Long-term savings is still a challenge for the majority of South Africans. According to the FinScope South Africa survey, half (48%) of South African adults are worried that they won’t have enough money for old age or retirement and 83% do not have any formal retirement product. Only 25% of adults claim to have enough money to save after covering all their spending needs.
The survey was released on Tuesday and tracks changes in terms of how South Africans aged 16 and older source their income and manage their financial lives.
One of the other findings was that strides to reach the unbanked population has had an impact with the banked population in the country in 2012 1.3m people higher than in the previous year. There are now altogether 22.5m banked adults in the country.
This amounts to about 67% of the adult population using StatsSA 2011 mid-year population estimates. This is 10m more adults in the banking system than there were in 2004.
Although a focus by the big transactional banks in the country contributed, the key banking development in 2012 was the roll-out of the new South African Social Security Agency (SASSA) MasterCard.
“Three in four (75%) social grant holders or 7.4m are now banked – up from 60% or 5m in 2011,” the FinMark Trust said in a press release accompanying the study.
Even though the big-four banks in South Africa are all, to some extent, trying to migrate their clients to cheaper digital banking channels, the study still shows that nine out of ten banked adults still claim to withdraw money from an ATM at least once a month, while only 25% claims to get their cash at a store till using their bank card.
Only 13% claim to use cellphone banking, which is the one digital avenue that reaches the most South Africans across all income categories.
“The big challenge is to get people, including banked people, to meaningfully engage financially by transacting frequently rather than withdrawing all their money at once. A third (34%) of the banked, or 7.3 million people, agree with the statement ‘as soon as money is deposited into your account, you take all of it out’,” the FinMark Trust said.
There are 9.8 million people in South Africa who have basic transactional bank accounts and no other kind of formal financial product.
- 28%, or 9.5m adults, claim to be a member of a burial society. This is up from 6m adults in 2004.
- The number of adults who claim to have formal funeral cover in their own name has more than doubled since 2004, at 8.7m (26% of adults) in 2012 versus 4.2m in 2004.
- One in ten (10%) claim to have cover with a funeral parlour, 8% with a bank and 7% with an insurance company.
- Growth since 2004 in the penetration of pension funds (9% to 12%), provident funds (6% to 10%) and retirement annuities (6% to 9%).
- Membership of informal savings or investment groups and stokvels has also grown from 7% in 2004 to 11% in 2012.
- Since 2004, personal life insurance has increased from 11% to 13%.
- In both 2004 and 2012, the percentage of adults in South Africa with disability insurance has been 4%.
- Car or vehicle insurance is also stable at 7% as is medical aid at 10%.
Although South Africans are quite indebted, they seem averse to borrow with 76% saying that they don’t like borrowing money. Altogether 43% said they would be embarrassed to borrow. The study still shows that the main reason cited is to buy food, which has been highlighted as an area of concern.