The Changing Pattern of Savings in South Africa 1970-1991

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Abstract
The pattern of savings flows in South Africa economy has changed substantially over the past 20 years. Since the early 1970’s, South African households have demonstrated a marked and continuing shift towards contractual savings schemes and away from discretionary savings schemes, a trend that has been most significant since the advent of rates of inflation in excess of 5 per cent in the early seventies, when the consequences of running a discretionary savings scheme had become particularly disadvantageous. In tandem with this change in the pattern of personal saving has been a steady decline in the proportion of Household Savings to Total Savings and a steady increase in the proportion of Corporate Saving to Total Saving. This paper analyses this changing pattern of savings and the implications for the South African economy. The most important implication of the switch towards contractual savings has been the increasing financial muscle of the leading Life Assurers, the Old Mutual, Sanlam and Liberty Life, who have dominated the market for contractual savings, and which has led to the establishment of three powerful groups of companies under their control. This increased financial power has also allowed the Life Assurers to raise their ownership stakes in the family controlled groups and they have thus implicitly supported the system of concentrated family control that pervades the South African corporate structure.

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