Banker S.A. December 2012 | Page 18

saving ‘We need to create an even more diversified financial service sector that will have a regulatory environment where it makes it possible for different types of financial institutions to service different segments of the market.’ South Africa’s excellent banking and well regulated financial services industry has developed a sophisticated range of products that can be used for saving purposes. These include products such as a life insurance, various pension schemes and retirement annuities, as well as discretionary savings such as savings accounts and unit trusts. Association for Savings and Investment South Africa (ASISA) CEO Leon Campher says his organisation has been working closely with National Treasury on the proposals. Members of ASISA, which includes most of South Africa’s investment fund companies, life insurance companies, investment managers, multi-managers and fund supermarkets, hold total assets of about R4.2-trillion. The financial services sector is estimated to be responsible for about a quarter of the country’s GDP. Large as it is, says Campher, more needs to be done to encourage South Africans to save more and the industry was looking at ways to stimulate savings, including by offering more innovative products and increasing financial literacy among consumers. Vital to this is the banking industry, comprising more than 70 banks – more than half of them foreign banks – which have established a presence in SA or acquired stakes in major local banks. This world-class industry, which has emerged relatively unscathed from the current financial crisis, has the depth of capital resources, the technology and infrastructure, as well as a strong regulatory and supervisory environment to enable it to become an even more powerful engine for growing savings. Cas Coovadia, Managing Director of The Banking Association of South Africa (Banking Association) is emphatic that the industry needs to do more, in particular among the vast numbers of the population who remain “unbanked”. ‘We need to create an even more diversified financial service sector that will have a regulatory environment where it makes it possible for different types of financial institutions to service different segments of the market,’ he said in a recent interview [widely published on the Internet]. ‘So you could have co-operative banks, village banks, savings and credit co-operatives, microfinance institutions. ‘We continuously work with government and the interaction between government and business is reasonably healthy – but we have challenges. While we have a very good policy environment, we fall short on implementation.’ But the issue of boosting savings cannot be left to government and to the financial institutions: a great responsibility also rests on the shoulders of ordinary citizens. The good news is that South Africa is rapidly developing an emerging middle class, 16 BANKER sa Edition 4 with the means and intelligence to manage sound financial affairs however; what’s discouraging is that this segment of the population tends to spend rather than save. It has had very little impact so far in changing the country’s savings profile. This is the challenge facing government, private sector and individuals alike – to change South Africans from spendthrift consumers to thrifty conservers. One example to follow would be the Chinese, whose legendary savings habits are built up by Confucian values of frugality, self-discipline and living within one’s means. A modest lifestyle and avoidance of debt were natural outcomes of this value system. Unfortunately, South Africans tend to be the exact opposite. Status-seeking, easy credit and a tendency towards instant gratification are a destructive combination, which militates against any effort to encourage people to save and pile up future financial problems. So what needs to be done? Quite clearly, the simplified and more attractive schemes outlined in the Treasury proposals are welcome. Innovative financial packages designed by the sophisticated, private financial sector will also be of benefit, but the drive for savings cannot simply end there. Education is vital to develop the culture of saving. The subject should be made part of the curriculum at school level, some exp \