This little piggy bank went to market ... er, no it didn’t
We're bailing out of our investments and saving less than half the amount we must to grow the economy 5%
South Africans are dipping into their investments to survive as the sluggish economy, high unemployment and rising cost of living make it harder for people to save. At 14%, the SA’s gross saving reached a 28-year low in 2018, the Investec GIBS Savings Index showed.
The index hit a low of 60 at the end of 2018 and deteriorated further to 56.6 index points in the first quarter of 2019. Optimal economic growth would require a score of 100 index points.
Index compiler Adrian Saville of the Gordon Institute of Business Science (GIBS) noted the decline in the rate at which money is put aside and a rise in the number of people disinvesting from their existing savings nest eggs.
The full report on the index – which breaks down levels of savings between the public and private sectors, business and households – is yet to be released. But even if it shows that one sector saved while the other consumed, there is less money available for investment to grow the economy at a rate that can start creating jobs, said Saville.
“Ultimately the question is not who is funding investment but whether funding is available. As things stand, the savings and investment behaviour of the economy corresponds more closely with a 2% growth rate. Any reference to a 3% to 5% growth rate is at odds with the savings behaviour,” said Saville.
He estimates that to achieve a 5% inclusive growth, the economy needs a savings and investment rate in excess of 30%. To achieve that requires material change in consumption patterns.
Saville said investment confidence was required to stimulate such a shift. “Otherwise you’ll have this pool of savings that is lying, waiting for an opportunity. Investment behaviour on the JSE over the last two to three years shows the appetite has been overwhelmingly to look for opportunities outside SA.”
Even if President Cyril Ramaphosa succeeds in his quest to attract $100bn into the SA economy in the next five years, Saville said that would amount to 8% of SA’s annual GDP, lifting the savings rate to mid-20% – which would still be less than the 30% required.
Economist Mike Schussler said if people get a sense that policy certainty is coming back after the election and that there is a future-friendly government in place, the level of savings is likely to pick up.