By Bekezela Pakathi for Business Day

British Prime Minister Theresa May has welcomed SA’s approach to land reform, saying the UK supported land reform that’s legal and transparent.

“The UK has, for some time now, supported land reform that is legal, transparent and follows a democratic process … it’s an issue I raised with President [Cyril] Ramaphosa when he was in London earlier this year. I will be talking about it with him later [on Tuesday] … but I welcome the comments he has already made about approaching land reform, bearing in mind the economic and social consequences … and that land reform will be no smash and grab,” May said at a business forum in Cape Town earlier on Tuesday.

Last week, US President Donald Trump posted a controversial tweet on SA’s push to expropriate land without compensation. “I have asked Secretary of State [Mike] Pompeo to closely study the South Africa land and farm seizures and expropriations and the large scale killing of farmers,” tweeted Trump. “South African Government is now seizing land from white farmers.”

Responding to questions on the matter and whether expropriation without compensation could hurt SA’s efforts to attract foreign investment, May reiterated that the UK supported land reform that is “legal and transparent”. She said SA and the broader African continent offered significant opportunities for investors.

“I think there are real opportunities for the future. I brought a significant business delegation with me across a wide range of business activities from financial services to agriculture. Obviously we look across Africa … they are looking to invest [but] want to ensure that countries have that stable aspect investors are always looking for,” May said.

The UK’s development aid would look at how “we can assist in bringing stability to those states that are fragile”, she said.

May was in SA as part of a three-nation visit to Africa in an effort to strengthen Britain’s economic relations with the continent, ahead of the UK’s exit from the EU In 2019. She is due to visit Nigeria and Kenya this week.

Review of fuel levy ‘is possible’

By Bekezela Phakathi for Business Day

The possibility of reviewing the fuel levies downwards to ease the financial burden on motorists and consumers has not been ruled out, says President Cyril Ramaphosa.

“The fuel levy is part of fiscal architecture we have in our country … we have said we want to look at that … the fuel levy is precisely one of those we are looking at,” Ramaphosa said in parliament on Wednesday

“We are sensitive to the burden imposed on our people.”

The price of fuel recently went up to more than R16 a litre in inland provinces. The hikes are expected to have a ripple effect on the economy.

The price of a litre of petrol in SA has more than doubled in 10 years, while the levies increased from about R1.30 in 2008 to the current R5.30.

The fuel levy contributes close to R63bn annually to the fiscus. The Road Accident Fund levy accounts for R1.93 of the fuel price. Taxis and other public transport operators have already upped their fares in response to the increases.

Ramaphosa said any decision would have to weigh the advantages of reducing the fuel levy against the loss of revenue for the state, which will have an effect “on a whole lot of things”.

“It’s not as easy as snapping a finger and coming up with an answer … it’s one of those issues we continue to look at and seek solutions for.… We import a commodity we have no control of in terms of prices,” said Ramaphosa, during a question-and-answer session.

DA leader Mmusi Maimane had asked Ramaphosa whether there was a plan to reduce the fuel levy, which he called a “corruption tax”. “The RAF [Road Accident Fund] is declaring losses and money is being wasted. Is there a plan to reduce the fuel levy?” he asked.

Department of energy officials told parliament on Tuesday that any adjustment to the fuel levy could only take place in the next financial year.

The government has said before there is nothing much it can do to stem the fuel increases since the country imports the bulk of its requirements. The change in the price of petrol is typically a function of both changes in international exchange rates, particularly the US dollar-rand exchange rate, and the change in international crude oil prices.

Ramaphosa also answered questions on the unemployment crisis and the burning issue of land expropriation without compensation.

“Since 2009 I have heard about plans and summits, yet millions of South Africans are still unemployed,” said Maimane. “The definition of insanity is doing the same thing and expecting a different outcome or keeping the same people [in the cabinet] and expecting a different outcome.… Can we bring change so we can expect a different economic trajectory?”

