Cash-strapped South Africans are unlikely to save, even when the incentive to do so improves with higher interest rates, the South African Savings Institute (SASI) has said.
Higher rates will only persuade those who have already developed a savings habit to save a little more.
Old Mutual’s latest savings and investment monitor reveals that just one in four people have a retirement annuity, while one-third of South Africans have no form of retirement savings.
The monitor, which is compiled from a survey of 1000 households, found that savings for education has declined, especially in lower income groups.
Interest rates have increased by a cumulative 75 basis points this year.
This would normally encourage people to save given that they would get more returns on their investments.
But consumers are overindebted and have to grapple with high inflation and rising costs of administered prices like electricity. SASI chairperson Prem Govender said interest rate hikes were good for long-term savers who were now able to live off fixed-interest income. But they were not beneficial to everyone.
Lower-income consumers now have less disposable income, making it even harder to save, Ms Govender said.
But most analysts believe consumers can cope with a 75 basis point rate hike. FNB Home Loans household and property sector strategist John Loos said the "big question" was how far the rate hiking cycle would go from here.
The Reserve Bank’s monetary policy committee left interest rates unchanged last week.
Research by FNB Home Loans shows that a person with a 20-year home loan of R600 000 would be expected to pay R5495 per month - R288 more than before the 75 basis points hike.
Mr Loos said it had not caused serious concern because it was not high enough to spark a major increase in non-performing loans. "We are confident that the overwhelming majority can absorb such a small increase," he said.
Ms Govender said household savings were negative.
This means that people were living off credit, and possibly eating into their savings.
Informal forms of saving, especially stokvels, were thriving.
The Old Mutual monitor showed that a black middle-income household contributed an average of R685 to stokvels each month.
Government hopes to incentivise savings by offering tax incentives.