Financial literacy is having a basic grasp of money matters and its four fundamental pillars: debt, budgeting, saving, and investing, says a well-known online lender. But if you are overwhelmed by debt, no matter how meticulously you budget, how possible is it to prioritise investment or savings?
Recent statistics show this question is likely to haunt many a South African – that is if they are lucky enough to be among the 67.9% of people who have a job.
According to SearchWorks, a data aggregation company, the average South African consumer allocates about 62% of their take-home pay towards servicing debt. The household debt-to-income ratio is projected to hover around 65% in 2024. In addition, this figure is coupled with an estimated R300 billion in debt owed to municipalities.
The official unemployment rate is 32.1% (7.9 million). According to Statistics SA, those between 15 and 34 years are more vulnerable to unemployment compared to older working-age South Africans, while about 3.4 million (33%) out of 10.2 million people aged 15 to 24 were not in employment, education, or training.
Global Money Week (18 to 24 March) is about educating people, particularly the youth, about finances. In South Africa, where only 51% of adults are financially literate, according to a recent baseline survey by the FSCA, the need to do so is urgent.
Ruth Benjamin-Swales, the chief executive of the ASISA Foundation, has been doing exactly that for the past decade – educating consumers about finance.
The ASISA Foundation, established by ASISA in 2012, operates as a public benefit organisation and a broad-based ownership scheme. Its primary goal is to gather funding from ASISA member companies to support consumer financial education (CFE) and related programmes for targeted beneficiaries, following the guidelines of the Financial Sector Code.
Benjamin-Swales says South Africa is complex when it comes to providing effective CFE.
“As we know, if you earn any income, most of our workers are completely drowning in debt. So, before you can even persuade them into taking up [saving or investment] products, you have to help them to manage their debt because that’s actually the better way of doing it,” she says.
Benjamin-Swales says in CFE, the uptake of a product is often the last step in a long journey.
“You have to be helping them to generate sustainable income, helping them to understand their financial risk. You have to give them a long-term view on things,” she says.
Designing appropriate products
Asisa released the research report titled “Association for Savings and Investment: A five-year transformation journey (2018 to 2022)” earlier this month.
Read: Asisa releases report on transformation scorecards of life offices and asset managers
Under “access to financial services”, the life office industry achieved its transformation targets on “market penetration”. ASISA said although this was a commendable achievement, “more work was required in designing appropriate products and ensuring full transactional access to underserved communities”.
Benjamin-Swales points out that a major hurdle for people in the lower Living Standards Measure groups is that most products, such as retirement annuities, require regular contributions.
“There are no or very few that are not on a pay-as-you-go basis. It’s definitely an area as an industry we are working to find more solutions in,” she says.
Reading between the numbers
Operating under the banner of Saver Waya-Waya (Save all the time), the ASISA Foundation fulfils its CFE mandate through four tailored programmes: WageWise, Financial Literacy and Micro-Enterprise (FLAME), L+EARN, and Build Up. These programmes are designed to meet the specific needs of different beneficiary groups.
WageWise, offered through employers and trade unions, is aimed at helping workers to manage their income better, while FLAME empowers micro-entrepreneurs to grow their businesses confidently and contribute to the economy.
L+EARN includes #SecuretheBag for young adults to understand finances, and #Biz for young black business owners to improve their financial literacy.
Build Up supports community members in co-operatives.
Marking its 10th anniversary last year, the foundation published a booklet titled “10 years of Infinite Impact: Asisa Foundation 2013 to 2023”. During this time, the foundation’s programmes reached more than 82 388 people across the country. Some of these people’s stories are captured in this booklet, pages as well as in the recently released research report.
While the numbers presented in the booklet – how much was spent on what and where – are impressive, it is these stories that show the true impact of the foundation’s work over the years.
Benjamin-Swales says for them, too, the focus falls on consumer education impact.
“We won’t just run a workshop and that’s it, walk away, tick a box. It’s about behavioural science, understanding what’s really going to change behaviour in that individual, not just having a good idea about saving, not just knowing about the product, but how you actually attract them and encourage them to take those steps.”
She says when it comes to the various programmes provided, the foundation tries to ensure that the impact of each can be measured.
“There’s so many dynamics in the consumer education space. I don’t believe that our members enter it lightly, just trying to promote a brand. It all shifted from there, wanting the impact to be achieved. Real impact, real changes in people’s lives.”
However, implementing CFE demands substantial funding.
In the research report released earlier this month, ASISA shared that the spend on consumer education for the past five years was R88 million. Although that might sound significant, Lister Saungweme, ASISA’s senior policy adviser for transformation, skills development, and education, says the amount is chasing a 60-million-plus population.
“Because every individual in this country deserves to understand the financial products. We believe more is actually required to scale up the efforts for consumer education,” said Saungweme.
Benjamin-Swales adds that it also demands patience.
“It requires more than a one-year grant and measurement opportunity… We need longer-term CFE initiatives and longitudinal monitoring and evaluation processes, because if we link it back to national baseline measures of financial literacy, despite all of our efforts, despite all of our spend, that level doesn’t shift significantly.”
She says that’s a big question.
“And that’s what has to be engaged in and what we are engaging in. We need a multiprong approach. We need members individually, but then we need members collaboratively to address that issue.”
To download the booklet, click here.
