Savings rates are an issue in SA, and while retirement funds form the capital base of a country, the local savings rates are dropping, which means that the capital needs to come from elsewhere - read internationally.
Paul Hanratty MD of Old Mutual SA who was speaking at the retirement reform conference in Johannesburg recently, says you need rapid capital investment to stimulate growth, and SA is well behind the other developing nations. Interestingly he says that the local government is a dis-saver.
There is a consumption appetite is SA, in much the same as is the case in the USA. We need to start saving and increasing the rate to 20% and 25% of GDP, to create economic growth.
But how? There has to be a holistic approach - government, individual, and pension funds have to get involved. We need to find creative ways of getting access to the non-formal sector, and get that grouping to save.
According to Hanratty, the savings crisis means that retirement provision must become compulsory in SA, and must be done for the greater good, and while businesses will kick back, this can be phased in over time.
There should also be some form of preservation in place, with incentives for savings for the population that doesn't earn huge amounts of money, in much the same way as tax incentives work for the more well off. The state old age pension scheme will also have to be reviewed in this context.
A warning - the negative impact of not saving is delayed, and creeps up on a country.
Turning to women, Hanratty says that they are afflicted to different diseases and have a fragmented working life, with many single mothers working as bread-winners, making up 40% of the workforce and this percentage will increase every year, and women will control more of the wealth.
In terms of employment Hanratty admitted that generally local businesses don't employ enough women, which is strange because the women customers will increasingly become a bigger proportion of the customer base.
Hanratty says that there are some things to do: put the needs of the saver first; ensure that the multi-employer arrangements work; address all the conflicts of interest; protect the saver in the individual retirement fund; and support the role of the FSB and the PFA.
In terms of conflicts of interest, Hanratty says that there are cross subsidies in the financial services products - and these need to be managed and ultimately removed.
Editor's thoughts:
* Hanratty says that the role of the regulators must be clear and well supported - as in his words they form the last line of defence for the consumer. This, from the same organization that is appealing decisions from the PFA.