Ramaphosa said the cabinet would soon announce details to stimulate economic growth, including finalising the Mining Charter and allocation of broadband spectrum.

“We want to unlock the levers that hold the economy back,” said Ramaphosa.

The president hit back at Maimane, saying: “I’ve not heard anything wise that you’ve said.… You are playing the people or the man, not the substantive issues that have to do with economic growth.”

Without land redistribution there would be no stability in the country, Ramaphosa said.

“Transformation means we must have redistribution of land because there was an injustice committed many years ago.… If you do not want stability then do not transform … but if you want stability then you must transform.… We will make sure that our country succeeds. Even the landowners must embrace this process,” he said.

Source: Fin24 

Some 40% of the credit provided by the country’s top 10 credit providers appears to be reckless, a new survey has found.

The Reckless Lending Indicator, released by debt counselling firm DebtSafe for the first time, is based on data from the top 10 credit providers in South Africa for the period of April to July 2018.

Of 5 591 credit agreements investigated, 51% appeared not to be reckless, while 40% appeared to be reckless.

Of the remainder, 7% reflected agreements prior to the National Credit Act and 2% comprised other agreements.

“The analysed data of the top 10 credit providers, based on agreements that appear to be reckless, suggests that the ‘big’ credit providers are playing a major role in the reckless lending environment in South Africa,” DebtSafe said in a statement.

These lenders include – in order – First National Bank (FNB) with 12% of the agreements that appeared to be reckless; Capitec with 6.5%, African Bank with 5.5%, FinChoice with 5.1%, Nedbank (MFC) with 5.0%; Absa and CapFin each with 4.7%; and Standard Bank with 4.2%. Last on the list are Nedbank (3.9%) and Old Mutual (3.9%). All remaining providers accounted for 44%.

The latest statistics released by the National Credit Regulator (NCR) in March 2018 indicate that SA has 25.46 million credit-active consumers. Meanwhile, 9.7m consumers – totalling 38% – have impaired credit records.

According to DebtSafe, this means “almost one in every 25 credit-active consumers that sit with an impaired credit record […] might be over-indebted”.

Over-indebted in three clicks

“It is shocking and scary to know that consumers can pave their way to over-indebtedness with just three clicks using modern-day technology. These days it is all too ‘normal’ to not only apply for credit but to also get it approved within a few seconds. The concerning question here is: does the credit provider conduct a thorough affordability assessment to make sure that the consumer can keep up with the agreed upon payments?” DebtSafe said.

Matthys Potgieter, debt expert and spokesperson at DebtSafe, said, “Previously consumers went to creditors to ask for credit, but now things have changed, and instead, hard-selling credit comes directly from the creditor to the consumer.”

According to Potgieter, consumers may be confronted with pre-approved loan applications via various mobile apps or other methods like SMS, email and telephone calls.

“Before consumers click ‘accept’ on such an application, I would like to ask them the following question, ‘If you withdraw or use all this money on the same day, would you be able to afford the loan’s instalments in future?’ and if they answer ‘no!’ – then they, with the click of the ‘accept’ button, will already be over-indebted,” he said.

Massmart still failing to deliver for Walmart

Source: Supermarket & Retailer

More than seven years after the $2.5bn acquisition of Massmart by Walmart, the merger between the world’s largest company by revenue and Africa’s second-largest distributor of consumer goods is yet to set the SA retail sector alight.

Walmart may have been overoptimistic about the deal and have underestimated the difficulties that SA retailers face

Walmart’s high-profile purchase of a 51% interest in Massmart — whose products straddle the general merchandise, liquor, home improvement and wholesale food markets — heralded the US group’s foray into Africa. It was part of a broader strategy to get into high-growth markets. With such growth aspirations in mind, Massmart, a high-volume, low-margin business, was a logical target for Walmart.

