Margarita M. Phillips 
The National Treasury has created a new bond savings product to encourage young South Africans to save.
The RSA Retail Savings Top-Up Bond product is believed to be due to strong public demand for a more affordable RSA Retail Savings Bonds product.
“The product is aimed at younger investors who are less likely to invest large sums of money,” the National Treasury said in a statement.
The RSA Retail Savings Top-Up Bond allows young South Africans to start saving with as little as R500, with the option to top up with a minimum of R100 at any time during the life of the investment.
Informal groups, such as social clubs and stokvels, which operate on pooled monthly savings, are also eligible to invest in the RSA Retail Savings Top-Up Bond.
“Anyone with a valid RSA identification number and a bank account in the Republic can start investing,” the National Treasury said.
Cash-strapped youth are either unemployed or underpaid
The Treasury’s efforts to foster a culture of savings among younger generations, while laudable, speaks to the inherent disconnect between government and its constituents.
Stats SA reported last year that one in two young people in the labor force were out of work in the first quarter of 2021.
“People aged 15 to 24 are more vulnerable in the labor market with an unemployment rate of over 63%,” the report said.
The burden of unemployment is also concentrated among young people since they represent 59.5% of the total number of unemployed.
“The youth unemployment rate is high regardless of education level,” the report says.
A PwC report titled South Africa Economic Outlook Responding to Rising Inflation and Rising Interest Rates said South Africa has 11.5 million unemployed adults, of whom 7.6 million are ready and willing to work. But the others (3.9 million) have lost all hope of ever finding a job.
Young South Africans are taxed
Young people who are lucky enough to have a job or have a source of income are struggling under the increase in personal income taxes.
The government has no tax incentives for young people entering the workforce or owning start-ups, leaving them no choice but to take out loans to stay afloat.
South Africa has one of the highest tax rates in the world, according to a report by Business Tech.
The 2018 report showed that South Africa’s income tax rate, at just under 10%, is the 12th highest, behind Germany, Austria and the United States at the time.
“A more worrying trend is South Africa’s tax-to-GDP ratio, which is approaching 30% (currently at 27.3%), well above the global average of 15%, and even above the 19% rate of the euro area.”
Alexander Forbes 2021 Member Insights research shows that the Covid-19 pandemic has had a greater impact on South Africa’s millennials due to high unemployment rates – and they are unlikely to have the ways to retire.
According to Viresh Maharaj, director of executive strategy and customer experience at Alexander Forbes, retirement planning companies like Forbes may no longer be relevant to millennials.
Increase in the cost of living
South Africans are currently paying the highest prices in history for gasoline, which has since driven up the prices of all goods, especially food.
Low-income consumers will also suffer the most because they already cannot afford nutritious food and will also have to pay more to get to work and school.
The long-term impact on inflation will see even the middle class struggle financially with rising interest rates, as everyone begins to recover from the financial aftermath of the pandemic.
The timing of the new RSA Retail Savings Top-Up Bond, which is expected to launch on April 1, 2022, is curious.
Last December, cash-strapped South Africans with retirement savings were given the opportunity to access some of their short-term money through the National Treasury’s two-pot proposal.
“In an ideal world, retirement savings would only be available upon retirement.
“But many South Africans have no short-term savings or have had to dip into their short-term savings to survive the devastating economic impact of Covid-19,” the National Treasury said at the time. .
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