A recent Wonga survey has revealed that financial literacy in South Africa is worryingly low amongst the general population. Meanwhile, Scandivavians are the most financially savvy pupils in the world. In this article we’ll be taking a closer look at the facts and statistics – and crunching some numbers – to discover what it would take to get South African financial education up to speed to benefit consumers, equality and the economy.
77% of polled South Africans do not check interest rates on credit applications
This is just one of the worrisome facts highlighted by Wonga’s survey of over 18,000 South Africans. This survey uncovered a significant lack of financial awareness amongst respondents. While 77% don’t check fees or interest rates on credit applications – instead borrowing blindly – a substantial 32% claim that they do not save any money on a monthly basis.
One caveat we should mention here of course would be the sample pool of South African survey respondents. With the vast majority of those answering the survey being a current, or previous Wonga customer (i.e. they’ve had to access Wonga’s short term credit) it’s reasonable to presume that these 18,000 respondents are a cross section of the most vulnerable demographic of South African society. This means the national average is likely healthier than what Wonga reports but this 77% is where the most attention and support should be directed..
A general lack of knowledge about credit and borrowing emerged from Wonga’s research. While saving and savvy borrowing were uncommon, a wider lack of knowledge was also demonstrated by the 67% who did not know what a credit check was.
South Africans – some of the world’s biggest borrowers.
These recent statistics are reflected by news that South Africans are amongst the world’s biggest borrowers. In fact South Africa had total debt totalling more than 70% of their gross domestic product as of the end of 2021.
An average for the last decade revealed that around 86% of South Africans borrowed money in some form – and 11 million individuals were considered to be “over indebted”.
A lack of financial education is widely considered to be a significant factor behind these figures, with the Treasury launching numerous initiatives designed to tackle the gap in knowledge and to help prevent more individuals falling into debt spirals as a result of ill-advised borrowing and poor saving habits and financial decisions.
While the Treasury has forced financial service providers – including major banks and other lenders – to contribute 0.4% of their profits after tax to financial education and launched a national consumer financial education strategy designed to target black Africans between 16-29, their current activities appear to be a drop in the water compared to Wonga’s findings. So where should we be looking to inspire a financial education revolution?
Scandinavian students are the most financially savvy.
Data from the Global Financial Literacy Excellence Center (GFLEC) reveals that Norwegian, Danish, and Dutch students top the list of the most literate across the globe. Their secret to success is a comprehensive programme of financial education which includes everything from Money Wisdom Month where bank employees visit schools, to extensive educational materials created by the Banking Association specifically for use in the classroom.
While there’s no immediate way to realistically compete with Scandinavia’s rigorous education system infrastructure, we can still look to adopt lessons and strategies those with the very best financial literacy skills and develop a clearer roadmap for our own students.
Image source: GFLEC
Does the Treasury need to take a leaf out of the Norwegian government’s book? What steps do you think would help create a real rise in the level of financial education in the country?