SASI comments on Q2 2015 SARB Quarterly Bulletin

The South African Savings Institute (SASI) is an independent non-profit organization dedicated to developing a robust culture of saving in South Africa.

Over the past 14 years , South Africa’s SASI has continued to be committed to playing a meaningful role in securing sustained growth in the national savings rate to enhance the financial health of the nation and the well-being of its citizens.

SASI believes that the South African Reserve Bank (SARB) Quarterly Bulletin released 15 September 2015 with data up to June 2015 is showing some encouraging movements on key Savings Data. These moves may however yet be scuppered by a floundering economy and a currency that remains under pressure.

 

Gross Savings as a percentage of GDP declined from 16.4% to 16.0% in the quarter ending June 2015. This decline is in line with expectations as a precursor to the current slowdown in the economy. Many corporates are starting to use reserves to try maintaining production despite slowing sales as well as increasing import costs due to a falling Rand. It is likely that trend will continue into the next quarter.

 

Household Savings as a percentage of Disposable Income shows a slight improvement from       -2.3% to -2.2 %. This is however no cause for celebration with South African households still depleting savings on a monthly basis.  The last time South African households were net savers is in 2001. This slight improvement is likely driven by an improvement in Debt to Household Disposable Income from 78.7% to 77.8%. The debt levels are still very high and consumers remain highly indebted.

 

Gerald Mwandiambira, Acting CEO of SASI says, “The marginal reduction in savings erosion is far from being a reason to celebrate as households continue to deplete saved wealth to meet current expenses. The picture remains challenging with consumers still highly indebted as they use more than three quarters of their disposable income servicing accumulated debt.”

 

SASI is encouraged that despite high debt levels, the downward trend is established with household debt as a percentage of income reducing, “ It is unfortunate however that the education on the dangers of debt for most South African consumers, has been from being severely indebted. It however is not automatic that as one gets out of debt and reduces debt, they start saving. In fact, without education on the value of savings, former debtors are more likely to remain spenders. SASI is therefore continuing to look for partners to educate the nation of the value of saving both for individuals and the economy at large.”

 

SASI notes that consumption as a percentage of GDP is 0.9% higher than the previous quarter. A significant increase.

 

In summary Gerald Mwandiambira added , “These numbers  strengthen the case for increased Financial education and activity to change behaviour and attitudes towards savings and investment. If the economic slowdown does take hold, many consumers will be challenged and trends forming may indeed be reversed. In a tougher economic environment, domestic savings are a core component to drive local investment our economy as foreign direct investment reduces. Savings also assist households to survive rainy days.”