National savings culture can be a boon for the economy

By The Standard and Newsday | Jul. 23, 2014

TWO weeks ago, we got final confirmation that the Zimbabwe national debt, was some $9,9 billion dollars, verified and dusted.

We also got wind of the fact that imports have finally slowed down and balance of trade has narrowed somewhat in recent months.

We are bombarded daily by unending business news stories bemoaning the lack of liquidity on the local market and how the country needs external support from all fronts in order to get out of its myriad economic problems. All these facts and signals are useful in debating the options available to Zimbabweans on a sustainable long-term basis.

In South Africa as I write this piece, July is national savings month and our friends down south are taking the issues of a national savings culture very seriously. Perhaps we should take a leaf out of their book and learn one or two things from their effort, but the general and sad truth is that the savings and thrift environment in Zimbabwe and most parts of Africa is very poor, even when compared to other emerging economies.

Creating a savings culture therefore becomes a fundamental economic and social objective, especially for our young people who are the future leaders.

Just to put issues into perspective a little, Zimbabwe’s savings rate as a percentage of gross domestic product is currently estimated at less than 10%.

Of the $3,8 billion in deposits in the banking sector, demand deposits constitute the lion’s share, 52% of total deposits.

Only 17% are long-term deposits placed for more than one year, whilst another 13% represent savings accounts and 20% are short-term deposits placed for less than one month.

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If one considers the fact that the majority of our savings accounts in the banks are mainly for receiving monthly salaries, the level of real savings is even lower than these figures show. Nearer home, according to the South Africa Reserve Bank, South Africa’s gross savings at the moment represent between 15% and 17% of GDP. While significantly better that our statistics, these figures are relatively still low when one considers that economies such as China and India were at 52,3% and 31,6% respectively far back in 2010. How can we begin to improve the country’s gross savings rate? We would posit that it begins with the individual saver, at household level, cascading up to the community, or business level, ultimately becoming a collective national responsibility at the aggregated level. Household debt seems to be on the rise in Zimbabwe, although we still need a proper study to establish the extent, it seems though that is its an intuitive fact since the advent of the multicurrency system, many consumers have been able to access credit from clothing and furniture shops, banks, micro lenders and so many other formal and informal sources. The rise of debt, if not counter balanced by an adequate level of savings can become a dangerous and unhealthy thing in the economy. So how can we begin? To save Zimbabwe — to grow the economy and to develop the means to deal with the problems like poverty — we must undertake a drive to save and build our national savings. If more citizens opt to save through mechanisms such as savings accounts with the banks, endowments and retirement schemes with insurance entitities, more capital will be made available to increase the productive capacity of the economy. This is will be achieved through the underlying investments in the private sector (through loans to companies and investments in shares in companies for example). National savings can also be channeled to infrastructure investments and through government schemes (such as government bonds and treasury bills). At present, Zimbabwe’s economic future development is heavily dependent on fickle and very timid foreign capital. Massive amounts of foreign direct investments are required but these will not come if our own capacity to accumulate resources is not tested. At the micro level, improved household savings will benefit individuals and ease the stressful levels of personal debt among consumers. But how can we as a nation, develop a savings culture — how can the country be groomed to become more provident in matters financial? We need holistic, innovative plans to foster a greater sense of awareness among Zimbabweans of the need to save and to make savings and investment simpler and more attractive. Perhaps we also need our own version of a national savings month in Zimbabwe, a period to concientise each other and encourage each other to save. The government will thus need to support innovative institutions such as banks who create products that would offer tax-free returns in various instances, for example, interest-bearing accounts in bank deposits, retail savings bonds or interest-bearing unit trusts such as money-market funds; or equity accounts, which invest in shares or property unit trusts. What are the banks doing? Several banks in Zimbabwe are actively promoting savings. Despite a significant hue and cry about high bank charges and high costs of banking, commercial banks have responded to public submissions and have developed more cost effective and attractive products to encourage savings. While we cannot mention banks by name here, some have come up with attractive savings schemes for women’s groups, youths and children. Banks are in fact calling for the support and response of the public and all stakeholders, on the need for a concerted national savings effort. l Clive Mphambela is a banker. He writes in his capacity as advocacy officer for the Bankers’ Association of Zimbabwe (BAZ). BAZ expressly invites other stakeholders to give their valuable comments and feedback related to this article to him on [email protected] or on numbers 04-744686, 0772 206 913