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Trends and
challenges
associated with
household saving
Johan van den Heever
Asisa Assembly 2014
Cape Town
25 June 2014
Capital formation must be stepped up considerably if the
NDP growth trajectory is to be achieved
Fixed capital formation
30
Percentage of GDP
28
26
24
22
20
18
16
14
70
75
80
85
90
95
00
05
10
15
20
25
30
Low domestic saving has in the past decade been
augmented by foreign saving
Investment and saving
36
Percentage of GDP
32
28
24
Fixed capital formation
20
Foreign
saving
inflow
16
Gross domestic saving
12
70
75
80
85
90
95
00
05
10
15
20
25
30
However, reliance on foreign saving feeds into the foreign debt
ratio and cost of servicing the country’s foreign liabilities
South Africa: Total foreign debt
130
Percentage of annual export earnings
120
110
100
90
80
70
60
86
88
90
92
94
96
98
00
02
04
06
08
10
12
14
Raising domestic saving: Constraints on all three sectors
Gross domestic saving by sector
20
Percentage of GDP
15
Companies
10
5
Households
0
Government
-5
-10
70
75
80
85
90
95
00
05
10
15
20
25
30
Household saving has trended lower until the financial crisis,
with a slight recovery thereafter
Households: Gross saving
12
Percentage of GDP
Bank credit ceilings lifted
10
8
6
4
2
0
70
75
80
85
90
95
00
05
10
15
20
25
30
While the household debt ratio has inched lower to 74,5% of
a year’s income, interest on debt has edged higher to 7,9%
of income
Despite low saving from current income, household real
wealth has risen considerably over the past 15 years
Household sector real wealth
5,000
R billion, 2005 prices
4,500
4,000
3,500
Revaluation effects
have been key
3,000
2,500
2,000
1,500
1975
1980
1985
1990
1995
2000
2005
2010
2015
The gross amount of cash flowing to insurers and retirement
funds remains significant
Gross premiums and contributions received
by insurers and retirement funds
20
Percentage of GDP
16
12
8
4
0
90
92
94
96
98
00
02
04
06
08
10
12
14
The gross amount of cash flowing to insurers and retirement
funds remains significant…but how to nurture it further?
Gross premiums and contributions received
by insurers and retirement funds
20
Percentage of GDP
16
12
8
4
0
90
92
94
96
98
00
02
04
06
08
10
12
14
Reducing unemployment is a key element in strengthening
household saving…
…probably even more so if it can be concentrated in
permanent contract appointments inclusive of retirement
fund membership
Source: Statistics South Africa, Quarterly Labour Force Survey , and SARB staff calculations
Unfortunately formal sector employment has been sluggish
There are limits to what government can do
 Public sector employment has to be funded and cannot rise
indefinitely without rising private sector employment and a
growing tax base
 Support from government also faces budget constraints
 2013/14 social grant beneficiary numbers, from Budget
Review 2014:
 Child support 11,1 million
 Old age
2,9 million
 Disability
1,1 million
 Other
0,7 million
 Total
15,8 million
 2013/14 social grant cost: R118 billion, 3,4% of GDP
 Co-contribution, safety net schemes all subject to limited
resources
Existing strengths and positives to build on
 The firm gross savings among those with jobs and income
streams
 Underpinned by solid institutions and sound principles
 Improved reach of financial inclusion via technology
 SASSA card initiative making a big difference
 75% of adults are banked
 Cellular telephone penetration is high - a platform for
further inclusion
 Market signals and equilibrating mechanisms that are in place
 If capital formation rises, various mechanisms kick in,
including
 Interest rates and yields
 The exchange rate
 Allow these to operate and not be stunted by
macroeconomic instability or overregulation
Conclusion
 There is a strong need to raise household saving in order to fund
higher investment and economic growth
 Easier said than done: earlier trend has been for household
saving to decline
 Yet “macro” statement “SA households don’t save” is wrong
 Strategy to structurally raise saving should emphasise:
 Raising formal-sector employment and generating inclusive
growth
 Optimised saving/retirement provision/social security
dispensation
 Stronger preservation rules and incentives
 Easy and affordable access to basic saving products
 Confidence and investment are key to growth, employment
 Macroeconomic and financial stability are cornerstones
Thank you