“We see an opportunity to take our mission and apply it in this part of the world and create growth opportunities,” Walmart CEO Doug McMillon said in January 2011. Indeed, since the deal was consummated in June 2011, Massmart, the owner of Game, DionWired, Makro and Cambridge brands, has increased the number of its stores from 288 to 424, as of January 2018.

It has a presence in several sub-Saharan African countries through its four operating divisions, Massdiscounters, Masswarehouse, Massbuild and Masscash. But, overall, the transaction that promised so much has delivered very little.

It is difficult to overlook that Walmart bought the majority shareholding in Massmart at R148 a share. As of Friday, Massmart’s share price has slipped 14.35% since the implementation of the transaction on June 20 2011. The shares were up 2.63% on Friday at R113.66.

“It has been disappointing,” says Ian Cruickshanks, Institute of Race Relations chief economist, of Massmart’s performance over the seven years.

Walmart may have been overoptimistic about the deal and have underestimated the difficulties that SA retailers face, Cruickshanks says.

“We are still very much an emerging economy. They must be prepared for the long run. But they have done a lot recently to reduce costs,” he says.

In the year ended December 2017, Massmart’s costs fell 1.3% and expenses as a percentage of sales were 16.4%. In light of the constrained consumer environment, which is stifling sales, Massmart has no choice but to prioritise cost savings.

Analyst Chris Gilmour has been scathing about what he says is Massmart’s lousy performance since the 2011 milestone deal. In that period, Massmart’s share price has lagged the general retailer’s index, which has grown by 77.98%, as of Friday.

Massmart is taking strain from deflation in durable goods, Gilmour says. “Circumstances have not gone their way.” he says.

Massmart says the deflation in domestic appliances and electronics has not stimulated customer spending because hard-pressed lower and middle income consumers prioritise spending on food.

In the SA market, which accounts for 91.6% of Massmart’s total sales, food and liquor make up 56% of sales, with durables responsible for the rest. Growth into the food market is a sore point for Massmart because the group feels hard done by what it calls anticompetitive lease exclusivity leases that rivals in the grocery retail market — Pick n Pay, Spar and Shoprite — have at malls where Massmart wants to roll out its Game FoodCo stores.

Massmart took its concerns to the Competition Commission in 2014. The Competition Tribunal earlier in 2017 dismissed Massmart’s complaint, frustrating the retailer’s plans to sell fresh fruit and vegetables, meat, dairy and bakery products at more shopping malls.

Cruickshanks says all is not lost for Massmart and has commended its pursuit of new revenue streams through value-added services and online businesses. In the six months ended July 1 online sales soared 69%.

By Georgina Crouth for IOL 

Stellenbosch Law Clinic filed an application in the Western Cape High Court, seeking judicial intervention on the manner in which debt is collected. It believes debt collection needs to be regulated and that costs must be capped.

The clinic is joined by Summit Financial Partners in representing 10 of their clients. All the major role players in the credit industry are involved, with 49 respondents, including all the major banks, the lending institutions, the ministers of Justice and Trade and Industry, and the National Credit Regulator.

Stephan van der Merwe, senior attorney at the university’s Law Clinic, says there’s widespread abuse in the industry.

“We have a lot of situations where people have been garnished with emolument attachment orders against their salaries. When you sit down and look at it you find amounts in excess of five, six, seven times the principal debt and they’re expected to continue making payments on it,” he says.

In one case, a client was granted an initial loan of R600, but had paid back more than R5 000 – about eight times the initial loan amount. In another, a farm labourer, earning R2000 a month, has R970 garnished from his monthly salary. Back in 2011, he was given a loan of R16 000 and has repaid in excess of R31 500 – yet the creditor alleges he owes R37 000.

Van der Merwe says the reason they get away with it is because there are no rules that the costs levied against the debtor are taxed.

“What you have is the creditors going to their attorneys or their collection agents and telling them to collect on the debt but the charges are borne by the debtor.

“This is why the debtors end up paying these astronomical amounts for small loans, because the attorney and collection agency fees are dumped on them.”

