Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
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