Saving to grow?
by Rob Wilkie, CFO Softline and Sage AAMEA
I read a few interesting statistics in a MoneyWeb article posted in June ‘12.
- South Africa has a net saving to GDP ratio of 16.5% mostly thanks to savings by our large corporates. This implies that small businesses (like households) have saved negative amounts, borrowing more than they save and earn.
- In China the ratio is 50% and in India it is over 30%. With the exception of South Africa, the level of savings in BRICS countries is trending upwards.
Three primary reasons are commonly given for why saving levels in South Africa are so low.
- An emerging middle class previously without access to consumer goods and financial services are borrowing for consumption instead of saving in order to bridge the lifestyle gap.
- The state offers a small pension reducing the incentive to save for retirement. In China there is no state pension and the Chinese therefore have no choice but to save for retirement.
- Interest rates are at a 30 year low. Being lower than the inflation rate, the real return of putting your money in the bank is negative.
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