South African Spending: How to keep the country saving

Did you know that the country’s national savings rate jumped from 14.2% in December 2020 to 18% in the first quarter of this year – the highest it has been since 2010 [i]? According to the South African Reserve Bank, this is a reflection of household spending patterns amid the uncertainty around the COVID-19 pandemic. Hennie Blignaut, Account Executive at Pay@ – a leading payment aggregator and provider of secure payment solutions – notes that this trend towards saving has also been echoed in debt repayments and insurance premium payment volumes, with the former spiking by 58% and the latter by 83% over the past 12 months. He unpacks some of the reasons behind these increases and shares how South Africans can keep saving:

For many, pandemic-induced lockdowns led to salary reductions at best and job losses at worst, no doubt waking people up to the fact that they need to save money should stricter lockdown levels return or if the country is affected by another crisis like the protest action we’ve recently seen in certain parts of the country.

In terms of the rise in debt repayments, most of these are for overdue or bad debt, much of which was amassed over the harsher lockdown levels, while people prioritized buying food and paying essential bills. Not paying back debt or leaving overdue debt for longer can result in excess interest and fees being charged by the credit provider as a means to collect the debt. It can also have a negative effect on one’s credit rating, with judgements or blacklisting being raised against one’s credit profile making it harder to get access to future debt. In light of this, South Africans are trying to catch up on their debts and get ahead by paying more, with average transaction values increasing by 36% year-on-year.

Due to the potentially deadly nature of the Coronavirus, not only are more people taking out funeral and life insurance, but policyholders are increasing their cover amounts to ensure that their families are cared for should something happen to them. The average transaction value has increased by 7% year-on-year. This is due to more insured lives being added to active policies and is a trend that will increase in the years to come as competitiveness in the market is driving down the cost of policies and increasing the value adds that form part of the benefits for policyholders and their families. Additionally, payment options in more informal areas are becoming increasingly accessible such as the ability to pay premiums in cash at retailers. Pay@ is also enabling insurers to collect bulk premiums from policyholders directly via digital bill presentment and collection methods, thereby reducing the travel costs incurred by the policyholder when having to make payments themselves. This saving allows them to open up cashflow for day- to-day expenses.

Despite the devastating drivers behind these changes in people’s spending patterns, it’s good to see that South Africans are taking proactive steps to safeguard their financial futures. I would encourage them to take further steps if possible, such as by becoming part of a stokvel. This is one of the primary means of saving for many South Africans[ii]. Since last year, monthly stokvel contributions have increased by 12% [iii]and I suspect that this upward growth trajectory will continue while the economy recovers.

There are several different types of stokvels which serve a range of different purposes. The latest Old Mutual Savings & Investment Monitor has revealed that 62% of stokvel savings go towards groceries, 60% is for school fees and 26% is to buy property.

South Africans can also start looking at other investments be they with their banks or endowment policies with insurance companies.

“If the pandemic has taught us anything is that we have to constantly be looking at ways to save for that inevitable rainy day,” concludes Blignaut.

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About Pay@

Established in 2007, Pay@ is one of Southern Africa’s leading payment aggregators and is trusted by prominent South African organisations to optimise their billing and payment processes. Pay@ offers consumers a growing variety of secure, innovative and convenient bill presentment and payment platforms. Its robust system ensures highly efficient processing, with unallocated payments for example being eliminated and transaction success rates of more than 99.996%.