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Financial pressures hurt SA's household savings

Dec 11 2016 14:01
Lameez Omarjee

Johannesburg – Low saving by government and households contributed to the overall decline in the national gross savings level for the third quarter.

This is according to the South African Reserve Bank (Sarb) quarterly bulletin, released on Friday. Gross national savings as a percentage of GDP declined from 16.7% in the second quarter to 16.4%.

Although savings by government and consumers declined, saving by corporates picked up. Gross saving by the corporate sector increased from 13.6% in the second quarter to 14.6% in the third quarter. This was brought about by lower dividend and tax payments over the period, stated the report.

Savings by government declined from 1.9% in the second quarter to 0.8% in the third quarter, as government consumption and expenditure increased.

Increased government spend was attributed to wages for temporary staff appointments for those working for the Independent Electoral Commission (IEC) during the municipal elections, the report stated. Overall, government consumption increased from 1.4% in the second quarter to 2.1%.

Although household disposable income increased from 1.7% to 2% in the third quarter, households still felt financial pressure given the greater economic environment.

READ: SA consumers 'holding back' on big purchases

Household savings fell from 1.2% in the second quarter to 1.1%, while household consumption expenditure grew at 0.9% on average, year-on-year (yoy).

According to data from Statistics South Africa (StatsSA) this is up from 0.7% in the first quarter to 1.1%. Household spend in the third quarter was mainly directed towards health-related costs and tourism-related goods by residents travelling abroad.  

However, households were reluctant to take on more debt. Growth in household debt declined significantly from 75.1% to 64%. Furthermore, spend on durable goods declined by 3.8% compared to the previous year. 

Higher-income earners, which should normally have a savings buffer, are facing a lower growth rate in wealth, explained Sanisha Packirisamy, economist at Momentum Investments.

“The prospect of higher taxes in the February 2017 national budget point to further headwinds,” she stated.

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