Gordhan: Financial literacy important

Gordhan: Financial literacy important

2012-07-04 17:45

Johannesburg - Becoming financially literate is important in today's world where financial institutions have turned into greedy monsters chasing profits, Finance Minister Pravin Gordhan said.

He said recent events involving Barclays Bank in the UK highlighted the importance of being financially literate and showed the profiteering in financial institutions.

Gordhan was speaking at a conference on financial literacy in Pietermaritzburg on Tuesday,

"What it shows us, ladies and gentleman, is when we talk about financial literacy in terms of what ordinary people and members of our community need to be aware of and the skills they need to learn... they need to be aware of the kind of world we are living in," Gordhan said.

"...financial institutions at the moment have turned into really greedy monsters who want to chase profit at any cost. And who don't want to get the right balance between earning profits and making sure that they do it with the right set of ethics and morality, and the right principles."

The conference was held by the KwaZulu-Natal Financial Literacy Association in Pietermaritzburg.

Part of the problem was the complexity of financial products, Gordhan said. He questioned whether people selling the products were explaining them properly.

South African consumers were vulnerable to unsuitable offers in terms of buying inappropriate products, and being victims of fraud and abuse.

"In today's world, which is not that simple, it's very important that we teach ourselves these skills," he said.

Financial literacy was not just about how household and business finances were managed. It was about empowering families to demand truth, and to have transparency on fees and costs.

The conference took place at a time when the financial sector generally, and banks in particular, "are in utter crisis, morally and ethically, and with a bankruptcy of leadership", Gordhan said.

"For the Barclays saga of the past few days illustrates brilliantly the fault lines in the banking sector. It illustrates dishonesty, manipulation of prices and information, profiteering at any cost, little regard for ordinary people and the cost to them of all of these shenanigans, and the shameless disregard for the economic damage that is done."

The Treasury is in the process of producing a policy document that would contribute to a "safer financial sector", he said.

Through this, the SA Reserve Bank would be responsible for financial stability and prudential regulation, and the Financial Services Board and the National Credit Regulator would take greater responsibility for consumer protection and consumer regulation.

According to a Financial Services Board study conducted in the second half of 2011, Gordhan said 24% of those surveyed had personally experienced income shortfall.

To cope, 57% borrowed from family and friends, and 36% cut back or did without.

Forty-eight percent found it difficult to cover bills or expenses in a typical month, 36% experienced lack of food , 39% went without necessary medication or treatments and 38% had no energy source to cook their food.

Barclays chief executive Bob Diamond and Barclays chief operating officer Jerry del Missier resigned over alleged fixing of the London Interbank Offered Rate and the Eurozone equivalent, the Euribor, the rate at which banks lend each other money.

The bank's chairman Marcus Agius resigned on Monday.

Absa is a subsidiary of Barclays.

  • chadjason.wilson - 2012-07-04 18:13

    Gordhan please utilize your integral knowledge in Financial literacy importance and apply for a job internationally. I am sure the bank of Uganda requires your skills. Failing which your appitude in fisical skills could be utilized in India, where surley the partizan ANC/ COSATU leders.... (I mean followers) would prefer you to apply your trade.... or are indians more african than whites?

      buzzardfrey - 2012-07-09 20:13

      Small talk!

  • wmutahi - 2012-07-04 18:14

    You got it Gordhan. People should also be educated on what to expect of governments and why we pay taxes.

  • bill.andre.904 - 2012-07-04 18:20

    Until the Honorable Minister can stop the misappropriation of some R20bn a year from government coffers, he has no right to make any comment. Actions speak louder than words.

  • Thato Okonkwo Fakudze - 2012-07-04 18:34

    Look whose talking and tell me why...

  • afrikeni - 2012-07-04 18:52

    Not only banks, HOW about thieving GOVERNMENT in terms of taxation. Indirect tax e.g VAT, fuel levies, tolls etc on top of direct tax now amounts to a person left with less than 20% as disposable income. And then tell us to save so that you tax the interest. Ya right!

  • stirer.kathray - 2012-07-04 19:02

    Agree Mr Gordhan. You should start at the top, and address the Provincial MEC's and their cohorts, and drill down to Municipal management. It will be difficult, but they will have to learn that the money under their control is not their personal fiefdom.

  • freddy.vanwijk - 2012-07-05 04:30

    Pravin Gordhan I fully agree with you and this literacy should be taught in schools as well as between parents and children so that there is a good understanding. However untill misappropriation of funds is stopped COMPLETELY,I would not make any comment if I were to "fill your shoes" right now. Saving cannot take place properly because taxes discourages the will to save.

      jason.marriott.75 - 2012-07-05 08:43

      Maybe getting kids text books on time would help with that!

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