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,
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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 \