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Savings in South Africa, Sharon Smulders
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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:

  • What is South Africa's current savings rate?

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.

  • Why is it so low?

Various reasons can be attributed to this low savings rate:

  • High unemployment – not having a job or having a prolonged spell of unemployment results in many people not earning any/enough income in order to save and/or resulting in accumulated savings being depleted to see them through these unemployment phases;
  • Financial strain – the effect of the financial crisis in Europe and the decline in global demand has put many South Africans under financial strain. A high increase in the cost of living (medial costs, fuel, water and electricity etc) has also limited the amount available for saving;
  • Economic uncertainty this is causing South Africans to postpone making key financial decisions such as saving;
  • Climate of doubt – South Africans are not confident that sound planning will result in a positive outcome leading many to postpone their commitment to saving;
  • Culture of consumerism – the desire to accumulate 'things' for oneself and where decisions are dictated by the most recent trends and fashions and funky advertisements is much stronger in South Africa than the culture to save;
  • Lack of effective savings products - transparent and cost-effective savings products are not readily available in South Africa;
  • Lack of awareness – poor financial awareness among South Africans that could potentially save is also rife.
  • How does our savings rate compare to other emerging countries e.g. China, Brazil, Russia and India (please provide the appropriate figures)?


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.

  • What can be done to boost savings?

The following should be considered to boost savings:

  • Create jobs – job creation, as was mentioned by President Zuma in the National Development Plan of South Africa, is essential not only to improve the economy in South Africa as the more people move into gainful employment, the more families begin to have more money that can be directed towards savings;
  • Encourage savings by reducing bank charges and tax on interest – the government needs to create a tax environment that encourages South Africans to save instead of spending the little they are left with;
  • Increase allowable tax deductions and tax concessions – particularly with a view to encouraging private savings, both short and long term;
  • Provide a transparent financial sector a safer and more transparent financial sector can readily assist in encouraging higher savings amongst consumers. Savings in co-operative banks should also be encouraged as they reach people who are situated in rural areas;
  • Increase educational campaigns - the government and the financial services industry should assist in educating individuals about the benefits of savings as well as the costs of the financial products (transparency should be the order of the day). Parents should also get involved and teach their children from a young age to understand the importance of saving by explaining to them for example how to save on a monthly basis for a bicycle or a holiday that they want. Parents should explain to their children that overdrafts and credit cards are not their money and that they have to pay it back with interest which ultimately increases the cost of the item significantly.


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:

  • short-term insurance against the unforseen car accident or loss of property;
  • long-term insurance against the risk of death or disability; and
  • medical aid cover against unpredictable medical costs.

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.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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