Spend it like Zuma: Life and debt in South Africa
The festive season is a time when household budgets are stretched and consumers accumulate debt beyond their ability to pay back.
South Africans have made a habit of shopping on credit, from banks and creditors who are only too willing to sign up new clients to the debt trap.
South Africans are notoriously bad savers, and without savings, times of need or want become times when credit comes in handy.
The Mail & Guardian last week reported on a long list of benefactors that have funded our president's opulent lifestyle.
But this is not a new trend, and the numbers show that Zuma is just another South African with bad spending habits.
At an M&G critical thinking forum held in Sandton recently, Rian le Roux, head of economic research at Old Mutual Investment Group highlighted one of the most sobering statistics of the evening by saying that, on average, people only save 8% of their annual income. To be able to retire comfortably, this needs to increase to 20% or more of an individual's annual income.
Financial journalist and panellist Maya Fisher-French said savings is not about an individual's income but about what that person spends.
"I know domestic workers who save up to 20% of their monthly salaries. Saving is a mindset. One only needs to look at other countries in a similar income bracket as ours to see why they are saving more. South Africans do not have to sit around and save for anything. Access to debt is far too easy so we can simply buy what we want on credit.
"If saving money becomes as easy as taking out debt, then people will save more," she said.
Household savings as a percentage of disposable income has fluctuated between 2.7% in 1991 and -0.2% in the first quarter of this year, according to the South African Savings Institute.
South Africa's gross saving rate was only 20% of gross domestic product in 2011/12, compared to other developing nations such as China's of 54%, India's of 34.7% and Russia's of 24.7%.
'The importance of savings'
Household debt as a percentage of disposable income is also ballooning, rising to 76.3% in the second quarter of 2012, while 6.9% of household disposable income went to servicing debt.
Simply put, South Africans live a life they cannot afford, and this is threatening our economic future.
"The importance of savings for our goal of sustainable and inclusive economic growth is recognised in the inclusion of a target of a 6% private saving rate in my performance agreement signed with President Jacob Zuma," Finance minister Pravin Gordhan told a South African Savings Institute function earlier this year.
But, in as much as Gordhan's plea is a signal to how serious the situation is, perhaps the problem lies with the man setting his targets.
Friday's report attested to Zuma being recognised as a financial "problem child" by Nelson Mandela, and being reprimanded by the former president and then ruling party treasurer-general Mendi Msimang over his lack of fiscal discipline. Banks too were complicit in Zuma's unbridled spending.
From 1994 – when Zuma was elected as ANC national chairperson – up until he was fired as deputy president of the republic in 2005, financial institutions including Nedbank, ABSA and Standard Bank allowed Zuma to splurge on credit – with scant regard for his ability to repay his debt.
'Politically' valuable client
But, the banks thought it was in their best interests to keep Zuma in their good books as a "politically" and "strategically" valuable client and kept his credit lines going.
In that time, Zuma spent far in excess of his salary, bought cars and property on credit, repeatedly exceeded his overdraft and continuously defaulted on debt owed.
Zuma told various bank leaders at the time that he was too busy with matters of national importance to pay attention to the finer details of his bank balance.
Old habits are difficult to break it seems, and Zuma has continued to spend more than he earns as president.
After his latest 5.5% increase in September, Zuma's annual salary as president is R2 622 561, and critics questioned Zuma's ability to fund his lifestyle with this salary alone, pointing to the Nkandlagate scandal as evidence that he is state funds for personal use.
Zuma's private residence in Nkandla is currently undergoing improvements worth an estimated R248-million – all of which are reportedly being carried out at the state's expense.
'Signal of commitment'
Ironically Zuma asked for a private sector pay freeze of 12 months in October as a "signal of a commitment to guide an equitable economy". This came after the intense labour protests that began erupting through the mining sector.
But the call conveniently came a month after the president's last pay increase and he has given no indication if he will indeed freeze his own salary. His spokesperson Mac Maharaj said that "due processes" needed to be followed in the decision-making of implementing a pay freeze within the government.
So while Zuma preaches to us to tighten our belts and prepare to weather any upcoming financial storms, he has shown an inability or an unwillingness to live within his own means.
South Africans at the tills this Christmas may either choose to use the example of the president to justify spending on credit and struggle under a mountain of debt or learn from the mistakes of the country's highest office bearer and be more circumspect. Experts said a change in behaviour needs to take place.
Peter Dempsey, deputy chief executive officer of the Association for Savings and Investment South Africa (Asisa), said at the M&G forum.
"Individuals need to relook their expenses and see which ones are justified and which ones are not ... Just look at cellphone usage in the country. A person is quick to buy the latest and greatest smartphone but is it really necessary when the existing phone is working fine. Saving is an attitude. You can spend and use what is left to save or you can save and spend what is left," he said.