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Johannesburg - South Africa is looking to strengthen its social security system by encouraging a higher savings rate among its highly indebted households, which should help economic growth and reduce the burden on state finances, the Treasury said on Monday.
South Africa's gross national saving rate, at 16%, is less than half of its emerging market counterparts such as India. Local households have since 2005 had a negative net savings rate, the Treasury said.
Household debt remains at near record highs and increased access to credit has partly contributed to the poor saving culture that has emerged over the past seven years. About 60% of households' savings is for retirement but the country still has one of world's lowest household savings rates.
Consumer spending has previously driven economic growth in South Africa and high levels of joblessness make it difficult for households to save. Only about 10% of the population is able to maintain pre-retirement consumption levels.
The Treasury also said low income households that save through the formal sectors tend to put money in products that provide easy liquidity.
The Treasury is also looking at ways to discourage people from cashing in early on their pension funds and reduce the costs of the funds.
