Most black South Africans don’t save for retirement. How to change this

Saving for retirement simply isn’t seen as a priority by many South Africans. This is borne out by data in the Old Mutual Savings and Investment Monitor 2016 which reported that those who do save consider putting money aside for funerals to be more important than saving for retirement.

The reason for this is probably that funerals often constitute a financial emergency in South Africa: they can cost up to seven times an individual’s monthly income. This phenomenon is particularly common among black South Africans; culturally, the more prominent the deceased was in society, the larger the funeral will be. This makes funerals an emotionally and financially stressful time.

But there is plenty of evidence to suggest that black South Africans can and do save money – just not for retirement. Research has found that 88% of “informal savers” (those who do not necessarily make use of savings accounts or share portfolios) belong to grocery schemes, burial societies, and savings clubs colloquially known as “stokvels” or “umgalelo”. The estimated value of savings in stokvels in 2018 was R44 billion, with approximately 11 million members.

So what’s stopping black South Africans, who make up 80.9% of the country’s population, from planning for retirement?