Johannesburg - Why is it urgent for each and every one of us to develop the habit of saving? Answers to this question were given at a recent South African Savings Institute (SASI) event in Soweto to mark the start of Savings Month.
Savings are one weapon against uncontrolled national debt. Olano Makhubela, chief director of financial investments and savings at National Treasury, outlined the disastrous situation Greece is currently facing.
Greece’s debt amounted to 177% of its gross domestic product (GDP) in 2014, said Govender. In contrast to Greece, South African debt for the same year was just under 66% of GDP. But that should not make us complacent.
“If debt is not controlled, it can cause unimaginable pain and suffering,” he said. “As a country, we should be vigilant to avoid this scenario.” He called on South Africans to resist the increasing temptation driven by a consumerist society to spend, noting that indebtedness is on the rise, with 4.9 million South Africans over-indebted in 2014 as compared to 4.7 million in 2013.
Consumers therefore to develop a habit of saving – even though, Makhubela acknowledged, many South Africans have very limited means. He urged South Africans to take full advantage of the new tax-free savings accounts, which he called a milestone on the road to a savings culture.
Savings are the backbone of a working economy, said Phakamile Mainganya, chief risk officer at the Industrial Development Corporation.
“South Africa has a gap in infrastructure of R90bn.” he said. This has a disproportionate effect on the poor and marginalised, and the country should be relying on domestic savings rather than external loans to fund projects aimed at reducing this gap.
Mainganya called on pension funds and similar investment bodies to invest in South Africa rather than outside the country's borders.
SASI chairperson Prem Govender pointed out that while South Africans have an appallingly low savings rate, it’s time to “think beyond what we are already doing” about ways to increase the level of domestic savings.
Instead of focusing on encouraging people to spend less, perhaps the focus should be on ways to increase the pot of money available to them – for example, by encouraging constant upskilling to qualify for better remuneration; to turn hobbies and skills to advantage over weekends to make more money; and emulating the well-off.
“The truly wealthy and the conscientious savers never ever display their wealth,” she said, adding that they do not waste money on unnecessary fripperies like personalised registration plates on their vehicles.
Govender added that she questions the image of South Africans as poor savers: “Research shows that there’s more than R44bn in stokvels. If people are saving these billions informally, what does that say about our banks and financial institutions?” she asked.
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