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Building a savings culture is a national responsibility

Personal Finance
AS Zimbabweans, we are simply not saving enough. We are tending rather to spend a lot more than we should.

AS Zimbabweans, we are simply not saving enough. We are tending rather to spend a lot more than we should.


While incomes are generally low and joblessness is relatively high, it still remains that as Zimbabweans, we simply need to save a lot more if we are to get our economy off the ground.

The common hue and cry is that credit is not easy to come by due to the tight liquidity conditions. These tight conditions are brought about largely by the dearth of savings in the economy.

For the few that are lucky to have access to credit, it is coming at a very high cost.

This is largely because banks are having to augment low domestic savings with offshore lines of credit.

The other worrying reality is the rising informalisation of the economy which has taken a lot of resources out of the formal financial system. Following the lost decade, a large number of previously banked individuals and businesses have fallen out of the ambit of banking.

Consequently, household savings as a percentage of disposable income continue to fall, while generally, average household debt levels are rising. Concomitantly, savings and long-term deposits as a proportion of total deposits in the country remain at low levels.

Zimbabwe needs to develop a savings culture in order to get out of the economic rut.

Not only is saving important at individual level, but also at household or family level, company or institutional level and ultimately at national level.

To illustrate the importance of national savings, we so often we read in the media how China has become a global economic giant with the world’s largest cash reserves at its disposal.

This is because as a nation, not only has China been attracting investment, but the Chinese have been saving and building financial capacity for the future. With such a huge pool of accumulated reserves (savings), Chinese companies are now able to invest in any part of the world.

It is little wonder that in the last few years, Chinese automaker SAIC bought out British car maker Rover as well as MG. Recently another Chinese automaker Geely, bought and rescued the London Taxi Company, famous for its black taxi cabs whilst another British luxury auto maker, Bristol, was snapped up by Xinjian Tractor Company.

It is not surprising that a fortnight ago, China General Nuclear Power Group clinched a deal to build a nuclear power station in Britain, simply because the British had no money to fund it. Well, the Chinese have the money and they are fully funding the project.

According to figures in the Bankers Association of Zimbabwe economic bulletin for October Zimbabwe’s savings rate as a percentage of GDP is estimated at less than 10%.

Of the US$3,8 billion in deposits in the banking sector, demand deposits constitute a major share, 52% of total deposits.

Only 13% are long-term deposits placed for more than one year, whilst another 13% represent savings accounts and 21% are short-term deposits placed for less than one month.

If one considers that the majority of our savings accounts in the banks are for receiving ones salary into, the level of real savings is even lower than the figures show.

Nearer home, according to the South Africa Reserve Bank (SARB), South Africa’s gross savings at the moment represent about 16% of GDP.

These figures are relatively low when one considers that economies such as China and India were at 52,3% and 31,6% respectively far back in 2010.

To save Zimbabwe — to grow the economy and to develop the means to deal with the problems like poverty — we must undertake a drive to save and build our national savings.

If more citizens opt to save through mechanisms such as savings accounts, endowments and retirement schemes, more capital will be made available to increase the productive capacity of the economy.

This is will be achieved through the underlying investments in the private sector (through loans to companies and investments in shares in companies for example).

National savings are also channeled to infrastructure investments and through government schemes (such as government bonds).

At present, Zimbabwe’s economic future development is heavily dependent on fickle and very timid foreign capital. Massive amounts of foreign direct investments are required.

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.

The government will 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.

Clive Mphambela is a Banker and Financial Advisor, he writes in his capacity as Advocacy Officer for the Bankers Association of Zimbabwe. He can be reached on 04-744686, 0772206913, or clive @baz.org.zw