Pretoria - Deputy Finance Minister Nhlanhla Nene says there is a need for financial literacy in the country as our savings performance is disappointing.
Addressing the launch of Savings Month, the deputy minister said due to the economic downturn, there has been considerable belt tightening by both business and consumers.
He said the country's gross savings as a proportion of Gross Domestic Product (GDP) rose to 17.1 percent in the first quarter of this year, up from an average of 15.4 percent last year.
"But even with the recent rise in South Africa's savings rate, our savings performance remains disappointing.
"Our savings rate is low by international standards and compares especially poorly to those developing countries with high rates of economic growth," said Mr Nene, adding that China's gross saving rate was over 40 percent.
The country's aggregate saving has been on a decline, following the drop in both corporate and household savings.
The ratio in net terms for corporate savings, which represents the bulk of total savings, fell from 6.6 percent of GDP in the 1980s, to 5.6 percent in the 1990s and to only 3 percent between 2000 and 2008.
"As a percentage of GDP, household savings has over the last 15-years declined sharply from 3.2 percent during the 1980s to 0.2 percent between 2000 and 2008.
"As a percentage of disposable income, household savings has fallen from around 5.4 percent in the 1980s to 0.28 percent between 2000 and 2008," said the deputy minister.
As a result of this, household debt has risen steadily in recent years, now currently standing at 76.7 percent of disposable income.
He said the low rate of savings was worrying because inadequate savings left households vulnerable to shocks in income and prices.
"This also hampered people's ability to put down deposits for large assets like houses, thereby affecting wealth accumulation.
"Likewise, low levels of individual savings add to the burden on government to provide retirement assistance, increasing the need to raise taxes for this purpose," he said.
