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Although South Africa’s Constitution gets high marks when it comes to demanding gender equality and women’s rights, the daily lived reality of most women in this country is far removed from these ideals.
With black African women representing more than half of the emerging mass market, the financial services industry may well have underestimated their economic importance for SA’s future.
The harsh reality is that the current First World model of financial planning does little to address the type of financial needs that is particular to this part of the population.
This is desperately needed if we are going to ensure that there is some level of social and financial mobility and stability.
Consider the challenges they face. This group bears the brunt of rising “single parenting” – irrespective of marital status (even when married, they are likely to live apart from their partner, exacerbated by the migrant labour system).
This is the locus for long-term care-giving of extended families (colloquially known as “black tax”) and looking after old parents who often move in as old-age homes are yet to gain cultural acceptance (the “sandwich generation”).
These women may not meet the means test for child support grants and their finances are often stretched to cover childcare costs and to be able to work, especially in urban areas.
Yet, self is often considered last by this group, with their insurance/investing needs narrowly constrained to stokvels and burial societies. This can and should be scaled up.
Clearly the one-size-fits-all approach of a First World financial planning model will not work for these women – nor will it grow the industry as a whole.
Such models, which assume nuclear family structures and life cycle of events, fall far short in terms of providing flexibility to suit an “on-again/off-again” work trajectory.
Similarly, they often fail to address what is valued most by this population.
There is little merit in simply criticising “black tax”, overindebtedness, or the excessive purchase of funeral policies, when the industry does little to understand the role these constructs play in an economy where the majority of the population have been unable to accumulate assets for multiple generations.
Likewise, a singular focus on long-term savings for retirement does little if it’s not paired with short-term flexible solutions that allow families to address financial emergencies or work interruptions.
But the industry also falls short in terms of recognising what astute savers these women can actually be.
What they may lack in terms of financial know-how, these women often make up for with a commitment to providing for a prosperous future for their children as evidenced by anecdotes of domestic workers or street vendors whose children are the first in their families to graduate from tertiary institutions.
We need more solutions to help them achieve those goals.
What could a better solution potentially look like?
The key is having a financial plan that better addresses appropriate core (have-to-have) insurance/investing needs and ancillary (nice-to-have) ones: in other words, bucket expected future liabilities and set up insurance and investments over a lifetime given the limited wealth in SA.
At the core would be basic medical aid for all required dependents. This would cover hospital plans, but allow for more comprehensive options as circumstances change.
Next, funeral expenses should be covered through family burial societies (pooled savings for funerals), which foster social cohesion and may be augmented by other funeral plans, underwritten as part of life cover where possible.
And finally, there should also be an effective savings vehicle. Stokvels currently fill this space admirably.
In spite of being classified as “informal” savings, stokvel savings have legitimacy in that they are cost-effective, trusted, and foster an effective model of appropriate fiscal responsibility through peer pressure.
While stokvels are not without risks, perhaps it’s time that the South African financial services industry recognise that the stokvel model fills a critical gap from a servicing perspective.
With “disruption” the prevailing buzzword, perhaps it’s time we consider innovative ways of offering value-added services such as financial education, regular investment updates or developing peer-to-peer (P2P) insurance through the stokvel model.
P2P insurance, also known as “friendsurance”, is simply the age-old mutual society, but is seen globally as a disrupter of traditional insurance.
Similarly, for burial societies, the insurance sector can operate alongside these groups as a reinsurer to smooth out the volatile claims experience.
This represents a win-win for all players and creates a bridge between the “formal” and “informal” financial systems.
The next level in financial planning should be life cover for the woman herself as a means of passing on wealth to the next generation.
This should be kept separate from the group life cover given the fluid employment situation of black African women.
Any reasonable amount should help the next generation to “class-creep” and hopefully escape the poverty quagmire of their parents.
Pressuring women into taking up more insurance (unless there is car and home ownership) should be avoided. This additional cover can be expensive, require advice and can be difficult to access at claim stage leading to a trust deficit with the industry.
Beyond this, our model could address investments for asset creation with any commensurate protection of these assets.
Here the objective would be to consider a goals-based framework that could be appropriately adjusted for the time-frame required to fund family members’ educational requirements, the deposit for a car or home, or additional funding to meet long-term healthcare needs.
It’s time we move to financial planning models that address South African problems. A pragmatic approach that moves humanity forward in this southernmost tip of Africa would probably find universal appeal and be implemented.
Otherwise the financial services industry short-changes both itself and its clients.
Ndivhuho Makhuvha is a financial risk manager at Hollard Insurance.
This article originally appeared in the October 2017 edition of Collective Insight, which appears in the 19 October edition of finweek. Buy and download the magazine here.