The common law in duplum rule says that interest cannot accrue to more than the capital amount. Since 2007, when the National Credit Act (NCA) came into effect, the statutory in duplum rule has been interpreted by institutions in a myriad ways.

“This is why we are going to court: to request a declaratory order that the statutory in duplum is applicable to all the interest, the costs, including the legal fees that are levied against the debtor – irrespective of whether a judgment has been granted.”

Van der Merwe says on a proper interpretation of the relevant sections of the NCA, it would mean that if the debtor is in default under the credit agreement these amounts may not exceed the unpaid balance of the principal debt at the time of default.

“When a consumer is in default all the combined interest, the collection costs and so on cease to run when they reach the unpaid balance of the principal debt.”

“The problem is creditors say legal costs don’t form part of it, or that this isn’t applicable after judgment.”

In addition to the two declaratory orders, asking for clarity on how sections 101 and 103 of the NCA are interpreted, the clinic is also asking that the court declare that legal fees may not be recovered from the debtor unless they have been taxed.

“Nowhere in the National Credit Act is a distinction drawn between legal fees and collection costs.

“What we’re saying is that creditors want to use expensive attorneys to collect on miniscule debts; debtors can’t be expected to pay those fees.

“We shouldn’t allow debtors to be abused in this way – we need to the court to make a ruling.”

Once the court has clarified allowable collection costs, the clinic wants it to order that an independent expert recalculate the applicants’ indebtedness and then order that if there is an overpayment, the money must be repaid to the debtors.

But before consumers get excited about having collection fees and interest repaid, Van der Merwe says prescription might be at play. “You might have trouble in court claiming that money back because prescription would have to be taken into consideration.

“There will be clarity: everyone will know what is expected and people won’t be abused financially as a result of uncertain legal interpretation.”

Van der Merwe says they are not attempting to vilify small cash loan providers, the credit industry or attorneys in general: “We applaud those creditors who are honest, give loans responsibly and collect responsibly: they play an important part in our economy.

“We are not tackling the industry in general – we have an issue with unscrupulous guys who don’t play by the rules. We are not going to assist so called ‘professional debtors’ either, who abuse the system by getting loan after loan at creditors’ expense if there are no merits in their cases.

“We have a problem with creditors who abuse low-income earners by coaxing them into enticing loans which they would never be able to service based on their limited wages.”

In 2016, the law clinic won a landmark case in the Constitutional Court, which found that several practices relating to the abuse of emolument attachment orders were unconstitutional.

“The court also considered the validity of the initial loan agreements which regularly included interest of 60% annually and they were concluded absent of any, or alterna- tively after severely defective, affordability assessments. Those transactions were conducted in breach of section 81 of the NCA which talks about reckless credit.

“Those specific creditors want to extend reckless credit to consumers, who they know won’t be able to repay the loans, and then they abuse the situation by putting debtors into a debt trap that they’ll never be able to get out of.

“People like that shouldn’t be able to shirk responsibility in their collection when they use illegal practices. They cause economic catastrophe in the lives of those clients.”

Van der Merwe says that after the Marikana massacre of August 16, 2012, clear linkages were drawn between the demands for higher wages and the abuses in the credit industry.

“Those workers demanded more money to allow them and their families to make a living because their salaries were severely garnished by credit providers that were instituting emolument attachment orders that were illegal and unconstitutional.

“We are trying to avoid those situations arising in the future, by asking the court to assist us in fostering a healthy and responsible credit environment.”

Poor families starved by the price of food

By Sizwe Sama Yende for News24

Poor families have been cutting down on buying proper nutritious food by as much as 26%, and need another R1 062.38 a month to be able to afford it.

The August 2018 Household Affordability Index was compiled by NGO the Pietermaritzburg Economic Justice and Dignity Group. It is in response to the government-commissioned panel of experts’ report on VAT, released last week, in which additional items were recommended for zero-rating. Currently, 19 items are zero-rated for VAT.

