The lack of a culture of saving among South Africans is a reason for concern, says Finance Minister Pravin Gordhan.
"Savings are a serious reason of concern among all of us and, from the National Treasury's point of view, we have to attract foreign investments because savings are low in South Africa," Minister Gordhan said.
The minister was speaking on Thursday at the launch of the Consumer Financial Vulnerability Index for May to June developed by the Bureau of Market Research of Unisa and the FinMark Trust.
He said one of the challenges facing South Africa was ensuring that it did not have excessive spending and too little savings. However, he added that too little spending and too much savings will not put the country in the right footing either.
"That is part of the global imbalance, how we get the right balance or equilibrium is one of the challenges South Africa faces. A balance needs to be found between savings and excess," Minister Gordhan said.
The index, compiled from a survey of 967 consumers, showed that overall South Africans were financially vulnerable, scoring 5.17 percent which is considered high in comparison to other countries. Savings vulnerability accounted for 5.74 percent.
"Even from a savings point as the index showed we are not making great progress as South Africa," said Minister Gordhan.
Minister Gordhan urged South Africans to use of RSA Retail Savings Bonds to save their money.
He added that the National Treasury was reconsidering increasing the level of investments permitted for these bonds. "They are our contribution to increasing savings in South Africa," he said.
The bonds, which were launched in 2004, are a safe and affordable option for especially low income earners. It allows them the opportunity to invest in their future with their money guaranteed by government through Retail Savings Bonds.
The reason government can guarantee an investor their money back is because bonds will not be put into the market and traded at all, but the investment will go towards funding government projects and decreasing the current account deficit.
The more money people invest in retail savings bonds, the less money government needs to borrow from oversees creditors, thereby decreasing the country's reliance on foreign credit and at the same time allowing government to reinvest that money in infrastructure projects, for example.
According to the minister the data further asked questions as to whether commercial institutions were doing enough to help South Africans through the recession. Another issue which needs to be looked at by both government and the financial world is financial literacy.
"There is still not enough work being done either by government or by other agencies to make South Africans more financially literate and economically literate," he said.
The study found that even high income earners were financially vulnerable because of high debt service and living expenses.
It also showed that people believed that they were financially worse off than a year ago. Nearly 35 percent of respondents said that their ability to make ends meet had deteriorated in the last year.
Those living in rural areas were the most vulnerable when coming to income and savings. Young and old people were also financially vulnerable. "This is because many young people were looking for jobs while older people became less economically active," he said.
Minister Gordhan said the findings of the study were important. "Across the world and in South Africa the current financial crisis and the poverty in the country create immense financial stresses," he said.
Studies like this, he said, help governments understand the nature of this stress, the sections of the population that experience the stress and what government and the private sector need to do in order to relieve this stress.
The survey is expected to be carried out again in October this year. - BuaNews