Location, Pietermartizburg, South Africa
079 398 9384 / 072 324 5043
info@pmbejd.org.za

Calls for South Africans to save money in the current socio-economic context may be misguided.

Calls for South Africans to save money in the current socio-economic context may be misguided.

Calls for South Africans to save money in the current socio-economic context of very low baseline wages, high levels of unemployment and escalations in the cost of basic goods and services may be misguided.

In our analysis this is because for most South Africans paid very low wages (1) savings are not generated from surplus income but from cutting back spending on already eviscerated critical expenses like food, electricity, transport and educational resources; and (2) savings remove money from circulating in the local economy.

Cutting back consumption of critical goods and services to extremely low levels damages the body and household functioning.  In this sense, saving is not rational because the sacrifices needed to make surplus money available to enable these savings actually damages the very foundation on which future savings have any value.

The July 2019 Household Affordability Index reflects a picture of the scale and depth of the affordability crisis facing South Africans.  There is just not enough money for households to secure their basic expenses let alone to save for a financial buffer.

  • In July 2019 the typical cost of basic expenditures for a Pietermaritzburg family of 4 was R7 624.13 while the wage for a general worker at the National Minimum Wage exemption rate of 10% (or R18 an hour) was R3 312 per month.  This leaves a shortfall of R4312.13.
  • The cost of the household food basket in July 2019 was R3 057,93.  In July 2019 our data shows that households are underspending on food by 25%.
  • In July 2019 electricity and water tariffs increased.  The price of prepaid electricity in Pietermaritzburg went up by 13,07%.  The average kWh consumption of 350kWh per month increased by R69,18 from R529,34 to R598,52.

Instead of calling for households to save, the call should be for employers (including the state) to pay workers a decent wage.  This will mean substantial wage increases. When workers are paid a decent wage then calling South Africans to save and educating us on how to save would be most welcome.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

eight − 4 =