The Pietermaritzburg organisation warns that families can no longer afford to eat properly and that no amount of “tinkering around the edges of our economic framework” is going to change this.

It wants all VAT charges to be removed from food in light of the price hikes that have occurred since government increased VAT from 14% to 15% in April.

“If there is a need to recover revenue from food, then it is better if it be recovered off luxury foods, which working class households do not buy and the wealthy do buy,” the organisation’s report found.

“Food is not a commodity. It is better for all of us if we are all able to eat properly and be healthy. Without proper nutrition none of our developmental outcomes will come to fruition. Our education outcomes will continue to be dire, our health sector will continue to collapse as more and more people get sick and – with very little money in the pockets of the majority of South Africans, and child stunting levels at 25% for girl children and at 30% for boy children under the age of five years – we can have no future workforce or political stability, or reasonable economic recovery.”

The VAT panel released its report to Finance Minister Nhlanhla Nene on August 6. It recommended zero-rating white bread, bread flour, cake flour, sanitary products, school uniforms and nappies, including cloth and adult nappies.

The panel also recommended that government should expedite the provision of sanitary products to the poor and ensure that zero-rating did not benefit producers, but rather, accrued to consumers.

Other options

Julie Smith, a researcher at the Pietermaritzburg Economic Justice and Dignity Group, said the country faced a crisis of affordability and suggested options that could be explored if VAT remained the same.

“We are saying government must remove VAT completely. However, there are a number of options that should be looked into. The income levels are too low because of the legacy of apartheid and workers must be paid a living wage. The government can also look into how it can increase the old-age and child social grants,” she said.

“Another option is that government should look into how it reduces the cost of goods and services. Transport to work takes a huge percentage of household incomes. Can we have a way of reducing fuel prices and have a public transport system? In South Africa, transport is privately owned.”

The ever-increasing cost of electricity, said Smith, also had a direct impact on poor households. Zero-rated foods still had to be cooked. “Unless the cost of electricity is looked into, people may have food but they cannot cook because they cannot afford electricity.”

Families need R1 062.38 more a month to be able to afford nutritious food.

The index shows that the cost of foods in the household food basket, a basket designed with women living on low incomes, was R3 009.65. But the median wage for black South African households is R3 000.

The difference in cost between the foods which families living on low incomes try to buy each month, and the foods which families would like to buy and should buy to meet their basic nutritional needs, amounts to R1 062.38.

The food that families need to buy to meet basic nutrition costs R4 072.38 a month.

The situation is worse for families surviving on the R400 monthly child support grant because it is below the poverty line of R531 per person per month. Also, the child support grant is below the cost of a nutritious diet for a child aged between 10 and 13, which is R569.98.

VAT on the household food basket in August, the index found, was R215.77 – or 7.2% of the total household food basket.

“If white bread and cake flour are zero-rated in line with the panel’s recommendations, the savings on the household food basket would be R40.81 a month (R31.46 on 25 loaves of bread and R9.35 on 10kg of cake flour),” the report found.

“This would bring the cost of the household food basket down to R2 968.84 a month. This amount is almost equivalent to the median wage for a black South African household, and this is just food – not transport or any other critical household expenses.”
Removing VAT from peanut butter, an excellent source of protein and fats on children’s sandwiches, the organisation argues, is not going to send the economy into the ashes.

Neither will subsidising eggs, maas, brown bread and maize meal.

Nor will regulating the retailers and the prices on supermarket shelves.

“We are facing probably our greatest crisis, and we are still unable to conceptualise the problem within the broader political economy and deal with its cause. We cannot deal with our food affordability crisis by limiting analyses to losses to the fiscus and evaluating a few chosen goods and services within such a narrow framework of evaluation,” the report found.

“It is not useful to approach problems in isolation or by using the entry point of analysis as ‘whether we can afford this’ or ‘what will the loss to the fiscus be for us?’.”

