Can South African seniors weather the storm, while SA faces its second recession in a decade plus some of the world’s lowest levels of financial literacy?
Now is not the best time to be South African and over 60 if you’re on shaky financial ground. With the country facing its second recession in a decade (and its seventh in 56 years), the road to economic recovery looks long, uncertain and more than a little bumpy for the population in general. This road could be further complicated by the low levels of financial literacy which have long blighted the Rainbow Nation. A recently released 2015 report into financial attitudes and behaviours in the country reaffirmed South Africa’s position amongst the least financially literate in the world and demonstrated a worrying low level of financial acumen across the country.
With 43% of participants admitting they did not have a household budget and just 37% claiming to always pay their bills on time, the SASAS (South African Social Attitudes Survey) highlighted a clear discrepancy between the public’s confidence in their financial knowledge and their true grasp of financial best practice. The survey also placed South African financial literacy at the bottom of the global heap, validating ongoing concerns about the quality of financial education in the country.
But what do these figures mean in the face of the oncoming financial storm? Do these figures suggest that South Africans are ill-equipped to look after their finances effectively during a period of recession?
To answer these questions, we first need to consider what the potential impacts of recession on everyday South Africans could be. The result of political unrest, a controversial president, an unstable currency, declining trade and manufacturing as well as a drop in GDP from both the secondary and tertiary sectors, the current recession (entered following a 0.6% drop in GDP over Q1 2017) is likely to have the expected effect on the general public. Increasing job losses, reduced employment opportunities, rising cost of living, shrinking consumer spending and difficulty accessing traditional forms of finance are all very much on the cards for the South African population.
Weathering the storm
The SASAS survey results paint a potentially troubling picture of the average South African’s ability to ride the wave of recession by taking shrewd financial steps. As many households appear to lack a budget, cutting costs and keeping track of spending will prove difficult at a time when purse strings need to be tightened. A mere 27% of South Africans claimed to set long-term financial goals and work hard to achieve them .
Making savings (often through careful budgeting) is another key step to take during a recession. Again, South Africans appear to be poorly equipped to put cash away with 41% expressing that they found it more satisfying to spend money than to save it over the long term.
Many organisations and businesses in South Africa including Financial Services Board (FSB) have been championing better financial education in South Africa for years, yet so far no convincing, unified approach has been taken to solving the death of money savviness. The current recession highlights the desperate need for better financial awareness and acumen in the country, tragically at a time when national budgets are stretched to their limit.
How do you think South Africa seniors can improve its financial literacy problem?
What steps will you be taking to weather the recession?
Have your say.
Article by Stephen Davies