Employer-assisted saving, collective investment schemes, the youth culture of conspicuous consumption, black tax and over-indebtedness were hot topics debated at the launch of the 10th July Savings Month, a campaign led by the South African Savings Institute (SASI) and supported by Absa and the IDC.
A panel of experts including SASI CEO and financial advisor Gerald Mwandiambira, wealth coach Samke Mhlongo, personal finance journalist Maya Fisher-French and Absa wellness executive Dr Lesego Rametsi was facilitated by SASI savings ambassador, businesswoman and media personality Azania Mosaka.
In the quest to find alternative financial solutions for South Africa’s dire savings rate, the spotlight fell on how employers can play a vital role in assisting cash-strapped consumers to save.
“Broader societal problems affect a firm’s performance and employees don’t leave worries about debt at the door. Talking about savings has never been more important. The picture looks negative but there are alternatives, innovative alternatives, that can have an impact,” Mosaka says.
Dr Rametsi cited a 2017 PWC report, building the business case for employer intervention.
“Research shows that 30% of your employees are distracted due to financial stress, and 46% of employees spend three hours thinking about or addressing financial issues. This has a major impact on productivity and the bottom line.
“By 2030, mental illness, which can be driven by financial stress, will be the highest burden of disease in the world. There is a business case for employers to come up with strategies that mitigate the risk.”
She added that organisational culture plays a huge role when it comes to the trust necessary for employees to disclose financial affairs, as well as busting a few myths.
“People believe that the higher levels of an organisation are safe and well informed on saving, this is not necessarily true and programmes must be inclusive at all levels. Education programmes also often take a one size fits all approach, whereas really a high level of customisation is required.
“For example, the needs of a graduate and a pre-retiree are different. We must also be sensitive to specific needs, for example buying a car may not be the conservative financial approach, but may in fact have a huge impact on the quality of life of that employee.”
Dr Rametsi believes that organizations need to have referral mechanisms. “Absa has introduced debt consolidation and part of this is giving employees access to psychologist to get to the root of their financial woes, , or you can’t get them out. You must understand their aspirations and drivers.”
Mhlongo echoed this, advising employers to not be the paracetamol, but to find the cause of the headache.
“The drivers behind financial distress need to be addressed, requiring honest conversations. This can be difficult for employers to address and some distance is required.”
The consensus was that employers could break the trust deficit by using third party providers, funding reputable financial planners to consult to employees. “The financial planning industry is evolving under the FSAC and should become more accessible, with set fees rather than the commissions that drive people to consult only to high net worth clients,” said Mwandiambira.
Mwandiambira said saving money is essentially a behavioural change, and this is behaviour that employers and HR professionals can help guide.
“HR professionals should be educating employees to start building a savings buffer and recommending tweaks such as regularly reviewing and adjusting their pension fund contributions. When you start working, you may have a Provident Fund, but you’re not educated on how it works. Forty years down the line, you realise you should have used it better! Education is key.”
He said employers can more actively facilitate or automate the savings process for those with an income, such as garnish savings options where money goes into tax free savings accounts and structuring 13th cheques as a savings tool.
“SASI’s message this year is ‘save before your spend’. Saving must run parallel to servicing your financial debt. Give employers permission to help you – will only benefit you in the long run.”
Collaboration with partners across all industries, even beyond financial services, is necessary to address savings in South Africa, according to Mwandiambira.
“The lack of a savings culture in South Africa is a systemic developmental issue, and no single organisation holds the resources – financial, intellectual or skills to address a problem of this magnitude on its own. Collaborative efforts from active corporate citizen companies such as ABSA have the potential to deliver results on a bigger scale.”
Mwandiambira believes that we need to move away from negativity around South Africa’s savings rate to developing innovative savings alternatives and reinforcing positive savings behaviour.
“Savings Month has been designed to remind consumers to strive towards financial freedom or remain continuously vulnerable. Cultivating a culture of savings and promoting alternative savings solutions in all spheres remains the focus of SASI and our dedicated partners.”
The 2018 SASI July Savings Month Community Campaign will take the savings campaign to grassroots’ communities, stokvels and tertiary institutions. SASI will hold workshops during July in various communities and at tertiary institutions.