According to the South African Savings Institute (SASI), South Africa’s (SA) official savings rate at the end of March 2016 was 15%, household savings rate was 1.1 percent and debt as a percentage of disposable income was 76.6 percent. These ratings demonstrate that there is still a huge gap in terms of the SA savings behaviour.
Being savings month, it’s important to reflect on some of these behaviours and concomitantly identify steps that seek to unlearn behaviors that adversely contribute towards financial ill-discipline.
The current savings behaviour reminds me of my childhood days. Being one of 10 children, I was reminded of how my parents went about raising and providing for us with meagre earnings.
With no real education to speak of, my parents were extremely wise and above all, they were good stewards or managers. Then it struck me – they were financially astute. The definition of astute is to have or show an ability to accurately assess situations or people and turn this to an advantage, in their case the family’s advantage.
In the case of the CDC, the organization has since inception, managed to go against the grain of financial expediency stereotypically associated with “state owned entities”. This it has managed on the back drop of tough financial times globally and domestically. The CDC has since its existence steered clear of any adverse findings from the Auditor General on how it administers public funds.
This in part, has been, as a result of proper budgeting; a sound & stable board underpinned by a prudent Audit and Risk Committee driven by astute men and women with extensive experience in the field of finance.
What can we all learn from being financially astute?
I would like to once more, reflect on the story of my parents. Some of the basic things that I recall that stood out for me about how they managed their affairs were:
- They were proactive and accepted responsibility, choosing not to pass the buck or blame others. They knew inherently that their finances were important and they felt a sense of duty to manage it well.
- This sense of responsibility forced them to take action and plan on how they will make ends meet. Whilst their planning was not sophisticated, they simply set aside the time needed to address how the monthly income was going to be spent.
- They knew what was essential to the family for survival and evaluated financial decisions in the light of what was really important. They did not allow themselves to just go with the flow as this could have had detrimental implications to the family.
Whilst they could not aggressively save, there was a keen sense of ensuring that money was put aside for a rainy day.
I clearly remember that my father would save enough and wait until he was able to purchase an item in cash as they did not want to live in debt. He was disciplined to resist the immediate gratification of buying goods on credit and he also ensured that when he bought anything, that it was good quality so that it would last him and the family a very long time.
I must say, all in all they were astute – given they had no financial planners to aid them and limited knowledge about the fancy stuff; they succeeded to care and provide for their family.
Why is it important to be financially astute?
It is essential that people or organisations discover their purpose and as such have a plan on how to fulfill that particular purpose. From a financial perspective it is imperative to prepare a monthly, and if possible a yearly budget for known income and expenses. For most people the income will in all likelihood be the same for one year.
It is needful to manage expenses within the parameters of one’s income. Having prepared a budget, it is vital to be consistently disciplined and stick to the plan or budget; basically it is about controlling expenditures and living within the necessary means.
It is strongly recommended to always commit to a savings plan. South Africans would be amazed if they can consider the effect of compound interest by starting to save and invest from a very early stage.
You would agree that there is wisdom in the counsel of many. This means seeking advice and information from those equipped and knowledgeable about growing and protecting wealth such as assets and investments.
If for example someone owns a property and has a bond over the property, it is important to make every effort to pay off the bond as quickly as possible. The saving on interest is huge and over time a paid up property is a profitable investment.
As part of planning it is wise not to forget to insure a future income. Getting a life insurance and pension arrangements in order is the first start, not just for consumption after retirement but for the entire family protection as well.
It is strongly advisable to increase the ability to earn; this can be achieved through continually improving skills to bolster value in the work, marketplace or diversifying income streams. Alternative revenue streams and savings can be the source of survival even to small and large organisations. Savings and fruitful expenditure are the life blood of any organisation.
A prime example is the CDC, it manages to reach its objectives and tolerate risks through prudent management of funds and savings. As a leading catalyst in driving socio-economic transformation in the Eastern Cape and South Africa at large, CDC’s strategic direction include job creation, training and skills development, investor attraction, revenue generation, and SMME empowerment and development, all which require a financially sound institution.
The organisations sound financial position has enabled it to expand its project portfolio size totalling to over R2.3 billion in the FY 2015/16. It currently holds a geographical footprint of projects across six of the nine provinces of the country. Up to this date, in all the projects managed by the CDC it has delivered high quality work on record time without any findings of wasteful expenditure.
Alan Straton
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