Old Mutual published the results of its annual Savings & Investment Monitor survey last week. The report, first published in 2009, investigates the savings and investment habits of South Africans living in metropolitan areas. The results are based on face-to-face interviews with more than 1,000 households and are considered to be a good barometer for the country as a whole.

In this blog post, we take a look at some of the key findings from the 94-page-long report.

South Africans are feeling the pinch

A sluggish economy, coupled with rising prices, is taking its toll on people’s ability to save for emergencies and their retirement. Only 30% of South Africans save for emergency expenses, while just 58% make any contribution to formal retirement savings.

Unsurprisingly, “[Old Mutual] noted a significant increase in the number of households experiencing financial stress.”

The report found that the number of households suffering major stress due to money issues increased by 25% from 2018. Lower-income households have been hit hardest, but middle and upper-income households are feeling the strain as well.

Despite this, 46% of South Africans said that they felt confident in the country’s economy; although it’s worth noting that confidence in the country’s economy differs greatly between regions. Durban, for example, has a confidence level of 54% compared to 28% in Cape Town.

Only 7% of respondents are living comfortably, while 29% are “doing alright”. This is reflected in the increase in the number of households taking out personal loans from financial institutions, up from 14% last year to 19%.

Underprepared retirees continue to work

This is the first year in which retirees have been included in the Savings and Investment Monitor, and some of the results are startling.

Perhaps the most staggering takeaway from the report is the fact that 92% of retirees continue to work due to their pension income (or lack thereof) being insufficient.

This highlights the importance of proper financial planning for one’s future.

For nearly 80% of retirees, the monthly contribution from their pension makes up just 27% of their income.

“Even the most modest contribution to a long-term savings plan can make a considerable difference to one’s financial future,” said Lynette Nicholson, research manager at Old Mutual.

The report found that 1 in 4 Baby Boomers – people born between 1946 and 1964 – have no formal retirement fund provision.

Stokvels emerge as a surprising disruptor

The traditional stokvel market has grown to an estimated annual value of over R40 billion, but there is a new, non-traditional, stokvel type making waves.

Property stokvels are emerging as a popular alternative to traditional lenders, who impose barriers to finance and lengthy mortgage periods.

The largest property stokvel surveyed has over 550 members and accumulates R24 million a year from contributions.

More ambitious property stokvels are building impressive investment property portfolios, while many assist members in buying or building a family home.

Amongst black households, 59% contribute to at least one stokvel every month, up from 50% in 2010.

“This is a unique feature of the economy and serves as both a destination for savings, as well as borrowings,” the report noted.

Stokvels have long been thought of as informal savings pools, used mainly by lower-income households.

However, monthly stokvel contributions from households earning R40,000 or more per month have increased by more than R600 to R1,743 per month.

Monthly stokvel contributions have increased at almost every income band. Households earning less than R6,000 per month have increased their stokvel contribution by almost 46% to R543 per month.

Quick takeaways

Here are a few more tidbits to come out of the report, and not all of them make for particularly happy reading.

  • South Africans spend 15% of their income financing their debt.
  • Job security is believed to be more important than job satisfaction by 81% of people.
  • Roughly one in two South Africans between the ages of 18 and 34 still live at home with their parents.
  • Compared to 31% in 2010, a staggering 44% of adults are still financially dependant on their parents
  • More than half of all mothers surveyed are single parents.
  • Only 20% of those receive regularly paternal financial support.
  • One in five South Africans admitted to having a ‘stash of cash’ that their spouse/partner was not aware of.
  • Only 45% of parents actively save for their children’s education, down from 62% in 2010.