Low savings holding SA back – Gordhan

2011-07-13 09:02

South Africa’s low savings rate is holding the country back compared with its peers, Finance Minister Pravin Gordhan said today.

“Compared with our peers internationally, South Africa’s savings rate has not performed well,” Gordhan said at the SA Savings Institute’s 10th anniversary in Johannesburg.

South Africa’s gross savings were 16% of gross domestic product (GDP) in 2009.

This compared with China’s savings rate of 52% and Russia’s rate of 22%.

Gordhan said it was no coincidence that these countries’ economies were leading the way.

South Africa needed to increase its savings rate if it were to become the “China of Africa”, he said.

South Africa needed to ask questions about the “consumerist society” it had become – “a society that wants to acquire things at any cost” and which was taking on increasing debt.

“This type of acquisitiveness also fuels the fires of corruption as people look for the quickest, easiest way to get things rather than to save for them.”

He asked how South Africa managed to have a savings rate of 30% of GDP before 1994.

“After 1994, we have a much more prosperous society. Why did the savings rate fall?”

Gordhan said if South Africans could save more, the country would rely less on borrowing funds from other countries to meet its investment needs.

“This would make us less reliant on volatile short-term capital inflows, which can easily reverse and pose risks of volatility ... Today the whole issue of volatile capital flows is one of the biggest challenges faced by emerging markets.”

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