An Overview of Savings in South Africa

While government and corporates are saving, individual South Africans are not and the trend appears to be getting worse each year. The fundamental reason for this differential lies in consumer behaviour and a number of measures need to be adopted to develop a savings culture in this country. Education is a core strategy and campaigns have to be directed at helping people to understand the importance of savings. As more people move into gainful employment, families begin to have more money that can be directed towards savings. Therefore, job creation is seen by government as a key vehicle for encouraging savings.

Saving is all about discipline and people spending less than they earn. People will have to adjust their lifestyle and the manner in which they live so they can accommodate the redirection of income into a savings scheme. After a few years, people will get used to the idea.

Implications for South Africa

The effect of a low savings rate on the economy as a whole can be interpreted in exactly the same way at household level.

"If a household is not saving enough to fund its needs, whether it is consumption or investment, it will have to borrow. The more you borrow, the less creditworthy you become and the higher the interest rate you have to pay. Exactly the same happens at the country level. If South Africa relies on foreign savings it will require that we justify the decision of foreign investors to invest their money in this country. Therefore, for South Africa to be able to attract capital inflows we have to be able to offer offshore investors a good return and that means a higher interest rate and a higher cost to this country to borrow the capital. The higher cost of capital results in higher costs of production, making the country less competitive. However, if the cost at which South Africa borrows is lower than the rate of return that it enjoys, then it can be beneficial. Borrowing is not bad in it's own right, it is when it is unsustainable that it creates serious problems."

(Elias Masilela , Chairman SASI)

Click here to read what the Bible says about Saving: Proverbs 22:6-7...