“Without financial literacy, even the best regulatory frameworks can fall short of fully delivering protection for financial customers,” FSCA Commissioner Unathi Kamlana said at the inaugural FSCA Financial Education Summit on 28 August.
The summit, held in collaboration with the FSCA, Visa, the Johannesburg Stock Exchange (JSE), and the Financial Services Consumer Education Foundation (FSCEF), had the theme “Creating accessible financial education for all in South Africa”.
The event brought together leaders and decision-makers within the financial sector to develop a co-ordinated approach to improving financial education.
A panel discussion, focusing on the topic “Saying ‘I do’ to consumer financial education – A long-term commitment” discussed some of the challenges surrounding financial education in South Africa. The panel consisted of Brendon Pearce, the chief executive of FinMark Trust (the moderator); Celiwe Ross, director: Group Public Affairs, People Cluster and Group Strategy: Old Mutual; Adrian Burke, the chief executive of the Association for Savings and Investment South Africa (ASISA); Viviene Pearson, the chief executive of the South African Insurance Association (SAIA); and Lineshree Moodley, the chief executive of Visa.
Pearce opened the discussion by highlighting findings from the 2023 Finscope survey, which tracks changes in consumer financial behaviour over two decades.
“The data does not make for pleasant reading, especially regarding access to financial services for the poor in South Africa. All indicators, such as non-funeral insurance, medical insurance, and savings, have worsened. The only areas that have seen an increase are over-indebtedness and funeral insurance,” Pearce stated.
He noted that South Africans spend more than R10 billion annually on funeral expenses, suggesting that reallocating even half of this amount could significantly impact economic stability.
Pearce also pointed out the increase in borrowing for basic needs.
“In 2013, 13% of people borrowed money to buy food. By 2023, that figure has risen to 41%,” he said. This stark contrast with spending on funerals highlights a critical issue: “We’re putting it all on consumers. While there are supply-side issues, financial education and policy have not effectively addressed these problems.”
Despite substantial investments in financial education – banks alone reportedly spent R153 million annually from 2018 – Pearce questioned the effectiveness of these efforts.
“What’s, the problem? Why are we still sitting with such low numbers of financial literacy?” he asked.
What’s the problem?
Answering the question, Burke noted that the problem transcends socio-economic boundaries.
“I think the challenge is not specific to a particular socio-economic group,” he said. “There’s a tendency for people to jump to the conclusion that we are talking to the poorer or any particular group. It applies to everybody.”
Burke highlighted a critical gap in financial education.
“The foundational basic understanding of financial concepts is missing,” he noted. “The mathematics, understanding interest, the time value of money – all of those items are missing on a large scale across a huge proportion of the population.”
He emphasised that without this foundational knowledge, advancing to more complex financial concepts becomes exceedingly difficult.
Building this foundation, according to Burke, requires time and repeated efforts.
“You can’t build the foundational elements by telling people something once and expecting them to understand it,” he explained. “It just doesn’t work.”
He underscored the need for continuous reinforcement, drawing parallels to the education system where concepts are revisited and tested.
Burke also pointed out the absence of a robust, lifelong financial education framework.
“There’s a lack of scaffolding in the financial education structure,” he said. “This is not about a once-off; it’s actually from childhood through life.” He argued that as circumstances and financial decisions evolve, so too must financial education.
In today’s information-rich world, Burke noted the challenge of capturing attention. “We live in a world of boundless information, and people read headlines and not the detail, and jump to conclusions,” he said.
He suggested that effective financial education must adapt to modern communication channels, including digital and social media, and address the costs and barriers associated with these mediums.
Burke also cautioned against the pitfalls of excessive transparency. “Transparency is about not saying more and more words, because the messages get lost in the volume,” he warned. “The mediums that people engage with have changed,” he added, underscoring the need for a strategic approach to communication.
And he tackled the critical issue of trust in financial services providers. “For people to listen to us, we need people to trust us,” he said. “We have to be honest and not just assume that people believe us.”
‘There is no silver bullet’
Burke said it is necessary to find a level of co-ordination that delivers education at a time when people want and need it.
“There’s no silver bullet. It’s got to be a teachable moment on a learning platform and in a manner that resonates with people, whether it’s home language or other entities, and that can only be done in a co-ordinated, united basis,” he said.
Pearson suggested the creation of a structured platform to enhance financial literacy.
“We have been thinking about the role of government and others,” she said. “I think that is where National Treasury and the FSCA can assist – by creating a common platform that serves as a go-to for financial literacy and information. Such an initiative should ideally come from a neutral party like the FSCA.”
Pearson added that scoping the financial system sector is crucial, because it is already a challenging landscape for those unfamiliar with it. She said people need clarity on, for example, what banks and non-life insurers offer, why savings are important, and who the key players are.
She said such a platform could facilitate sharing among those involved in consumer education, including service providers and training programmes. However, Pearson cautioned, “it should not be too prescriptive”.
Ross highlighted a common misconception about co-ordination and collaboration, noting that “oneness isn’t sameness”. She emphasised the importance of focusing on areas where each party can have the most impact, advocating for collaboration where it makes sense while allowing entities to maintain their unique strengths.
She added: “What’s becoming critically important is understanding the way that people learn and are going to learn going forward.”
She observed that despite the influx of information, programmes, and funding, the impact remains questionable.
“We’ve got to start understanding how we get that to people in the way that they consume it best, and where they’re at,” she said.
Moodley agreed, and added that for financial education to be impactful, what is needed are tailor-made training programmes.
“And in order to do that, we need to invest in understanding data. We need to invest in understanding what consumers want and put together programmes and facilitate it through mediums where they are receptive. Because if there’s no adoption, we’re not really creating the impact,” said Moodley.
Treating symptoms
When taking questions from the audience, Ruth Benjamin-Swales, the chief executive of the ASISA Foundation, said financial literacy in South Africa is in crisis. She said that instead of treating the symptoms, it needs to become an issue under the Presidency.
“What are the factors that give rise to this financial literacy crisis? So obviously, I think the one we’re talking about today is the issue of the need for it to be integrated into our schooling system. Without that, we really are just going to be treating symptoms.”
However, she said that there were other issues that needed to be taken into account, such as when the National Credit Act was formulated.
“The levels of credit that get made available to people who actually shouldn’t be able to have that level of credit because of the irresponsible behaviour it leads to that causes a problem that we now have to go and address through our financial education. But we are just treating a symptom. We need to get to those root causes.”
For example, she said, access to gambling and substance abuse was broad in South Africa.
“But the reality in South Africa is that gambling is a major issue and becoming more prevalent through digital platforms that are just allowed within our society.
“So, it’s societal issues that needs co-ordination and collaboration at a much higher level. Everything we talk about here is relevant, but until that co-ordination happens at that high level, for our country’s sake, we are really just treating symptoms.”
