Skip Ribbon Commands
Skip to main content


  • +27 21 950 2548


Skip Navigation LinksMedia Centre

State of the Nation’s Savings

30 July 2019

President Ramaphosa recently updated the nation on the progress we are making towards our collective goals. This included a sobering reflection on the challenges that our rainbow nation faces now, and on the road ahead.

Let’s take a moment to consider the role that we, as individuals, can play in helping our country to reach these goals through the simple act of saving and investing whatever we can every month. Macroeconomists often refer to the following virtuous cycle in economic development:

Saving funds investment > investment fuels growth > growth enables more savings as people generate more income.

The National Development Plan (NDP) echoes this sentiment, as policymakers view inclusive growth to be paramount in eliminating poverty and reducing inequality.

The fuel for growth through investment can come from a number of sources – including individuals and households, private sector companies, foreign investors and the government. However, for the fifth consecutive quarter, we have seen a decline in the private sector’s willingness to make long-term investments (as measured by gross capital formation). This means that business owners are not reinvesting profits into their businesses to the extent they have in the past. This, together with the current budget deficit, means that South Africa will either continue to become increasingly dependent on foreign investment, or we will have to step up as individuals and households.

The truth is, we have not been doing well. The portion of income that South Africa saves (in other words, the gross domestic saving rate) has been falling steadily to reach an all-time low at the end of last year. The net household saving rate (the amount that households save less the debt they incur) has been virtually zero or negative since the mid-2000s.

Play Your Part

In this context, what can you do to play your part in turning this trend around?

  1. Become critical of your spending and start saving. Saving is spending that has been deferred. Are there purchases that can be delayed? For example, replacing a car or cell phone is often an expense that can wait. Don’t let the need for instant gratification prevent you and the South African economy from getting ahead.
  2. If you do have savings, put these to good use by investing. Any time you invest, no matter whether you opt for unit trusts, the JSE or a direct investment into a private business, you are handing your savings over to someone else who needs these funds to produce or create something. Your savings are put to work and your reward is a share in the profits that are made. What’s more, jobs are created in the process.
  3. If you do invest, take a long-term view. Many investors are nervous about the investment opportunities currently available and some mistrust the markets, given the crashes we have witnessed in recent history. However, these are just tiny blips for longer-term investors. With the rising cost of living, the only way to come out ahead of inflation is to take on some investment risk. Good investors are rewarded for riding out the short-term ups and downs of the market. Just be sure to diversify your assets, with the goal of reducing the volatility of your portfolio over time.
  4. Take advantage of the incentives offered by the government. Economists measure the state of South Africa’s saving according to three components: 1) historic savings stock (how much we have saved over time); 2) new savings flows; and 3) how attractive the savings environment is. It is no surprise that the former two components have deteriorated over time. However, the environment has improved over the last decade with the introduction of vehicles like tax-free savings accounts and retail investment bonds, as well as increased tax incentives for retirement savings.

There has never been a better time to start saving for your own long-term financial success, while playing your part in supporting local economic growth.

Sanlam Life Insurance is a licensed financial service provider.
Copyright © Sanlam