“In every national budget that I recall, there is always an incentive for people to save and invest for a more secure future, but this is not the responsibility of the minister of finance alone,” said Ramos. “The financial services sector has a duty to encourage and to help people to save, and we take this very seriously.”
Ramos said the World Bank and the SA Reserve Bank agreed that South Africa’s national savings stock accumulated from household savings had been trending downwards for the past 35 years, with consumers tending to borrow rather than save. This was true for households in lower income brackets, where savings were often cancelled out by debt and far too little of the borrowing was used to acquire long-term assets like housing, she said.
“According to Asisa (Association for Savings and Investment South Africa), residential housing as a savings asset in our country is considered low for a developing nation at 24percent of the household balance sheet,” Ramos said.
“While it is easy to conclude that this is caused by a poor culture of saving, the reasons are far more complex. In many situations, people are not able to save because households have a higher dependency ratio than they should. Persistent unemployment and the rising costs of living, made worse by historical spatial development patterns, mean the average lower income household faces far greater pressures than many of us imagine.”
Inkunzi Wealth Group chief executive Owen Nkomo said many people earned too little to save. “Many people cannot afford to save. When you have a minimum wage of R3000 you think about the rent that person is paying, the number of children they have and (the fact that) they need to pay for transport. The landscape is very complicated,” said Nkomo.
National Treasury’s chief director for financial investments and savings, Olano Makhubela, said there were 800000 stokvels in South Africa, saving about R49billion a year. “Are alternative savings investment institutions focusing any attention on these informal institutions? Are these stokvels knowledgeable about the alternatives?” he asked.
Makhubela said about 60percent of stokvels were investment-focused, while 18 percent were investment clubs. “The remaining 22 percent are grocery stokvels and burial societies. Investments in equities by groups of individuals through stokvels or investor clubs are becoming a popular way of building up savings and investments. This is encouraging. The government has also played its part in enabling alternative savings and investment products,” he said.
He cited the introduction of the RSA Retail Savings Bonds in 2004. “We’ve also provided an enabling mechanism for the house- holds to save and invest in more products tax-free. Financial institutions have placed a significant and commendable role in marketing tax-free saving accounts,” he said.
Makhubela said transfers between tax-free savings accounts will be enabled with effect from March next year. The annual contribution had been increased from R30000 to R33000. “Employers should encourage their employees to take this tax-free savings account, especially using their bonuses,” he said.