Today is July 1 and every year, this marks the start of the National Savings Month in South Africa. This is an important month in South Africa, where stakeholders join forces to explore ways and means of building a savings culture.
Clive Mphambela
All manner of financial service providers, including banks, take a lead role in educating the public about saving. They go all out to run campaigns and adverts reminding the populace about the benefits, at individual level and at national level, of saving and getting out of debt.
This being the 15th year running that this month has been observed means that our friends down south are taking the issue of a national savings culture very seriously indeed.
Perhaps, we should take a leaf out of their book and learn one or two things from their effort, but the general and sad truth is that the savings and thrift environment in Zimbabwe and most parts of Africa is very poor, even when compared to other emerging economies. Creating a savings culture, therefore, becomes a fundamental economic and social objective, especially for our young people who are the future leaders.
Just to put issues into perspective a little, Zimbabwe’s savings rate as a percentage of GDP is currently estimated at less than $5,15 billion in deposits in the banking sector and demand deposits constituted the lion’s share, or 53% of total deposits. Only 18,3% are long-term deposits placed for more than 30 days, whilst another 13,9% represent savings accounts and 14,9% are short-term deposits placed for less than one month.
If one also considers the fact that the majority of our savings accounts held in the banks are mainly for the purposes of receiving monthly salaries, the level of real savings in these accounts is even lower than these figures show.
Closer home, according to the latest World Bank indicators, South Africa’s gross savings rate at the moment represent between 18,5% of GDP. Meanwhile, Zimbabwe has a savings to GDP ratio of -12,1%, meaning the country is digging into savings rather than accumulating savings. We are generally spending as a country, more than our current income, hence the negative savings rate. Savings as a percentage of GDP peaked in 1975 (22%), 1988 (22,1%) and in 1994 (21,8%). During the lost decade, the national savings rate plummeted from a positive 19% in 1998 to minus 21,5% in 2008.
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Whilst significantly better than our situation, South Africa’s figures are relatively still low when one considers that economies such as China and India are at 50% and 30% respectively. Other countries to emulate in terms of savings are the United Arab Emirates, 44% savings to GDP ratio, Saudi Arabia, 44,1%, Algeria, 44,2%, Equatorial Guinea, 76,3% and Botswana 37,3%.
Where are we going wrong as a country? How can we begin to improve the country’s gross savings rate? One would posit that it begins with the individual saver, at household level, cascading up to the community, or business level, ultimately becoming a collective national responsibility at the aggregated level.
Household debt seems to be on the rise in Zimbabwe, although we still need a proper study to establish the extent, it seems though that is it’s an intuitive fact since the advent of the multicurrency system, many consumers have been able to access credit from clothing and furniture shops, banks, micro lenders and so many other formal and informal sources.
The rise of debt, if not counter balanced by an adequate level of savings, can become a dangerous and unhealthy thing in the economy. So how can we begin to drive a culture of saving?
To save Zimbabwe — to grow the economy and to develop the means to deal with problems like poverty — we must undertake a drive to start saving and build our national savings. We need to close the hole we are digging ourselves into and then start to build a cache of national savings.
If more citizens choose to save through mechanisms such as savings accounts with the banks, endowment and retirement schemes with insurance entities, more capital will be made available to increase the productive capacity of the economy.
These savings will in time be channelled via financial intermediaries and financial markets and transformed into investments in the private sector and public (through loans to companies and share investments in companies and bonds, for example).
National savings can also be channelled to infrastructure investments and through government schemes (such as government bonds and treasury bills).
At present, Zimbabwe’s future economic development is heavily dependent on fickle and very timid foreign capital. Massive amounts of foreign direct investment are required, but these will not come if our own capacity to accumulate resources is not tested.
At the micro level, improved household savings will benefit individuals and ease the stressful levels of personal debt among consumers.
But how can we, as a nation, develop a savings culture? How can the nation be groomed to become more provident in matters financial?
We need holistic, innovative plans to foster a greater sense of awareness among Zimbabweans of the need to save and to make savings and investment simpler and more attractive.
Perhaps we also need our own version of a national savings month in Zimbabwe, a period to conscientise each other and encourage each other to save.
The government will, thus, need to support innovative institutions such as banks who create products that would offer tax-free returns in various instances, for example, interest-bearing accounts in bank deposits, retail savings bonds or interest-bearing unit trusts such as money market funds; or equity accounts, which invest in shares or property unit trusts.
What are the banks doing about building a culture of saving?
Several banks in Zimbabwe are actively promoting savings. Despite a significant hue and cry about high bank charges and high costs of banking, commercial banks have responded to public submissions and have developed more cost-effective and attractive products in a bid to encourage savings.
Whilst we cannot mention banks by name here, quite a number of banks have come up with attractive savings schemes for women’s groups, youths and children. Banks are, in fact, collectively calling for the support and response of the public and all stakeholders on the need for a concerted national savings effort.
Clive Mphambela is a Banker. He writes in his capacity as Advocacy Officer for the Bankers’ Association of Zimbabwe. BAZ expressly invites other stakeholders to give their valuable comments and feedback related to this article to him on [email protected] or on numbers 04-744686, 0772206913
