Two days ago South Africa joined the continent in celebrating Africa Day. What a welcome change to hear about the gains Africa has made, instead of the countless tales of death, disease, disaster and despair.
Stuart Pennington of Good News lists a number of new trends, e.g.
- Primary school enrolments have grown by 20% over the last 12 years
- In 1972 there were three democratic elections as opposed to 40 in 2007
- 10 African economies will rank amongst the fastest growing in the world at above seven percent
- 17 African countries will have a budget surplus that they are able to carry forward
- 12 will have a positive current account balance.
Africa, South Africa and KwaZulu-Natal are changing world history. But while we refuse to continue with outdated stereotypes of our continent, we are also tackling a challenge that directly impacts on the bottom line: the Personal Financial Skills of public servants.
Today is an important day in the lives of public servants in KwaZulu-Natal: the official launch of ABSA’s 2011 Government Employee Financial Literacy training at the Public Service Training Academy, which combined, with the launch of the KwaZulu-Natal Financial Literacy Association’s initiatives, will have far reaching consequences. Not only does the responsible spending of households impact positively on families and individuals but ultimately it also affects the provincial and national economy.
Global household debt
The consequences of how households spend their money were illustrated vividly in the recent global recession, especially when comparing household spend in China and the USA. The average US household debt is reported to be 135% of household income, compared to 1.7% for the Chinese. If federal borrowing was included, the US number increased to 266% of average household income.
China’s household debt is the third lowest in the world and its savings rate is the highest. Overall most Asian countries have lower household debt levels and high savings rates relative to the US and UK.
Admittedly, consumer credit is necessary to smooth our consumption stream. However, uncontrolled consumer credit is simply traumatic.
Consumer debt in South Africa
Debt counselors Debtbusters quoted in the Mail & Guardian a figure of 11 million South Africans, nearly a quarter of the country’s population, who are struggling with debt, and banks are sitting on a total (probably bad) debt burden of more than R35 billion.
Government has dropped interest rates by over six percent since 2008, yet the average debt-to-income ratio of consumers in South Africa is still very high at 78,2%.
Public servants
Unfortunately a substantial number of our civil servants are also part of the statistics. They have become bill collectors and this inability to manage their own resources may create uncertainty on the level of trust, honesty and integrity with which they would manage departmental budgets and assets.
In this context, the adage of “charity begins at home” is very appropriate. In 2007 the Public Service Commission called for an investigation into the extent of indebtedness of public servants. The investigation covered all national and provincial departments within the public service and focused on information in respect of micro-lending transactions that took place and garnishee order issued during the 2006/07 financial year. The report can be downloaded from the KZN Financial Literacy Association’s page on the KZN Treasury’s website.
Garnishee orders are a significant barometer of indebtedness as such orders indicate that the debtors, in this case the public servants, are unable to service their debts. In essence it is at this stage that an indebted public servant requires external management of his/her debt. Such garnishee orders place an obligation on the State as employer to ensure that the required payments are made at the stipulated period of the month.
It transpired that a staggering 20% of the total number of public servants employed within the public service made garnishee related payments to through Persal, emanating to more than R1 billion. Concern deepens when one learns that a number of senior managers were forced to make garnishee payments. These managers have express financial management responsibilities in terms of thePublic Finance Management Act (PFMA). If their personal finances are not in order it raises concerns about their ability to manage public finances.
More recent figures as at the end of April 2011, revealed that 25 580 of public servants of KZN provincial departments, made garnishee related payments through Persal. A total of 5 539 employees received administration orders, i.e. were declared bankrupt and 4 317 employees received court orders to pay child maintenance.
The high number of child maintenance court orders also reflects social irresponsibility. The least a man can do, when he fathers a child, is to take responsibility for that life. We all know that living a socially irresponsible life and practising unprotected sex increases the risk of HIV and AIDS. However, it also brings unplanned expenses along – often at a stage of a young person’s life when he or she should be planning to accumulate wealth.
| Garnishee orders, admin orders and maintenance ordersper department as at end of April 2011 | |||
| | |||
| Department | Garnishee orders | Administration order | Child maintenance |
| Agriculture | 344 | 109 | 186 |
| Arts and Culture | 40 | 15 | 9 |
| Economic Development | 28 | 1 | 2 |
| Education | 13977 | 2303 | 3719 |
| Health | 9662 | 2764 | 14 |
| Human Settlements | 109 | 33 | 47 |
| Royal Household | 23 | 7 | 1 |
| Office of the Premier | 25 | 0 | 2 |
| Community Safety | 17 | 4 | 1 |
| Sports and Recreation | 9 | 1 | 1 |
| COGTA | 132 | 52 | 56 |
| Transport | 530 | 57 | 117 |
| Treasury | 23 | 3 | 4 |
| Social Development | 267 | 68 | 54 |
| Legislature | 25 | 0 | 1 |
| Works | 369 | 122 | 103 |
| Total | 25580 | 5539 | 4317 |
In reality that means that one out of every seventh public servant receives garnishee orders through Persal. However, it is likely that many more are indebted, as the statistics do not include other loans and debt to colleagues, family and friends. Payments can also be made through stop order between the public servant and his/her bank, as well as direct cash payments to micro lenders.
