A few challenging factors
There is no doubt that South Africa is currently facing the greatest economic and political crisis since the birth of democracy in 1994. And it falls on us, as capitalists, to find a way to invest with a conscience in order to adhere to government’s goals of Radical Economic Transformation.
These were the words that opened the inaugural South African Insurance Association Indaba where the central theme was the much debated National Development Plan (NDP) and the role of the financial services industry in achieving the goals outlined by the key document.
Lofty ambitions
Many people don’t agree with the NDP and regard it as no more than an idealistic document which sets lofty goals that may never be adhered to.
Ashraf Kariem, Member of the Office of the Presidency, pointed out that the financial services industry has a key role to play in realising the goals set out by the NDP. “It is the financial services industry that has the most important role to play in eradicating poverty and reducing the country’s current unemployment rate. Participation in the sector is low, and it is the duty of insurers to work towards a model whereby there is increased participation,” said Kariem.
In order to achieve this, the industry needs to embrace technology, something that it is currently still trying to define and coming to terms with. If we don’t know how technology will affect the sector, how will the sector innovate in the technology space?
Large scale development
One of the key sectors of the economy that can grow the economy at a accelerated rate is the Small to Medium sized Enterprises (SMME). Kareem pointed out that SMMEs make up 42% of South Africa’s gross domestic product and accounts for 47% of the country’s employment.
And yet, it is often one of the most neglected sectors of the economy. In the financial services industry, we hear about how mergers and acquisitions are happening at unprecedented levels because smaller companies are just unable to come to terms with the economic pressures of doing business in the current environment.
“This is a problem,” admits Kariem, “we need to consolidate and strengthen different models of business support so that we can assist SMMEs.” He concluded by saying that access to finance for these companies is important.
Challenging factors
Dr Azar Jammine, Director and Chief Economist at Econometrix, agreed with Kareem but also pointed out that there are a few challenging factors that the insurance industry needs to overcome.
One of these is the current crime rate. Dr Jammine pointed out that between 2010 and 2012, when South Africa was going through a period of economic growth, the crime rate in the country saw negative growth.
This has changed as the economy has declined and there were some changes in political leadership, which has brought about economic uncertainty. “When the economy is depressed, there are fewer jobs. When there are fewer jobs, poverty increases; when poverty increases, violent crimes increase. We have seen increased levels of house robbery, car hijacking and cash in transit heists. We must also be cognisant of the important role that the Sasria plays in the market. However, they face their own challenges. One just has to look at the recent public disturbances and strike actions in Eldorado Park and Richards Bay to see examples of this,” said Jammine.
The inequality demon
As Jammine pointed out, when people are facing tough times, money to afford products which are not necessity items becomes scarce. And unfortunately insurance is not seen as necessity in the eyes of people who are struggling.
“I sit on the board of one of the country’s larger hospitals, and I have seen examples of this myself. Less and less people are able to afford medical aid and have to rely on government healthcare to take care of their medical needs,” said Jammine.
He added that the financial services industry has an important role to play in the broadening of dispersion of wealth in the country. Education is the way to achieve this. According to Jammine, only 20% of the country’s population is financially literate. This needs to change and insurers have a role to play.
Editor’s Thoughts:
At what level is the debate. It is unfair to expect insurers to bear this burden alone; government has an important role to play. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za
Comments
e) how to read an income statement f) how to read a balance sheet. g) how to apply for necessary loans h) how to access crowd funding. i) how to register for e filing and pay tax j) how to save on tax bills.
All the above are mainly common sense and should be taught at home, but how many twin income earners have the time and surprisingly not many parents have these skills. Thanks for great articles
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