Life industry spends first R700 000 on financial literacy for public servants

23 August 2006 Lucienne Fild

By the end of this month some 2 500 government employees in all corners of the country will have attended financial literacy workshops sponsored by the Life Offices Association (LOA) to a cost of close on R700 000.

The Financial Wellness Programme was launched by the LOA, in partnership with The Careways Group, in March this year. The Careways Group specialises in providing corporate employee wellbeing services, including helping employees gain control of their finances.

The programme will see the South African life industry spend R2.6-million over the next year with the aim of equipping some 15 000 government employees with skills to reduce debt and to successfully manage their personal finances.

Lerato Mametse, Communications Manager at the LOA, says research conducted by The Careways Group shows just how desperately South Africans need to be educated on how to achieve financial wellbeing.

According to research by The Careways Group, South Africa has some three million employees who experience negative cash flow every month and over four million employees with adverse credit records.

In addition some 1.5 million garnishee orders (court orders allowing for debt collection) are currently effective in SA, in terms of which approximately R570-million is deducted from employees salaries every month to service debt. Sadly the Careways Group also found that about R750-million is being over deducted from employees salaries via these garnishee orders as a result of abusive practices carried out by lenders and debt collectors alike.

Data from the Micro Finance Regulatory Council shows that in the 12 months to the end of February this year, registered micro lenders had disbursed R27-billion to South Africans in financial dire straits with the average loan size being R1 719. This means, says Mametse, that last year some 15 million loans were advanced.

Unfortunately this extremely high level of indebtedness is causing employees to resign from their jobs to access their retirement funds and to escape garnishee deductions. The best way of ensuring that the most vulnerable consumers are protected is by teaching them basic financial skills.

Mametse says the life industry first became involved in financial education of government employees in 2001, after National Treasury had stopped all payroll deductions for government employees, because they were often taking home very little or nothing at all at the end of the month as a result of excessive deductions from salaries.

She says in many cases employees were trying to repay loans or meet a number of different insurance premium deductions.

However, recognising that moderate payroll deductions could help public servants with their financial planning, National Treasury re-introduced payroll deductions in 2002, but within very strict limitations. And the financial services industry agreed to help government employees take home more money every month by consolidating loans, rationalising insurance policies and through financial education.

Mametse says the Careways education programme takes public servants through the necessary tools of financial well being like budgeting, borrowing, saving and how to manage these effectively.

She says when surveyed during the current workshops, about 30% of all participants reported that they were struggling with over indebtedness. She expects this number to increase once the workshops start targeting public servants in the lower ranks. She says in an effort to assure buy-in from all Government departments managerial staff has been targeted first.

Target employees are identified with the help of government departments and the four hour workshops are presented in English, Afrikaans, Zulu, Xhosa, South Sotho and Tswana. After the workshops all participants also have access to financial counselors via a telecare service. Participants with garnishee orders against them can also use the telecare service to have their orders audited to ensure that the correct amount is being deducted.

Mametse points out that the LOA is not limiting its education drive to government employees. She says in line with the Financial Services Charter, the industry is busy finalising a multi-million rand consumer education drive to span over 10 years.

Press release : 25 August 2006

Lerato Mametse
Life Offices Association (LOA)
Communications Manager
(021) 421 2586
084 406 8272


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