroding South Africans' disposable income (e.g inflation, fuel price volatility, electricity hikes and proposed toll fees in Gauteng)?
Although decreasing levels of disposable income of South Africans is a reality, the desire to purchase luxury goods or goods to keep up with the Jones’ is still evident in the South African society. These desires are often met by obtaining credit over a lengthy period of time. However, the risks of not saving are high, as it aptly explained by Vicky Robin – “If you live for having it all, what ever you have is never enough”.
South Africans should be disciplined and spend less than they earn. They should carefully plan their spending (by preparing budgets) and should at all costs not incur unnecessary debt to buy luxuries that they cannot afford. Various avenues of savings can be followed, such as taking out:
Lifestyles and the manner in which people live will need to be adjusted so they can ensure that they have additional income that can be deposited into a savings scheme. A nation of savers will boost the economy and create jobs – both essential elements for the ultimate survival of the South African economy from a local and international perspective.