Discover the multifaceted challenges and opportunities that lie ahead for individuals and families in 2024 and beyond. File photo.
Topics that dominate personal finance discussions in 2024 and 2025, reflect the dynamic interplay between economic conditions, technological advancements, societal values, and political developments. We cover some of these topics briefly.
1. High Unemployment rate.
In the last few days, we witnessed the improved matric results and the first day of school for grade 1 learners. All very encouraging, however, the statistics of the position of youth employment is a major problem in our country. The youth (15 to 34 years) remain vulnerable in the labour market. The third quarter of 2024 results show that the total number of unemployed youths decreased by 171 000 to 4,8 million, while employed youth recorded an increase of 66 000 to 5,8 million. As a result, youth unemployment rate decreased from 46,6% in the second quarter of 2024 to 45,5% in the third quarter of 2024.”
The Expanded Definition of Unemployment (including discouraged job seekers): 43.2% (Q2 2024), this situation is not sustainable, and it needs to be resolved immediately or the cost will be calculated not only in monetary terms, but human lives will be lost.
The very same department providing us with statistics on the high unemployment rate in our country publishes the following in their own annual report. “STATISTICS SOUTH AFRICA Annual Report: 2023/24”
The following statistic (from the Department of Statistics regarding their own salaries) is mind-blowing.
Senior and top management (levels 13–16) (permanent staff) receive a salary of R1,302,000 on average! This is a staggering 2,455% more than the minimum wage. This is whilst they have 629 vacant positions, a vacancy rate of 19%.
The South African government has allowed salary expenses to run away at unsustainable levels. Under instructions from the National Treasury, the brakes have now been applied. The total budget for salaries cannot be increased. Management has chosen to rather keep on paying existing personnel more instead of spreading the love amongst all workers.
2. Inflation and Economic Concerns: Inflation remained a major concern, influencing consumer behaviour and voter decisions. The Reserve Bank takes a very cautious stance and remains reluctant to lower interest rates unless they are convinced the inflationary pressure is a thing of the past. Currentl,y the Rand has once again weakened against the Dollar, and we can expect a substantial increase in fuel prices.
Another disturbing fact is that South Africa is importing maize for the first time in seven. “Relief may start in the second quarter of the year. Wandile Sihlobo, Agbiz's chief economist On January 9, South Africa's white maize spot price traded around R6,724 per tonne, up 55% from the previous year.
Sustainable and Ethical Investing: There was a marked shift towards aligning investments with personal values, favouring companies that prioritise environmental, social, and governance (ESG) criteria. This trend was reflected in the growing number of ESG-focused funds and increased investor interest.
The Johannesburg Stock Exchange (JSE) state the following on its web page. “FTSE/JSE Responsible Investment Index. This index is a broad market benchmark that considers only companies meeting a minimum ESG rating hurdle of 2.5. This index can be used as a benchmark for portfolios that have an ESG-based mandate, and it can also be used for research and analysis.
The eligible universe for this index comprises constituents of the FTSE/JSE Shareholder Weighted All Share Index, which are also companies that have securities included in the FTSE All World Index.
3. In South Africa, where approximately 50% of households receive government-sponsored grants, several personal finance challenges are prevalent:
3.1 Dependency on Social Grants: A significant portion of the population relies on social grants as their primary income source. While these grants provide essential support, they may inadvertently discourage active participation in the labour market, potentially perpetuating cycles of poverty and limiting economic mobility.
3.2 Financial Inclusion Barriers: Despite efforts to enhance financial inclusion, many South Africans perceive banking services as costly, leading to limited usage. This perception hinders access to financial products that could facilitate savings, investments, and economic empowerment.
3.4 Economic Inequality: South Africa grapples with high levels of economic inequality. Social grants aim to mitigate this issue; however, disparities persist, affecting access to quality education, healthcare, and employment opportunities, which are crucial for financial stability.
Sustainability of Social Grant Funding: The extensive social welfare system requires substantial government expenditure. Ensuring the sustainability of these programs without compromising other essential services poses a significant fiscal challenge, especially in a constrained economic environment. We already see that the Western Cape will start 2025 with as many as 2,500 fewer teachers.
3.6 Fraud and Mismanagement: Instances of fraud and administrative inefficiencies within the social grant system undermine its effectiveness. Such challenges can delay disbursements and erode public trust in social support mechanisms.
3.7 Technological Advancements in Finance: The mainstream adoption of fintech solutions transformed personal finance management. AI-driven insights and robot-advisors became commonplace, assisting users in budgeting, investing, and understanding spending patterns. Chatbots are implemented on many web pages to help customers.
3.8 Financial Wellness and Literacy: Financial wellness took centre stage as individuals sought comprehensive approaches to monetary health, encompassing savings, investments, and stress reduction. Employers increasingly offered financial wellness programs, and there was a heightened focus on financial literacy, aided by AI tools.
3.9 Digital-Only Banking and Payment Methods: The rise of digital-only banks and the evolution of digital currencies and payment methods changed how people manage and access their finances, offering greater convenience and accessibility.
3.11 Early Retirement and Financial Independence: The Financial Independence, Retire Early (FIRE) movement gained further traction, with more individuals aiming to achieve financial freedom and retire early by adopting disciplined saving and investing strategies.
3.12 Impact of Political Changes on Personal Finance: The Government of National Unity is thankfully still functioning. This year we will see many challenges from the EFF and the MK party and internal battles in all the parties including the ANC. We do not have a stable political environment, but all is well provided we work together to make life better for all our citizens, especially those without an income. It is horrifying to see the condition of emancipated miners at Stilfontein, foreigners or not.
4. A multifaceted approach. Addressing these issues requires a multifaceted approach, including promoting financial literacy, enhancing access to affordable banking services, creating employment opportunities, and ensuring the efficient administration of social programs to support sustainable personal finance management among South African households.
Poverty and inequality remain pervasive across Africa, undermining progress toward development goals, with almost 440 million people still living below the international extreme poverty line of US$2.15 per person per day. Access to essential services such as education, healthcare, and infrastructure is uneven, particularly in rural and marginalised communities. These disparities exacerbate social tensions and limit opportunities for millions, perpetuating cycles of deprivation and exclusion.
Africa’s population is projected to increase by almost 60% by 2050, creating immense pressure on infrastructure, education, and the job markets. The continent’s youth, the largest portion of Africa’s population, face high unemployment and underemployment rates. Their response is increasingly violent. Economic systems have not adapted to absorb this growing labour force, perpetuating cycles of poverty and disenfranchisement, with youth unemployment rates exceeding 30% in several regions. Migration, both within and beyond Africa, has become a desperate response for many.
South African citizens have an exciting yet challenging year ahead of them. But as our sport men and women and class of 2024 has proven we can overcome and attain excellence. Drastic action is required to alleviate the unemployment problem. This is not just the job of politicians, but all our entrepreneurs must contribute. Over the longer term, we will all succeed, or no one will.
* Kruger is an independent analyst.
** The views expressed herein are not necessarily those of Personal Finance or Independent Newspapers.
PERSONAL FINANCE