It is no secret that South Africans are not great savers – it is also no secret that our spend-thrift ways have been a matter of debate for years. Solutions have been posed and economic models have been suggested to change the national outlook, all to no avail.
Six years ago, Dr Monde Mnyande, then advisor to the Governor and Chief Economist at the Reserve Bank, pointed out that the evolution of South African savings – instead of displaying a positive curve – was doing just the opposite when savings were expressed as a percentage of GDP.
He showed that between 1960 and 1999, gross savings in the South African economy averaged around 22%. However, the aggregate saving rate between 1985 to 1999 fell to around 18% from about 23% in the period from 1960 to 1972, and 25% in the period from 1973 to 1978. During the 1990s, the national savings performance deteriorated to about 16%. Dr Mnyande said the steady decline in savings during the 1980s and 1990s resulted from slow economic growth, rising tax and interest rate burdens. South Africans, rather than continuing to save, concentrated on maintaining their lifestyles.
During apartheid, this encouraged South African migrant workers to form stokvels, collaborative ‘safety nets’ to survive financially outside of their social settings back home, with some schemes attracting up to 50 members. But in the late 1980s, the apartheid government began to recognise the power of these collective savings schemes within black communities and tried to ban them. This became a huge barrier, because the savings were used to assist stokvel members to pay for necessities, such as burials and groceries.
In support of these collaborative savings groups, the National Stokvel Association of South Africa (NASASA) was formed in a bid to secure legal representation and protect stokvels. As a result, NASASA is today a self-regulatory body, approved by the registrar of Banks under the Banks Act of 1990.
This year, the South African Savings Institute (SASI) celebrates its 15th anniversary and looks back on the evolution of the nation’s savings during this period. Tracing back the country’s history, we can see that the household saving rate increased to -0.80% in the first quarter of 2016 from -2.40% in the fourth quarter of 2015. Personal savings in South Africa averaged 4.98% from 1960 until 2016, reaching an all-time high of 23.80% in the second quarter of 1972 and a record low of -2.70% in the fourth quarter of 2013.
Standard Bank research indicates that only 5.5% South African households potentially have the ability to save, as they have positive net-income balances. The higher-end households can potentially save 19% of their after-tax income, while affluent households have a savings potential of 65%.
The bottom line, however, is that arresting deterioration in our savings rate requires an ‘about turn’ in our behaviour. A culture of savings means examining priorities and deciding which personal expenses are acceptable and which should be avoided. Essentially, as has been pointed out by more than one expert, people can spend and then decide what portion can be saved, or they can save first and then decide what portion of what remains can be spent.
Perhaps, as a nation, we can reverse our ‘devolution’ of savings by re-examining our most successful saving mechanism and adopting some of the behaviours that make it so: Stokvels epitomise ‘the peak’ in inculcating savings habits by changing consumer behaviour.
In stokvels, the emphasis every month is on getting your contribution in by the due date. The penalties are subtle; other members are from the community and know you well. As regular meetings are held to discuss savings and the objectives of the society, the fact that you have not contributed is known by friends and neighbours. Worst of all, by not meeting obligations, you are placing the group in danger of not meeting their objectives. It is peer pressure at its best.
Related: A Savings Culture is Not Enough
Add to the mix the fact that stokvels have defined objectives for saving and you have the perfect recipe for a new attitude to savings that most South Africans could embrace. The irony, of course, is that stokvels are generally schemes that have been the preserve of lower-income groups, yet they have succeeded in mobilising billions of rands in national savings. Recent reports put their value in South Africa at and estimated R49 billion annually.
We have now reached the point where the power of stokvels combined with the need to attract more people into mainstream banking has seen them become organised: To have bank accounts, stokvels must have constitutions and office bearers. Like any business, no payments can be made without authorisation by nominated signatories.
As banks, we are already seeing savvy young professionals take on the lessons provided by their elders. There is an increase in the number of savings schemes that rely on the stokvel principles of pooling and distributing funds. However, their ambitions are loftier and the contributions significantly higher. Middleclass South Africans are saving together to invest in equities and unit trusts, or to use joint resources to acquire lifestyle purchases. The trick is finding ways to expand these changes in habits so that saving by groups becomes attractive to the majority of South Africans.
Apart from stokvels, South Africans should consider various savings and investment accounts that can help them plan for their future better – be it for retirement, that special holiday, or to cover unplanned expenses. The question each consumer should pose is, which savings account is right for me? Standard Bank’s PureSave account is, for example, an easy way to start saving and gain instant access to your money when you need it. With the MarketLink account, you gain the flexibility of being able to access your cash, in addition to competitive interest rates. Should you have a lump sum of money, consider the Tax-Free Call Account, where you can invest up to R30 000 a year and a maximum of R500 000 in your lifetime – and get tax free returns on your contributions.
Maybe the key to our national savings evolution rests on going back to our roots, and saving as a collective toward a common goal..