The Sunday Mail
Tawanda Musarurwa
Zimbabwean workers are simply not saving enough, reflecting high levels of unnecessary consumption, a new report has shown.
Experts says a national savings culture is a fundamental economic and social objective, especially for the youths.
Latest findings contained in the report ‘Harnessing the Demographic Dividend in Zimbabwe’ — jointly carried out by Government, through the Ministry of Finance and Economic Development, and the United Nations Population Fund (UNPF) — show that there is a disproportionate bias towards consumption relative to labour income.
“Average annual consumption per person is higher than average labour income per capita from infancy to age 29. Over a range of 24 years between the ages of 30 and 35, mean per capita labour income exceeds per capita consumption.
“Thereafter, labour income again falls below the level of consumption. In sum, individuals under the age of 30 and those aged 54 years and above contribute to the dependency burden in Zimbabwe,” reads part of the report.
Local banker and analyst Clive Mphambela believes that a holistic approach is required for Zimbabwe to start building a national savings culture.
“To save Zimbabwe — to grow the economy and to develop the means to deal with the problems like poverty — we must undertake a drive to save and build our national savings.
“If more citizens opt to save through mechanisms such as savings accounts with the banks, endowments and retirement schemes with insurance entities, more capital will be made available to increase the productive capacity of the economy.
“This will be achieved through the underlying investments in the private sector (through loans to companies and investments in shares in companies, for example).
National savings can also be channelled to infrastructure investments and through Government schemes (such as Government bonds and Treasury Bills),” he wrote in one of his columns on the issue.
“At present, Zimbabwe’s economic future development is heavily dependent on fickle and very timid foreign capital.
“Massive amounts of foreign direct investments are required but these will not come if our own capacity to accumulate resources is not tested.
“At the micro level, improved household savings will benefit individuals and ease the stressful levels of personal debt among consumers.”
According to the joint Government and UNPF report: “The underlying consumption profile for Zimbabwe relative to peak labour income suggests that some form of transfer, with the likelihood of remittances, finances the high levels of consumption.
“It also means that Zimbabwean households are unlikely to make significant savings that can be invested to boost the economy. This has negative implications for the magnitude of the first demographic dividend that Zimbabwe can harness.”
Mphambela, however, blamed low savings on lack of confidence in the financial system.
“Lack of confidence in the financial system is always a key impediment to saving in the economy. In Zimbabwe, the confidence of savers was severely dented by the demise of the Zimbabwe dollar in the broader context, while at the micro level, a number of bank failures have occurred in our system that have created a negative perception of banks.”
Demographic dividend refers to a situation where a country enjoys accelerated economic growth that stems from the decline in fertility and mortality rates and growth in the economically active population.
Findings of the report suggest that Zimbabwe entered the demographic dividend window around 2004, which peaked in 2012 and is projected to last until 2060.
The demographic dividend window is a period when a nation’s proportion of the working age group is most prominent. This occurs when the population is predominantly younger and percentage of the economically active is at its height.
“Because of the high levels of consumption relative to labour income, Zimbabwe has a lifecycle deficit — the difference between labour income and consumption,” highlighted the report.
Finance and Economic Development Minister Professor Mthuli Ncube said to harness the demographic dividend, Government had to contain runaway birth rates, especially in the adolescent age group by encouraging the group to further their education, while promoting use of contraceptives.
“Harnessing the demographic dividend requires that Government, civil society, business, development partners, and the nation at large jointly address the increasing adolescent fertility rate through keeping adolescents in school and colleges and creating jobs for them.
“Making it easy for them to access family planning information, services and designing programmes which will encourage contraceptive use intended to delay the first birth within marriage,” he said.
