South Africans save very little and this is cause for concern, Minister of Finance Pravin Gordhan said on Thursday.
”We have to attract foreign investment because savings in South Africa are so low,” Gordhan said at the release of the Consumer Financial Vulnerability Index in Midrand.
It showed that ”we are not making great progress” in saving.
”I am going to do a PR exercise and recommend RSA retail savings bonds. Treasury is even thinking of increasing the level of investment permitted for these bonds. They are our contribution to increasing savings in South Africa.”
He described the index as an important tool that served as a reminder of the negative consequences felt by a large number of people who did not have access to financial advisers.
”Not enough has been done in the areas of financial education and economic literacy for South Africans.”
Turning to financial vulnerability and the present financial crisis, Gordhan said this vulnerability had to be seen in the context of the last three to four years of excess.
”Vulnerability is a result of either poor judgement or excess. We are fortunate that our banking and credit regulators helped South Africa to stay relatively safe — but not safe enough as the excess went too far.
”A balance needs to be found between savings and excess.”
In what he called ”the post Lehman Brothers period” — referring to the United States investment bank that collapsed in September 2008 — consumers were asking important questions.
”They are asking how safe their pensions are and how well their savings have been invested.”
Gordhan said in some developed countries people had even reviewed their retirement plans.
”What the Consumer Financial Vulnerability Index tells us is that the systemic crises that the financial service industry gets itself into can cause huge damage to people — the system we have needs to be radically reviewed.”
Gordhan said he had asked the Treasury to research how public servants in South Africa had coped financially.
”We have 1,2-million to 1,3-million public servants at the national and provincial level. We found that 210 000 public servants are now affected by garnishee orders.” — Sapa