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Economic inclusion through financial literacy - A stimulus for economic growth in South Africa

Occasional paper 3/2021

Copyright © 2021

Inclusive Society Institute

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South Africa


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Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members or Members.

June 2021

Author: Sershnee Pillay


This article aims to tackle the issue of financial literacy as a tool to emancipate the South African national economy from global debt and create self-sustaining stability. Drawing on the concept of financial inclusion and the impact that our citizens can have on stimulating the economy, together with models that have worked in international environments, this article highlights the benefits and ideology of financial literacy as a tool in our unique South African context, with recommendations for a way forward.

The COVID climate

While South Africa together with the rest of the world finds itself in the midst of a global pandemic, naturally all the focus has shifted towards healthcare and infrastructure to support vaccination efforts. This is without a doubt a necessary and vital focus area to alleviate the current situation, but an ancillary fact is that these efforts can only reach as far as our Rand does, and how far is that exactly?

Statistics South Africa published data in March 2021 which showed that South Africa’s economy contracted by 7% last year (StatsSA, 2021). In a forecast by Minister Mboweni in the 2021 budget speech delivered in February this year, it was further evidenced that our economy is flailing. The reported budget deficit has ballooned to a record 14% of GDP, more than double the Minister’s 2020 forecast of 6.2% (Hogg, 2021).

This points to a disturbing and undisputable fact: South Africa’s ability to care for its citizens is limited by our weak fiscal position. Economic growth has been a long-standing goal for the government and seemingly one which we consistently fall short of, for a multitude of reasons. The impact of which holds dire consequences for the very taxpayers who are caught in the negative cycle of a contracting economy and rising living costs, propelling individuals towards escalating debt to make ends meet. All the while, chasing the ever-elusive economic reprieve of GDP growth. As if this was not concerning enough, there is now yet another contender for our resources in the form of COVID-19.

The resulting scenario being a bleak picture of continually perpetuating debt from both a micro- and macro-economic standpoint. South Africans are heavily in debt, be it looking at our own pockets or our collective debt as a nation.

This has created the perfect storm for a tiered intervention, one which can address the issue of economic growth at a grassroots level as well as lead us on the sustainable road to recovery as a nation.

Financial literacy - the key to economic empowerment

To increase our fighting weight when it comes to facing the next potential pandemic or even how we manage our organic finances in a regular climate, the answer lies in strengthening our fiscus. The author is of the opinion that this can be achieved through financial literacy.

Financial literacy refers to the ability to understand and apply different financial skills effectively, including personal financial management, budgeting, and saving. Financial literacy makes individuals become self-sufficient, so that financial stability can be accomplished (Biswas, 2021). This definition and elaboration outlines some of the key concepts which are vital to the success of such an intervention. For decades we have been trying to address and alleviate the symptoms facing our country and our poor finances. Financial literacy is the cure that addresses the cause of our financial ill health at multiple levels.

Citing a comprehensive study completed by the Human Sciences Research Council on behalf of the Financial Services Board, ”the level of financial literacy among adult South Africans tends to be in the low to moderate range on average” (Discovery, 2018).

This alarming fact may well provide the basis for us to understand why we as South Africans do not make informed choices with our finances and are drawn into more and more debt over time. The most unfortunate reality is that in most cases this is by and large due to our upbringing, having learned these behaviours from our parents and other role models while growing up. We have seen and emulated the same behaviours our family’s have followed, only to be, not-surprisingly, caught in the same financial quandary ourselves later in life.

General wealth

If we consider the way money is handled in a typical South African household, we see that most families are struggling to get through the month and manage their general living expenses. ‘The Household Affordability Index’ compiled by the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD), showed that as of 2019, 56% of the South African population is living on less than R41 a day (BusinessTech, 2019). When faced with a low-income household in situations such as this, the thought of a concept such as financial literacy may present as an inaccessible ideal. Yet if we look into the history books, many a time we can trace back a family’s generational wealth to one particular individual who learned how to make his proverbial ‘R41’ grow into something substantially more valuable, thereby breaking his family’s generational cycle of poverty. The problem then is not a lack of means alone, but a lack of willingness to take a calculated risk for high reward and disciplined gratification, due to a lack of understanding the science of money.

If the problem presents itself through bad learned behaviours, but we see in certain instances that the mould was broken, it seems apparent that the solution then is to provide enabling environments, skills and knowledge to equip young South Africans to break the bad money habits earlier on in their lives, thereby giving them the tools necessary to create their own wealth and even build and accumulate wealth for future generations. This is vitally important at this point in time, given the all-time high access to credit and the appeal of this in low-income families.

Financial capability

The island nation of New Zealand is home to the indigenous Māori population amongst a variety of other cultural and linguistic groups with various generationally learned and accepted financial behaviours, which for the purposes of this research, provides similarities to our own diverse South African melting pot of cultures.