Waltons staff down pens in wage protest

By Sne Masuku for IOL

Workers at the stationery manufacturing company Bidvest Waltons have walked off the warehouse floor and local stores in a wage protest.

They carried placards on Monday outside the warehouse at Riverhorse Valley highlighting what they say are poor working conditions and demanded 100% bonuses.

In addition, staff demanded an 11% salary increase across the board and a minimum wage of R7 000 a month.

The Bidvest Waltons employees in KwaZulu-Natal said they were further prejudiced as they were allegedly paid less than their counterparts in Cape Town.

They are also demanding double pay for working Sundays, an 18% shift allowance, and a guaranteed 13th cheque, amongst others.

Police were on sight at the warehouse to monitor the situation while the union officials were in negotiations with management.

Also on the worker’s grievances were allegations of racism. They also complained of workers being forced to use one toilet.

“We are made to use one toilet for both males and females. We, women, feel uncomfortable to be in the same toilet wither male colleagues.We have complained a number of times to management, but we have been ignored,” said a worker who wished not to be named for fear of victimisation.

The management was unavailable for comment as officials were still locked in negotiations.

Watch the video here.

94% of Jo’burgs bridges ‘dangerous’

By Simnikiwe Hlatshaneni for The Citizen

Urgent repairs will start on the M2 in the CBD in October, with the reconstruction estimated to take up to a year to finish.

Johannesburg’s ageing road infrastructure was in the spotlight yesterday after it emerged that parts of the M2 near the Johannesburg CBD were in dangerously poor shape and parts of it would soon be closed, pending repairs.

Built in the ’60s, the bridges on the M2 were now near the end of their design lifespan, requiring urgent reconstruction and rehabilitation, according to Joburg mayor Herman Mashaba.

The M2 is one of the motorways which link the N3/N2 with the inner city and the western parts of the city.

The Joburg Road Agency (JRA) appointed a specialist to conduct detailed assessments on the affected sections of the bridges. It was found the sections were severely cracked, which affected their structural integrity.

According to the JRA, just 6% of Johannesburg’s bridges were in good condition. The remaining 94% needed immediate intervention.

“As an immediate measure, the JRA is preparing to redirect limited funding from other projects, at a cost of approximately R58-million, to start working on the bridge, as a matter of urgency,” said Mashaba.

Once work begins in October, the reconstruction was estimated to take up to 12 months. During this period, one lane would be closed at a time and most of the work on top of the M2 would be done during evenings.

The mayor said Johannesburg was suffering from an infrastructure backlog.

“Previous administrations allowed for a R12-billion backlog in bridge infrastructure, R7.1-billion on road infrastructure and a R56 billion backlog in storm water drainage systems. In a survey conducted in 2017, 3 900km of the road network fell into the poor, or very poor, condition.”

The expected increased congestion on affected roads was expected to affect the local economy, as well as tourism.

Moya Messenger is a new mobile messaging app that allows users to communicate without incurring data costs.

The app, developed in South Africa by biNu and released in July, provides #datafree text messaging that works when a mobile user has no airtime or data balance on their smartphone device.

The Moya app provides a similar messaging experience to market leader WhatsApp, but with the distinguishing feature that text messaging is #datafree across all four major mobile networks.

“We are profoundly motivated by the positive social impact of enabling ubiquitous #datafree mobile messaging, developed in Africa, for Africans,” says Gour Lentell, CEO of biNu. “We do it by utilising telco reverse billing, which allows us to pay mobile messaging data costs.”

biNu has reverse billing agreements with MTN, Vodacom, Cell C and Telkom, and has built a technology platform that enables partners and customers to make their apps and websites #datafree for end-users.

Lentell adds, “Despite a multi-million dollar marketing budget, WeChat struggled to gain a foothold in the South African market largely because the incumbent network effect of WhatsApp proved too competitive to overcome.”

