Financial Literacy Seen as Fix for Income Inequality in South Africa
By Jeanne Doran
August 2, 2017
Financial literacy advocates took advantage of South Africa’s National Savings Month in July to urge business leaders there to get on board with financial education for employees.
“South African employers should definitely integrate financial education and training into their employee relations strategies,” Lyndy van den Barselaar, South Africa managing director of Manpower Group, wrote here. “Employers should be taking this seriously, as employees are the most important asset to any business.”
Businesses around the world have begun to embrace financial wellness programs as a way to help workers solve debt and other money issues in part so that they will be under less stress and become more focused and productive in their job.
But financial wellness is also seen a way to promote general economic activity. That makes the call for a stepped-up effort timely in South Africa, which is in a recession.
The savings rate in South Africa is 15.4% of GDP, well below the 25% target set by the South Africa Reserve Bank. Only 23% of consumers have extra money at the end of the month; 77% have zero savings. A third of people don’t have a bank account and only slightly more than that pay their bills on time. More than 11 million credit-active South Africans are in over their heads, according to the debt management firm Debt Rescue.
Van den Barselaar is encouraging business owners to offer financial education programs through email, on-site classes, e-letters and other strategies, including one-on-one counseling with a third party financial services expert brought into the workplace.
“Not only does this bode well for employers as their workforce will become more financially literate and on the path to financial security and freedom; it will also bode well for each of the employees—and therefore for the economy at large,” she said.
Financial education might also help alleviate South Africa’s extreme wealth inequality. The three richest people in the country have as much wealth as half the population combined, according to a report from Oxfam. The country’s richest 1% controls 42% of the nation’s wealth. This is one reason that financial inclusion topped the agenda at the 2017 World Economic Forum on South Africa in May in Durban, where Oxfam launched its “Even it Up” Campaign aimed at rebalancing the country’s wealth.