Some people celebrated yesterday that, technically at least, South Africa has emerged from a recession, following the announcement that the third quarter Gross Domestic Product showed a 2.2% increase.
Some important sectors, including manufacturing, finance and retail, were up significantly – but Business Unity South Africa warned South Africans not to get ahead of themselves because “key areas” of the economy are “in distress”.
That’s a timely warning because, at this time of year, many of us go crazy spending money we don’t have buying things we don’t need … all in the name of celebrating the festive season.
Our behaviour during the rest of the year, however, shows that the South African middle class is under huge pressure. Data from First National Bank’s retail analysis reflects about 56% of middle-income earners spend all of their salaries within five days or less of getting their pay cheques.
FNB defines middle-income earners as those being paid between R7 000 and R60 000 a month – a significant chunk of the workforce, not to mention a sizeable number of those contributing to the country through income tax.
FNB says it is not even a case of consumers living from one salary to another – the reality is that many people’s monthly salaries just do not last 30 days.
A good deal of that is due to people not being cautious enough in their spending and falling into a debt trap because of a desire for fancy items. When the debt eventually catches up with them, they have to make sacrifices in important areas, such as having back-up savings for emergencies.
This shows a worrying lack of financial literacy among South Africans, many of whom have not been taught how to manage money.
We suggest that this is made a major priority for government’s future curriculum design.