SA must save more: Manuel
Richard Mantu
21 October 2004
Finance Minister Trevor Manuel has urged South Africans to raise their level of household savings to effect higher growth levels, financial independence and security - and called on the country's financial institutions to help educate the public on managing debt.
He stressed, however, that South Africa's debt levels were not cause for alarm.
Speaking at the National Savings Institute/ Metropolitan Excellence Research Awards in Pretoria on Monday, Manuel said higher savings were a crucial part of South Africa's recipe for higher growth.
"Savings and growth go together like port and heat in the making of a flambé", the minister said.
South Africa's savings level as a percentage of gross domestic product (GDP) fell to 14.5% in the second quarter of 2004, from highs of over 20% during the 1980s.
Manuel said the government had put measures in place to decrease dissavings by bringing the deficit to GDP ratio down to
international norms from highs of almost seven percent in 1993 to current levels of three percent.
New low-cost bank account
Manuel also applauded South Africa's financial services sector for the new low-cost banking account Mzansi, which will offer financial services to the "unbankable" sector of society.
The minister described Mzansi, which launches on 25 October, as a "huge leap in the way in which we increase access for South Africa's poor ... We applaud the financial services sector for the reform initiative, which has shown awareness and displayed sensitivity to this issue."
'Teach the public about debt'
And speaking at a fundraising dinner in Cape Town on Wednesday, Manuel urged the country's financial institutions to educate the public about debt management.
The event was organised by "You and Your Money", an organisation that educates the public about managing their money.
"Debt in
and of itself is not a bad thing", Manuel said. "It allows us to fund our ideas for the future. Credit provides the essential fuel to smooth the dynamics of the economy. That said, this fuel could be explosive if not handled carefully."
The minister said that the days of moneylenders advancing loans to people in the knowledge that their debt commitments exceeded their income were over. "This simply cannot continue. Certainly, a part of this is pure greed and unethical behaviour on the part of some."
Manuel stressed, however, that South Africa's debt levels were not cause for alarm. "At a macroeconomic level, household debt is a reasonable 55% of disposable income", he said. "This is up from just over 50% at the end of 2002.
"Even more encouraging is the fact that overdue loans as a percentage of total loans in the banking system have fallen from around 5% in 2002 to 3% currently."
Manuel urged financial services stakeholders to engage with the draft Consumer
Credit Bill, which he said was key to protecting consumers' rights. "We are confident that this additional piece in the regulatory puzzle will further promote sound governance of lending practices."
He added, however, that legislation and good intentions were not enough. Hard work was needed, by organisations such as You And Your Money, to educate the public about their rights and on how to manage their debt.
Source: BuaNews
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