Interview with Dr Sheshi Kaniki (Deputy Chair) about SASI and Savings Month

Dr Sheshi Kaniki, the Deputy Chair, gave an interview to Kaya FM on the 29th June at 05h00 about SASI and Savings Month.

What is the South African Savings Institute? – The South African Savings Institute (SASI) is an independent non-profit organisation established in 2001 to promote a culture of saving in South Africa. SASI depends very much on partnerships with other institutions that have an interest in promoting saving.

What is Savings Month about? – This is SASI’s national saving awareness campaign. Savings Month falls in July of every year. We use the media to promote the saving agenda and work with our partners on activities geared at strengthening saving. The motto for this year’s Savings Month is ‘Tighten Your Savings Belt’. This motto acknowledges the depressed economic environment we are currently facing. It also communicates the need for financial discipline if saving is to take place.

What is the current savings environment like? – It is quite poor. South Africa does not compare favourably with other emerging economies. Recent years have been particularly bad, with the annual gross saving ratio below 15% from 2004 to 2007. Having said that we have seen some improvements in the last year – the gross saving ratio in q1 2009 was 17.1%, up by almost 3 percentage points from 14.3% in q1 2008. And while still negative, the saving to disposable income ratio for households is at its best level since q2 2006. However, given the current economic environment, this could be a reflection of low consumer confidence and a reluctance to spend.

Is it possible to save given the economic downturn? – For those who have lost their jobs during the downturn the answer at this stage is no. For them, social assistance programmes from government will be critical for weathering the storm. Hopefully, the interventions government has proposed will help them get back into the labour market as quickly as possible. However, for those fortunate to still have their jobs I’d say yes. Interest rates have fallen significantly since the beginning to the year. We have seen a drop in the year-on-year inflation rate. The year-on-year consumer price inflation rate for May was 8%, the lowest level since the beginning of the year while the producer price inflation dropped from 16.4% in May last year to -3.0% in May this year, which means producer prices are actually falling. These developments increase the disposable income of households and hence their saving ability. There is also a better institutional framework for personal financial management in the form of institutions such as the National Credit Regulator and the newly formed National Debt Mediation Association. Also, this is an excellent time to make a sober assessment of your expenses and see where you can cut down.

Why is it important for people to save? – Fast growing economies have high saving rates – China (50%) and India (30%). These savings are essential for the fixed investment required for growth and improved living standards. Investment is one of the main components of national output, and it is critical not to be skewed towards consumption expenditure, which is relatively high in the case of South Africa. The global economic crisis started as a debt crisis rooted in the US, which has one of the lowest saving rates of any major economy. In the long run financial sustainability and wealth creation at the macro level or at the household level can not be attained through excessive borrowing, but will require the discipline of saving.