Cracking the Savings Code: Why South Africans Struggle to Save
5 Jul, 2024


Maanda Matambele, Business Development Manager at Prowess Investment Managers


According to Debtbusters, 65% of South African households use their monthly earnings towards the servicing of debt, leaving very little towards saving for an emergency, let alone a rainy day. Maanda Matambele, Prowess Business Development Manager, unpacks some of the issues and spotlights some useful strategies towards a savings culture.


In South Africa, saving is more than just a challenge—it’s a complex puzzle shaped by debt burdens, Covid19 pandemic fallout, high levels of unemployment, and soaring living costs.


Amidst these myriad challenges, practical steps like budgeting and exploring investment options can offer a lifeline in the quest for financial stability.


Building a savings culture is a long term endeavour which speaks to not only habits and outlook, but addressing several hurdles such as:


  1. High levels of indebtedness: Many South Africans face high levels of debt, including personal loans, credit card debt, and store credit, making it challenging for them to save, as so much of their income goes towards debt repayment.
  2. Post Covid 19 effects: Loss of income and livelihood during the pandemic has affected many people, and its impact on small and informal businesses has been significant. The restrictions on trade resulted in many business closures and layoff of workers.
  3. The cost of living: in the last two years inflation has soared to unprecedented levels, resulting in significant price increases for core commodities like food and transportation costs. FinScope Consumers South Africa 2023 recent studies show that nearly half of South African adults are reportedly borrowing to afford groceries.
  4. Low levels of financial literacy: For many, a lack of financial education and awareness can be a barrier to saving. Without the necessary knowledge and skills to manage their finances effectively, individuals may struggle to prioritise saving or may not understand the importance of doing so.
  5. Income inequality: South Africa has one of the highest levels of income inequality in the world. Those living in poverty or on low incomes often have little to no disposable income to save after covering essential expenses. This exacerbates the disparity in savings rates between different socio-economic groups.
  6. Informal savings mechanisms: In some communities, informal savings mechanisms such as stokvels (rotating savings and credit associations) are popular. These allow members to contribute small amounts of money regularly, which are then distributed to a different member each cycle. While stokvels promote a culture of saving, they may not offer the same level of security and financial growth as formal savings accounts. The next phase of stokvels savings should consider how to make long-term investments decisions.
  7. Access to financial services: Whilst strides have been made to bridge the gap, many South Africans, particularly those in rural areas, still have limited access to formal financial services, such as banks and savings accounts. Financial inclusion and expanded access to banking services are crucial to the development of a savings culture.
  8. Government initiatives: The South African government has implemented various initiatives to promote savings and financial inclusion, such as the introduction of tax-free savings accounts and financial education programs. However, the effectiveness of these initiatives in changing long-term savings behaviour remains to be seen.


So, what can individuals do in the face of such challenges?


Here is our back-to-basics approach – 3 steps towards savings.


  1. Have a budget and review it monthly according to the goals you have set. The most important factor is how you plan around items that are within your control whilst putting a strategy in place to control aspects like debt or credit. The focus should be on accumulating healthy credit and reducing bad credit. We refer to Mortgage/Home loans as part of healthy credit as it is backed by an asset like a house.
  2. Consider a savings vehicle or funds to preserve the value of your capital or what we refer to as building an emergency fund. This helps you set money aside for a time when you might need it most. Many income funds are structured with the purpose of preserving capital or matching inflation with lower volatility.
  3. As an investor starting a savings journey you should consider one of the fundamentals principles of investing, diversification. This means allocating your capital across different available asset classes, or investing in a fund that does this for you. 




@Maanda Matambele, Prowess Investment Managers
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