“But we definitely see a place for a challenger like Moya, where the data cost barrier of mobile messaging is removed completely for South African consumers, particularly in an era of #DataMustFall and an increased amount of pressure on consumer incomes,” Lentell says.

Moya functionality

Moya Messenger was built using open-source messaging technology and was adapted to be #datafree.

The app offers unlimited texting, group chat, security with automatic encryption of messages, and automatic contact discovery that allows users to connect with others also using the Moya app.

However, while message attachments like photos, videos, voice notes, documents and the like are fully supported, sending media attachments is not #datafree. Moya users will be pre-emptively warned when they will incur mobile data costs or need to switch to Wi-Fi to send media files.

According to Moya, the commercial model around the platform is to provide rich, programmatic access to businesses and enterprises of all kinds so users can engage at scale with their audiences through messaging, without a cost implication for their users, members and customers.

“We see opportunities for organisations to benefit from a #datafree platform. For example, financial institutions can deliver on customer support and document exchange; trade unions and political parties can communicate with their members; government agencies can disseminate information and implement service delivery; NGOs can reach target communities; and the FMCG sector can reach their audiences,” Lentell says.

The key feature that sets Moya apart is that sending and receiving messages from businesses or other enterprises remains #datafree for the end-user.

“It’s counter-productive for organisations to try and engage their customers and mobile audiences on other messaging platforms when they have no airtime available,” adds Lentell.

A core standard that will be applied rigorously to Moya is that all business communication will be on a consumer opt-in basis only.

Moya Messenger can be downloaded via the www.datafree.co.za website or the Google Play Store.

By Carin Smith for Fin24 

Research by Momentum and Unisa shows that 73.5% of SA households were “financially unwell” in 2017.

The research found that, while some households did very well during 2017, others just muddled through, while a large portion struggled immensely.

According to the study, one of the more concerning findings was that the proportion of financially well households was virtually unchanged between 2016 and 2017.

Even more concerning was that the proportion of financially well households was virtually unchanged since 2011.

However, there was a bright spot: The research found that while a large proportion of households was still financially unwell, it also found that these households were not as financially unwell as they had been previously.

Decline in net wealth

The study looked at various factors influencing the financial well-being of South Africans.

One was a decline in the net wealth to disposable income ratio of households, caused by a decrease in assets to disposable income ratio.

The decline was mainly due to negative growth in house prices and real investments in residential property increasing by less than 1% compared to 2016.

In addition, the real value of financial assets was lower during the first half of 2017 compared to the same time a year earlier.

Skills gap

The research further showed many households just don’t have the means and skills needed to take control of their finances.

While more people completed secondary and tertiary qualifications, social capital levels remained low due to feelings of disempowerment, low levels of subjective well-being, financial vulnerability and low consumer confidence in the economy.

There are indications that, although the SA educational system delivers a growing number of matriculants and graduates, the students predominantly acquire academic knowledge and not high-level cognitive, social and communication skills.

It furthermore looks like an improvement in education did not translate into a proportional increase in income, the study suggested.

This can, to a large extent, be explained by low labour demand growth due to a skills mismatch in the SA economy.

Control

Factors over which households have little control include macroeconomic factors such as low economic growth, high levels of unemployment, political and policy instability, and low levels of business confidence.

The factors over which households do have control include the educational levels of household members, their financial literacy and capability levels, their work statuses, the degree to which they conduct debt and financial risk management and financial planning, the amount of money they earn, and the level to which they save and accumulate their net wealth.

The results of the study have shown that, although households do have control of these factors, they generally don’t budget, conduct very little debt- and financial planning, and generally have very low financial literacy and capability levels.

Intervention

The research findings suggest that a comprehensive intervention is needed for financially unwell households to become financially well.

Such a comprehensive intervention should be more multi-faceted than merely providing social grants, social housing, free services and financial products, according to the report.

Putting households on a path of financial wellness growth will require high-quality education, an enhancement of their financial literacy and financial capabilities, and improving their understanding of financial planning and other financial services.

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