Durban - Finance Minister Pravin Gordhan has again voiced concern about the high number of South Africans caught in a cycle of debt.
Many are being forced to take unsecured loans from unscrupulous financial services providers, further deepening the debt cycle.
Gordhan said education and financial literacy were keys – particularly among the youth – to turning this situation around.
Addressing the KZN Financial Literacy Association’s International Child and Youth Finance Summit via a Skype video link yesterday, Gordhan said the income of more than 50 percent of South Africa’s adult working population did not cover their living costs.
“They are being caught in a cycle of debt and are borrowing through the unsecured lending sector to make ends meet. But many are also caught in consumerism in a generation where we are told to spend all the time.
“Are we buying what we want or what we need? is the question we need to ask ourselves.
“The youth can’t be making the same mistakes that this generation is making. You need to save and be more responsible around your finances. We need a culture of savings. You can’t earn R100 and keep spending R110.
“That’s going to get you in trouble. You are then forced to borrow and get into a cycle of debt because you borrow more to pay your debts,” Gordhan told more than 500 largely young delegates at the conference.
He said a recent study showed that about 60 percent of young people over 16 were playing a role in managing household budgets. He said with the responsibility they were carrying, increasing financial literacy and education, especially among the youth, was crucial.
‘Be more aware’
“As the youth, you need to be aware of financial issues… how to make and save money, invest money and, most importantly, how to manage your finances. Apart from subjects like history and maths, financial literacy is becoming increasingly important. You need to become more aware of how finance affects all of our lives.
“If you look at the global financial crisis of 2008/09, what happened in Wall Street and later Europe, affected the whole world. A million jobs were lost in South Africa. It shows you what can happen when finances are mismanaged… Now, unsecured lending in our country has resulted in households becoming over- indebted and ordinary South Africans are finding great difficulty coming out of it.
“Following the global financial crisis, governments around the world have passed stricter regulations so financial institutions don’t put us at risk… but consumers also need to make the right choices. We have to ensure consumers are protected. Financial institutions just can’t sell products to citizens that they can’t afford. Regulations are there for firms to do the right thing.”
Gordhan said access to affordable credit was of benefit when used productively, but bad when funding excessive consumption.
KZN Finance MEC Ina Cronjé said the KZN Financial Literacy Association was an initiative of the provincial Treasury and the summit was to promote financial literacy and education among the youth.
“We want our young people to be more money smart… the financial future of our country will depend on it and on us building a savings and investment culture. We have to look at existing financial education and ask: Is it relevant or sufficient?” she said. - The Mercury