According to Oxfam, 30.4 million South African’s live in poverty. Although the Rainbow Nation has long fought to achieve equality, the country still faces a great wealth divide. Black African women are particularly affected by this wealth gap, with 49.2% reported to be living below the poverty line in 2015.
South Africa’s unemployment rate is another factor affecting personal finance in the country. Currently standing at 26.7% of working adults, unemployment is a particular issue for South African youth, 55.2% of whom are not currently in work.
Amidst these – and many other hot button issues – a fight for financial inclusion is taking place. Supporting citizens to become informed about finance and access financial services is now the goal of many charitable organisations, government schemes and corporate outreach initiatives. Although increasing financial inclusion does not directly alleviate the problem of poverty, or increase job opportunities, this approach may empower consumers to make more informed decisions regarding their personal finances.
This empowerment may have many benefits. Consumers with enhanced financial literacy are less likely to fall prey to scams, or choose inappropriate financial products. By ensuring all South Africans have the tools they need to access and accurately evaluate financial services, the country may help individuals escape potential poverty traps.
Access to finance products
Financial education and access to financial services are the two cornerstones of financial inclusion. Across the 1.2 million km squared nation, many of the most financially vulnerable live in areas where services are less accessible. From basic current accounts, to access to regulated loan products, 11 million South Africans are currently unbanked or underbanked.
Technology is rapidly transforming this picture. 4G is now available across the majority of the country, and 80% of the population are believed to have access to smartphones. These figures will continue to rise, gradually reaching the poorest and most isolated communities, where access to digital financial services could at last provide people with convenient access to banking products.
Although South Africa’s “Big Five” traditional banks currently dominate financial services, a raft of new digital services are now entering the market, including short-term loan providers ‘Wonga’ and new digital bank ‘Bank Zero’, supporting remote access to financial products.
Boosting financial education
As financial products become more accessible, formerly financially naive consumers require financial education to ensure responsible use of such services. With 0.4% of all financial service companies’ after tax net profits going towards consumer financial education (in line with the Financial Sector Code), increasing funding is available to support South Africans in becoming informed consumers. In 2018, spending on financial education for consumers totalled an impressive R153 million.
But is increasing access and education paying off? The coming years will be critical in assessing the effects of burgeoning financial inclusion upon the South African population. If positive results are to ensue, education and access must come hand in hand, to ensure new communities have the appropriate skills to benefit from fresh access to services.