The Commission for Financial Capability (CFFC) in New Zealand has initiated the first financial literacy model which has been aligned to the New Zealand Curriculum and across Māori Medium Education (2020). The Programme, named Sorted in Schools, aims to tackle the issue of financial literacy, redressed as financial capability, to curb the spread of debt cycles and encourage better monetary decisions at various life stages, ultimately leading to financial security and a healthy retirement. With its inception and approval from the New Zealand government received in 2017, CFFC has been working on implementing the programme for secondary school students over a four-year period.

As communicated by CFFC, “in March 2019, Sorted in Schools launched its first learning and teaching package for years 9-10 for the New Zealand Curriculum. The package is based on the theme of financial identity, and includes topics such as managing my money, debt, savings and goal setting”.

“The launch of package two, financial sustainability, followed in June 2019. Financial sustainability includes topics such as KiwiSaver, retirement, insurance and investment.” The programme was adapted and developed for Māori Medium Education and since 2019 has also been rolled out in te reo Māori for years 9-10. At this stage in 2021, it is estimated that ‘Sorted in Schools’ will have rolled out eight teaching and learning packages across years 9-13. Four for the New Zealand Curriculum and four for Māori Medium Education in te reo Māori.

The programme is supported by the New Zealand government, including the Ministry of Education, The New Zealand Qualifications Authority (NZQA), the Tertiary Education Commission and the Ministry of Business, Innovation and Employment (MBIE). Through the partnerships and support outlined above, the free, government funded programme has grown with such popularity that it has over 67% of secondary schools in New Zealand signed up to teach their students essential money skills with ‘Sorted in Schools’ (2020).

A key driver is equitable access to financial capability, with a keen inclusion and consideration for the programme to reflect the cultural viewpoints of New Zealand’s diverse student population. Emphasis is placed on an increase in collaborative partnerships that support not only schools and students, but also their communities, parents, and families.

Why should South Africa care about financial literacy?

Looking to a first world nation such as New Zealand and their identification of the need for such skills having resulted in the initiation of a landmark programme such as ‘Sorted in Schools’ for their diverse populations’ needs and future security, one must surely see the value in taking action to adopt our own version of a financial literacy programme suited to our unique needs and future goals as a nation, in the hope of one day also holding first-world status.

The question then is how do we duplicate or re-create this kind of programme on home soil? What are the tried-and-tested principles of financial literacy that can lead to positive money relationships and become a proponent for creating generational wealth for the vast majority of South Africans?

In a paper on financial literacy and inclusive growth in the European Union, Sweden and Denmark were cited as the world’s best performers in financial literacy rankings – interestingly, the EU also houses below global average performers such as Romania and Portugal. What was highlighted by these findings was that even amongst other developed economies, low-income individuals, women, young people and less educated people tend to consistently underperform in literacy tests (Batsaikhan and Demertzis, 2018). Here too, we see a direct correlation between a stable economy like Denmark and a high financial literacy ranking.

If we aim to place ourselves amongst the likes of New Zealand and Denmark with a strong and bolstered economy, we need to encourage initiatives which promote financial literacy activities in the South African context. Therefore, our current education system should be rejigged to include financial literacy, with a clear focus on the following areas:

Nurturing a savings mindset/culture:

In a popular personal finance quote by Warren Buffett, he said, “Do not save what is left after spending, but spend what is left after saving” (Doyle, 2020). The emphasis is placed on reserving your savings out of your earnings, then from the balance that is left, you should plan your expenses. This is an essential skill which benefits any age group and even a child learning this principle can take the lesson home into their communities and contribute to larger-scale financial literacy. The key is to begin promoting the change in behaviour and mindset at an early age, nurturing the positive shift before negative money behaviours are learnt and accepted as the norm.

Debt rehabilitation:

This is an important area of learning given the South African context which features elements such as “black tax”, for example, which these days is not wholly limited to race. Most South African families unwittingly and unintentionally create a debt cycle for their child even before the individual has had the chance to start building a security base for themselves. This may manifest in a number of ways, from elderly parents needing support, to siblings who lean on one another to make it through the month, and even in the form of student loans taken out since funding was not available for tertiary education, due to poor planning and ill-managed resources by the adult members of the family early on in the child’s life.

Sharing the science of how to free oneself from the crippling reality of inherited debt could be life-changing for many young South Africans and again is a transferable skill which can alleviate a community’s pains, given the correct distribution.

Tax efficiency:

Teaching the value of understanding saving vehicles such as a Retirement Annuity can really provide the youth with the leg up that is needed when embarking upon the world of personal finances. This is a great example of an avenue that is easily accessible to all through saving even a minimal amount, which translates into big rewards later on and promotes tax savings and planning for the future, potentially unlocking generational wealth creation, if used correctly.

