SA public struggle with finances

Financial issues are a major worry for SA consumers and entrepreneurs in the townships – as UCT students found out when hosting financial literacy workshops around Cape Town.

South African consumers are struggling to manage their budgets and pay their debts. According to one of the country’s leading credit bureaus, Compusan, it is not only the poor who are battling to make ends meet. Its data shows that even consumers with bigger incomes are struggling to make mortgage payments.

The company says that the number of accounts that had adverse enforcements listed on them had increased in June 2016 by 26% from quarter to quarter. How to cope with debt and manage finances better were also issues that came up repeatedly at a series of workshops hosted by students from the African Institute of Financial Markets and Risk Management (AIFMRM) at UCT in Cape Town recently.

“We were surprised at the amount of detail people wanted to know, about paying off their debt, who to talk to regarding managing their debt and how to cope with rising costs,” says Kevin Rodrigues, 23, an MCom student in Risk Management of Financial Markets at the institute.

Rodrigues was the organiser of a series of social outreach events held by the AIFMRM with partners Ndima Yam, Phaphama and the American Corner. There were different kinds of workshops, aimed at general consumers, entrepreneurs and more disadvantaged members of society.

“For me, it was about going out there and making a difference,” said Rodrigues. “Getting a degree is not only about learning content but engaging with community members and the context within which people live in this country.”
He said financial experts often worked with very sophisticated concepts and instruments, a kind of bubble environment where it was easy to miss the impact that financial institutions had on consumers as well as entrepreneurs.

Viwe Sakela, the head of Phaphama, said for young people in townships trying to get a business off the ground in these challenging economic times meant an even bigger need for financial advice. “Many of these entrepreneurs have not gone to university. Their big motivation to start a business is to get a job and make a living.”

This is why students from the AIFMRM chose to work with Phaphama in offering mentoring and financial advice to entrepreneurs – another aspect of the financial outreach programme. “The challenges are basic, but crucial,” says Sakela. “It is about operational issues, like keeping track of the money or the need to keep accounts and proper bookkeeping.”
She added that many township entrepreneurs are unaware of the need for financial statements for their businesses, which are vital if they want to apply for a loan.

Sakela said a little information and financial advice made a huge difference to the lives of these budding entrepreneurs. Rodrigues said for consumers as well, the fundamental know-how of managing budgets and operational costs of households were big worries.

According to Debt Rescue, South Africans consumers owe as much as three quarters of their monthly pay to creditors. About 77% are flat broke at the end of the month with no hope of saving any money and about 60% said they struggle to pay monthly home loans and credit cards. Findings from a 2015 report showed that the average South African had R70 000 in debt.

Rodrigues said their advice on dealing with debt was to be proactive about it, for people to talk to banks or people they owed money to manage their debt. Although many could not afford to pay for debt counsellors, this option was also available, Rodrigues said. He added that many people came after the workshops or during the break times, to enquire about how to get jobs.

The financial literacy workshops were the first of their kind held by AIFMRM and it is envisaged that more will be held in future. “Financial literacy is a key problem for low income households,” commented Dr Co-Pierre Georg, senior lecturer with AIFMRM.

He said, “The goal of our programme is to provide students with a well-balanced and rounded education. Social responsiveness is a key ingredient in our curriculum. What impressed me most, though, was how much passion and energy the students developed as part of the programme.”

He said the institute was grateful to partners Ndima Yam and Phaphama for their help in hosting the workshops, saying the institute was looking forward to continuing the partnership next year.

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