the silver lining for some people during these unprecedented times.
This has been the case in many countries, including South Africa, as more people started to work from home, their social life forced onto the back burner. More importantly, the pandemic emphasised the potential of a sudden loss of income, while many banks across the country rolled out loan-payment breaks to consumers amid the global health crisis. All of this meant that more people chose to set aside a larger portion of their earnings in deposits, while Africa’s most industrialised economy contract the most in nearly three decades.
However, the concern now is that although South Africa is beginning to recover from a harsh COVID outbreak a couple of months ago, people continue to be defensive, holding on to their savings despite a revival in economic activity, and experts warn that this trend could temper the nation’s economic growth prospects. According to data issued by the South African Reserve Bank in its Quarterly Bulletin, in the second quarter of this year, the national savings rate escalated to 18 per cent, from 16.6 in the previous quarter.
“Much of that cash is still on deposit with us and shows you that South Africans have genuinely been quite defensive through this process and maybe some are still too defensive,” Absa Group’s acting Chief Executive Jason Quinn noted. “How do we get growth when people are still cautious and defensive?”
Central bank data shows that South Africa’s economy is projected to grow by 5.3 per cent this year, by 1.7 per cent in 2022 and 1.8 per cent the following year.
