DERRICK MSIBI: This crisis highlights the need to build shock absorbers before the next one hits

In the Business Beyond Covid series, CEOs and other business leaders and experts in their sectors look to the future after Covid-19. What effect has the pandemic and resulting lockdown had on their industries and the SA economy as a whole? Which parts will bounce back first and which will never be the same again? Most importantly, they try to answer the question: where to from here?

In SA, our general lack of “safety nets” and/or “shock absorbers”, at both an individual and national level, has long been an issue. In contrast, individuals did not necessarily reform their behaviour. As much as lenders tightened their lending criteria, individuals’ appetite or need for credit continued unabated. At the same time, the overall level of individual savings in formal structures such as bank deposits, unit trusts and general contribution to long-term savings has been measly.

With our national funding needs increasing, the local pool of savings is insufficient, requiring offshore borrowing in hard currencies. As much as it is useful to have diversified sources of funding, raising hard-currency funding when emerging markets are under pressure due to global uncertainty becomes costly and unsustainable.

At Stanlib we too have a responsibility to improve awareness of the importance of saving and provide advice on how to save. Our chief economist, Kevin Lings, will be issuing a report on the topic, focused on the importance of precautionary savings, the obstacles in growing savings and macro remedies to better equip individuals, businesses and even government to improve their readiness to respond to short-term cash-flow interruptions.

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