In the news today: SA should save more – Gordhan

Dear Pravin, if this is such a grave risk to the economy, why don’t YOU, as the finance minister, collect our tax monies and SAVE IT FOR US?  Instead, YOU are the one forcing US to borrow even more.  The private sector is trying to repay debts in order to rebuild savings, yet YOU, as the head of government finances, are borrowing and spending on our behalf.  You are such a hypocrite.  If you were really concerned about the low level of savings in the economy, you would give us a sound, stable and strong rand that pays higher interest rates, and makes it worth our while to save, and you would preside over a government surplus, not deficit.

SA should save more — Gordhan

Pravin Gordhan says South Africans need to save more money.

FRANZ WILD and NASREEN SERIA

Published: 2011/04/11 07:08:47 AM

SA NEEDS to boost savings to lower its reliance on unstable “hot money” inflows, Finance Minister Pravin Gordhan said on Friday.

“SA ’s savings is at a very low rate, therefore SA is highly dependent on the flows of capital,” he said at a conference held by a state pension fund in Pretoria .

He distinguished between “good flows of capital, which results in long-term investment” and “not-so-good flows of capital, what we call hot money, which is creating huge amounts of instability and volatility”.

The South African economy relies mainly on foreign investment in stocks and bonds to finance its import requirements.

Record inflows into government bonds last year helped push the rand up 11% against the dollar, undermining the recovery in manufacturing, which makes up 15% of the economy.

SA ’s savings rate was 17% of gross domestic product last year, little changed from 16% a decade before, according to data from the central bank.

“It’s crucial that we build our savings base,” Mr Gordhan said.

A surge in foreign portfolio inflows last year prompted countries such as Brazil, China and Turkey to take steps to curb gains in their currencies, including building reserves and imposing taxes on inflows. SA ’s central bank has boosted gross reserves by almost R10bn to R49,3bn since the beginning of last year to help cap the rand’s gains.

Taxes and other control may not suit SA ’s case , partly because the lack of savings “makes us dependent on portfolio flows “, Reserve Bank deputy governor Daniel Mminele said.

Business Day