Creation of cashflow/ assets/ wealth:

Stemming from a basic practical skill like budgeting, individuals stand to benefit from understanding how to make their money work for them, in not just sustaining their lifestyle but improving it for themselves and their families. Most high net-worth individuals who came from impoverished backgrounds generally share a specific trait. They learnt that the science of money means that as your income increases, your lifestyle does not necessarily have to match that elevated paycheque. They applied the simple yet effective technique of maintaining their standard of living and constantly investing the increased income into more and more savings vehicles or investment vehicles, which allowed their money to grow. Over time, they in effect multiplied this effort, meaning that essentially their assets began generating further wealth for them. If this principle can be taught to children coming from low-income households at an early age, there is little doubt that they will have the discipline to make this model work to their benefit.

The economic advantages and efficiencies brought about through financial literacy

Notwithstanding the clear practical benefits already outlined above, the behavioural shift in the youth from low-income communities would have long-term benefits, such as providing the educational basis to allow for clear and well-informed decision-making regarding their finances. Ranging from establishing clear credit records through understanding the evils of debt cycles, to the removal of what would otherwise be a predisposition to accepting poor financial advice and falling prey to “get rich quick” schemes, the evidence points to the long-term benefit being a more stable financial future.

The positives of financial literacy provide a means to free the youth from repeating the mistakes made by generations before them, who unfortunately did not have the same skills, tools, or resources to allow them such freedoms or choices. In a sense it creates a semblance of what could be seen as the beginnings of equality for previously disadvantaged households and families.

The macro-economic effects of which would be experienced through a shift in the way our society handles, manages, and interprets their financial security. Behaviourally, it would mean a psychological overhaul of established norms such as cash-based transactions, moving to more evolved means such as digitals funds and electronic fund processing. The safety and security that comes with such systems allows for access to markets previously out of reach, thus opening up the world market for small local businesses. This, together with the technological advances arising in the financial sector, will allow for a trajectory of financial independence unheard of at this level of the economy.

What does this mean for the South African economy?

These concepts when applied in real-life situations provide an alternative to the current stark reality of many South African youth, who are faced with the prison of poverty and have accepted the life sentence. The introduction of a financial literacy programme has the potential to breathe life into the generation of township economies, allowing the youth of South Africa to create an enabling environment for themselves, which by extension will nourish and feed their own families and communities.

The reach is infinite if these spider networks are created through financial literacy drives in schools and even community workshops, which take the message of financial literacy and practical lessons to achieve financial freedom into the communities that need it most. The implied benefits of a successful roll-out of such programmes will intensify entrepreneurship amongst the youth, resulting in job creation and thereby promoting the relevant upskilling needed to drive growth in the various economic industries and sectors. This in itself creates a “big bang” effect, which allows the national economy to flourish, given the spider network of township economies and their self-sustaining structures.

How do we kick-start this programme?

The recommendation is that, similar to New Zealand’s Commission for Financial Capacity, a public private partnership is needed between the South African government, the Department of Trade, Industry and Competition, the Department of Education and financial services institutions, with a focus on creating wealth through financial planning and financial interventions.

The author is of the opinion that this kind of collaboration could provide the operational and technical framework needed for:

  • Classification of the split of funding between the public and private sectors;

  • Creation of the learning material / technical syllabus, with emphasis on catering to the multi-lingual population;

  • Identification of communities which could benefit from the programme (ideally across the whole of SA);

  • The phasing and timelines for roll-out; and

  • The distribution model encompassing specific age groups, schools and their tiered needs and evolution within the programme.

Financial literacy holds the key to economic liberation for the South African individual and the multiplied effect of such an intervention is the stimulus that will emancipate the South African economy and help stabilise us in the global economy. Through an inclusive economy which enables its citizens to create their own opportunities, our nation will thrive and become a self-sustaining, empowered country, which every South African will be proud to call home for generations to come.


Batsaikhan, U. Demertzis, M. 2018. Financial literacy and inclusive growth in the European Union, Bruegel Policy Contribution (8:6-9) [Online] Available at: [accessed 25 May 2021].

Biswas, S. 2021. What Is Financial Literacy? [Online] Available at:,financial-literacy [accessed 28 May 2021].

Business Tech. 2019. More than half of South Africans are living on less than R41 a day. [Online] Available at: [accessed 25 May 2021].

Commission for Financial Capability. 2020. Equipping young New Zealanders for their financial futures. [Online] Available at: [accessed 26 May 2021].

Discovery. 2018. The link between financial literacy and economic empowerment. [Online] Available at: [accessed 26 May 2021].

Doyle, G. 2020. Do not save what is left after spending; instead spend what is left after saving. Warren Buffett. [Online] Available at:,%E2%80%9CDo%20not%20save%20what%20is%20left%20after%20spending%3B%20instead%20spend,left%20after%20saving.%E2%80%9D%20Warren%20Buffett [accessed: 7 June 2021].

Hogg, A. 2021. Executive summary of 2021 National Budget Speech. [Online] Available at: [accessed 27 May 2021].

Sorted In Schools. 2020. [Online]. Available at: [accessed 26 May 2021].

Statistics South Africa (Stats SA). 2021. GDP: Quantifying SA’s economic performance in 2020. [Online] Available at: [accessed 27 May 2021].

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This report has been published by the Inclusive Society Institute

The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals.

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