Debt is killing us! The burden that it places on employees and institutions is far reaching:
Impact of debt:
- Ill health
Financial difficulties are among the known causes of stress and anxiety. If a person already suffers from one or another type of illness, financial distress could worsen his/her condition.
Low morale, depression and even suicide
- Low productivity
Health problems experienced by employees as a result of financial distress, is bound to have a negative impact on their level of productivity. Absenteeism or the continued absence of employees from work deprives the State as employer to deliver on its promise of a Better Life for All to the citizenry of South Africa.
Productivity levels of employers decline due to spending unnecessary time on issues relating to employees’ debt management.
Some public servants engage in remunerative work outside the public service to service debt and the fatigue and stress associated with holding two jobs at the same time is likely to impact negatively on an employee’s capacity to delivery. There are instances where some employees continue to carry out remunerated work without obtaining the necessary permission from the HODs of their departments.
It is said that debt-stressed employees show increased dissatisfaction the employer due to unrealistic expectations on remuneration structures and performance measures.
- Administrative burden
Payroll costs climb due to garnishee orders and the additional personnel costs. The capturing of garnishee orders on Persal places an additional administrative burden on employers: it takes time to verify information and capture the data.
- Ethical considerations
Indebted employees are vulnerable to accepting bribes and commit unethical or corrupt practices to remedy their financial situation.
Absenteeism, absconding and theft escalate
- Retirement planning
Lastly, employees will resign solely to access their pension fund monies in order to service their debt. They will leave stable employment without securing another job or income.
Retirement funds are threatened as these monies will be used to settle debt instead of catering for retirement.
It is heart breaking to see people suffering in their old age after spending many years of hard work. It also adds to the state’s expenses, as it now has to provide an Old Age grant to these people to prevent them from perishing.
Intervention measures
It is important to realise that debt is not a crime. Everyone in every income bracket is at risk. However, it has to be addressed. Debt can also be prevented by proper financial planning and advice. There is really not much of a difference between the provincial budget and a household budget. And the golden principles underpinning all successful entities remain the same – whether you are big or small. However, if nobody tells you about them, what are your chances of success? Knowledge is after all a building block, and opinions, attitudes and behaviour emerge from what we know. Knowledge also protects us as consumers against scams and unscrupulous practitioners. And yes, even administrators and debt councilors can be dishonest.
It is for these reasons that the Provincial Cabinet took a decision to include financial education in workshops offered at the Public Service Training Academy.
ABSA
With the assistance of ABSA a total of 5663 officials have received financial education training since 2009.
Today ABSA has also announced its 2011 programme and we are grateful for their expertise and resources. Thank you ABSA, for also sponsoring the catering of today’s event.
KwaZulu-Natal Financial Literacy Association
Offering financial education to approximately 189 000 civil servants requires all hands on deck. As custodian of public funds, the KwaZulu-Natal Treasury realises the impact that financial education can have on households, emerging entrepreneurs and our young people. I made it a priority to include financial education in outreach events with communities. However, as the demand for these programmes grew, it became clear that the Provincial Treasury was only scratching the surface of the need for basic financial education.
A way had to be found to enhance the impact of interventions in order to reach more people and change attitudes and behaviour. This gave birth to the recently established KwaZulu-Natal Financial Literacy Association, an advisory body, which provides strategic direction and coordinates programmes.
Focus groups
A decision was taken to focus on five groups in the province to enable members to develop programmes tailored to the needs of the specific groups. It will also allow members to put their effort, time and resources where their passion lies. The five focus groups are:
- In school youth
- Out of school youth
- Women and vulnerable groups
- Small, medium and micro enterprises (SMMEs)
- Government employees
Today our Government Employee focus group has launched and we are looking forward to expanding the Government Employee Financial Literacy initiatives in a collective effort. Thank you, Shekhar Mahabeer, the group leader of this very important group, as well as Idah Zwane, the deputy chair and the focus group executives, who all represent different banks, organisations and entities.
Working together in a coordinated way, government, business, the non-government and non-profit sectors will make a much better impact than working in fragmented isolation, which often leads to some communities being over serviced, while others miss out.
Working together will enable stakeholders to:
- follow best practice
- use experts in the identified fields
- get value for money
- share the costs and have common messages
- reach a wider audience
- have greater success in changing attitudes and behaviour
- contribute to economic growth and job creation in the province
- have educated consumers who will take informed decisions
A total of 50 entities have joined the association to date as members. The members are from financial institutions, academic institutions, accounting firms, business chambers, non governmental organisations (NGOs), regulatory bodies and several government departments. We extend an invitation to all departments and organisations to join us as members of the Association.
We appeal to our civil employees to make use of the financial education opportunities offered at the Academy, through Employee Wellness and the KwaZulu-Natal Financial Literacy Association. It can be life-changing.
Forward to a financially literate KwaZulu-Natal! Phambili!
