the Absa Private Bank client dinner function, Greenway Wood Resort, White
River
9 May 2007
Programme director, Mr Lassy Chiwayo
The regional head of Absa Private Bank in Mpumalanga, Mr Kenneth Mhlongo
Members of the Absa Board of Directors present here this evening
Former Premier of Mpumalanga, Dr Matthews Phosa
MECs present
Colleagues in the legislature
Distinguished guests
Ladies and gentlemen
We are gathered here "together", "today" for "tomorrow" to experience
"wealth beyond measure". We are here because all of us are concerned about the
financial well-being of all South Africans; we are all concerned about the low
levels of saving by South Africans. As Benjamin Franklin once said, I quote,
"An investment in knowledge - always pays the best interest", close quote.
When he tabled the 2007 budget on 21 February 2007, the Minister of Finance,
honourable Trevor Manuel raised his concern about the low level of saving in
our country, and in order to inculcate the culture of saving, government had to
provide more tax relief especially to individuals, to raise household income
which could influence savings.
According to the National Savings Barometer of the South African Savings
Institute released in July 2006, the private savings environment continues to
improve, yet actual savings remain dismal.
It indicates that savings continued to increase by 2,09 index points to
118,90 in the first quarter of 2006, thus reflecting an improvement in the
overall saving environment in South Africa. However gross saving as a
percentage of the Gross Domestic Product (GDP) in the country decreased from
13,5 percent in the fourth quarter of 2005, to 13 percent in the first quarter
of 2006 in spite of the improvement in the overall savings environment as
measured by the Savings Barometer. The recorded household saving rate is at a
record low of approximately 0,2 percent of disposable income.
Gross corporate saving as a percentage of the GDP, dropped by 1,5 percent to
10 percent in the first quarter of 2006, whereas the gross saving by households
remained unchanged at just above 1,5 percent.
The low savings level, thus have a negative impact on domestic productivity
and will impact negatively towards the growth of our economy, which continued
to expand at a robust pace of 4,9 percent in 2006. As a result, the projection
for 2007 is 4,8 percent, which is lower than the 2006 figure due to weaker
growth in the world economy and the interest rate increases of the past year.
The growth rate over the next three years is projected to average just over 5
percent.
Why do households in South Africa have a low savings culture? South Africans
have a low savings culture because of the following reasons, to mention but a
few:
* investment costs structure in the market is high for smaller
investors;
* poor and risky investment advice in some instances;
* there is a culture of indirect savings through third parties;
* strong marketing campaigns, which promote buying on credit;
* spending behaviour of South Africans going beyond what they can truly afford;
and
* the market not really understanding the needs of the broader communities in
the country.
It is therefore very important to start saving as South Africans, since this
will put more money into the economy thus influencing economic growth, which
will lead to more job and investment opportunities.
What can we do increase the culture of saving?
One of the main reasons why the level of banking is low is because of the
high banking fees. Banks like Absa and others can provide a solution by
reviewing their banking charges and provide affordable charges to the
previously unbanked.
We appreciate efforts of banks by coming up with products such as the Mzansi
Account, which is a product aimed at encouraging those who were not banking or
saving, to bank.
The uptake in Mzansi accounts, which now stands at over 3,3 million,
indicates that even though peoples' incomes may be low, they are still willing
to save. This willingness to save by the previously unbanked, should be
nurtured, and where a culture of savings does not exist, it needs to be
fostered. If we encourage people to save, we will be relieving the government
from having to cater for those people who did not save for rainy days. If that
happens, the burden of government on social security will increase as more
people will enter the system.
We hope the investigation by the Competition Commission to look into the
cost structure of bank charges will lead to the reduction in banking charges
and thus encourage more people to save.
The New Partnership for Africa's Development (Nepad) emphasises that there
should be an unwavering commitment to domestic resource mobilisation on the
part of African countries. It asserts that a concerted effort must be made to
reverse the declining trends in saving levels in African countries. There is
also the danger that, in future years, South Africa's competitive position with
regard to saving could be undermined unless the taxation of personal saving is
reformed.
Government, working together with institutions like the South African
Savings Institute (SASI) will continue to encourage people to save. Let's all
work to change the current level of savings, in order to create a society which
is not reliant on government for sustenance. Let's encourage our people to say
no to more debt, and refuse to be lured into getting deeper into debts.
Let's stand together today for a better tomorrow because the "wealth" and
future of this country is "beyond measure".
I thank you.
Issued by: Department of Finance, Mpumalanga Provincial Government
9 May 2007
Source: Mpumalanga Provincial Government (http://www.mpumalanga.gov.za)
