Trevor Manuel should have done more in the Budget to encourage people to save regularly and invest in their own financial future, helping to break the dangerous cycle of over-spending and over-indebtedness, says www.justmoney.co.za, South Africa's online guide to money.
Although Mr Manuel eased the tax burden on individuals, he did little to persuade people to save the extra money he put in their pockets. www.Justmoney.co.za has revealed some of the initiatives it would have liked the Finance Minister to have announced in the Budget to help South Africans AND boost the country's economy.
Paul Beadle, General Manager of www.Justmoney.co.za, explains: "Trevor has successfully steered South Africa through an economic boom - however that growth was also stoked by excessive spending driven by easy access to credit. Now people are struggling to repay those debts and Mr Manuel needs to help foster a culture of financial responsibility."
The www.justmoney.co.za Budget wish list includes:
• Dedicated Tax Free Savings Accounts - Although Mr Manuel upped the tax-free savings threshold to R19,000 per year for taxpayers under 65, he also expressed concern over the lack of savings in South Africa. The introduction of dedicated tax free accounts would encourage more people to save regularly by giving them the opportunity to earn even more money. It would also trigger competition amongst banks to offer the best rates and win customers. The tax-free ISA (Individual Savings Account) has proven very popular in the UK
• Tax Relief for First-Time Home Buyers - Affordability is a big problem for home buyers currently faced with high interest rates and steep property prices. By giving first time buyers tax-relief on a portion of their mortgage for the first one or two years, Mr Manuel would be helping more people on to the property ladder, enabling them to invest in their financial future
• Children's Savings Accounts - Mr Manuel should start good financial management at an early age by introducing a standardised account for children - similar to the Mzanzi account - offering a guaranteed interest rate for under-16s. Currently some banks pay much less interest on children's accounts than they do on ordinary savings products. To give the scheme a boost, Government could match opening deposits by up to R50 per child
• Financial Education Programme - To counter the lack of financial understanding in South Africa, Mr Manuel should introduce an education programme, for both adults and children, covering basics such as opening a bank account, managing your money and knowing your rights. Support by the banks would give the programme a flying start and create a new generation of responsible customers
Beadle continues: "Mr Manuel's previous Budgets have helped strengthen the country's economic framework and address service needs. But a growing problem facing South Africa is the number of over-indebted people, which needs to be tackled immediately.
"The National Credit Act has done much to protect consumers from reckless lending, but it doesn't encourage them to be more responsible with their money. Steps such as those outlined by www.justmoney.co.za would help boost the individual prosperity of South Africans alongside the economic success of the country."