The International Monetary Fund (IMF) and the World Bank report that global debt has trended upwards since the 1970s, with the global average debt-to-GDP ratio having surpassed 225% in 2018.
In emerging markets like South Africa, the rise has been particularly steep. According to the South African Reserve Bank, South Africans are now spending over 75% of their take-home pay on debt. Research shows that around 84% of South Africans are not able to make ends meet month-to-month and 80% resort to expensive unsecured loans such as those offered by illicit mashonisas. Furthermore, only 6% of retirees are managing to retire comfortably on their life savings.
A study by business analytics firm, Kantar, revealed that many South Africans want to save, but lack the financial understanding to navigate and select between the various options available, from traditional bank savings accounts to more exotic investment platforms like cryptocurrency.
Financial literacy product aims to address complex financial issues
Leana de Beer, CEO of WaFunda, a social impact enterprise, notes that the financial environment of today is becoming increasingly complex. WaFunda recently launched Blackbullion South Africa, a financial literacy product which aims to address complex financial issues typically faced by South African youth.
“In South Africa, for example, we’ve seen the rise of new borrowing options, as well as widespread, easily available forms of credit and micro-financing. With new fintechs driving rapid innovation, the advent of cryptocurrencies, and new investment options emerging every year, the financial world becomes more and more difficult to navigate, and the need for financial literacy grows ever more crucial,” says de Beer.
“Many of us are understandably intimidated by talk of ‘asset classes’ and ‘investment vehicles,’ but when we empower people with knowledge about how the money world works, we give them the confidence to make good financial choices; a confidence that comes with a solid understanding of the principals involved.”
Financial knowledge is key
De Beer believes that financial knowledge is the key to building financial empowerment, especially for South Africa’s youth.
“Financial literacy should be a cornerstone of the education system at all three levels – primary, secondary, and tertiary,” she says. “By weaving financial education into the schooling and training spheres and embedding the concepts of financial literacy into the syllabus, we can target the young people who will be the leaders of tomorrow, equipping them with the tools to cultivate financial success and drive South Africa’s economy forward.”
She envisions a model in which the tertiary education and private sectors collaborate to fully embed financial literacy into the student funding environment, ensuring that prospective students can manage their funding confidently, and leverage their earning potential for better financial outcomes.
“The student financing landscape is ripe for high-impact financial education initiatives,” she says.
De Beer believes that instilling a culture of financial literacy in South Africa will result in knock-on benefits at the macroeconomic level.
“Financially wise citizens are discerning consumers, and can manage finances, avoid bad debt, and plan for the future. This in turn eases government’s task of crafting fiscal policy that works for the people,” adds de Beer.
Social benefits of better financial education
The social benefits of better financial education include more people being able to afford education, property and accommodation, and medical care. De Beer adds that financial knowledge prefigures many key outcomes throughout our lives, including borrowing, saving, and investing decisions, not only during our working careers, but afterwards into retirement too.
“Financial literacy is a potent form of investment into South Africa’s human capital,” de Beer says. “Less debt means less stress and better health. At a holistic level, good financial literacy leads to better life outcomes, enhanced personal prospects, a thriving landscape of entrepreneurship, and more opportunities for everyone.”
Blackbullion South Africa delivers engaging and relevant content to help young South Africans make better financial decisions before, during and after University. For more information on Blackbullion South Africa, visit www.wafunda.com/products/blackbullion or send an email to firstname.lastname@example.org to book a demonstration of the platform.