Where South Africans invest their money

Nearly half of South African households’ wealth is invested in listed companies, followed closely by investments in unit trusts and retirement funds. 

This was revealed by the Reserve Bank in its latest Quarterly Bulletin, which included a note on the financial health of South African households. 

The bank noted that consumers remain under immense financial pressure due to the rising cost of living and increased debt repayments due to rising interest rates. 

This has pushed down households’ savings rates to a mere 1.6% of GDP, below historical levels and among the lowest in the world. 

A low savings rate significantly impacts economic growth, inhibiting financial institutions’ ability to fund new investments. This is because they have a narrow deposit base to draw on. 

Furthermore, it may push these companies and the government to raise funding outside of the country and in foreign currencies, significantly increasing the vulnerability of South Africa’s financial system to external shocks.

The bank’s data showed that South Africa’s national savings rate, including that of companies and the government, is only 12.7% of GDP. 

This is far below the historic average of 25% to 30%, which coincided with strong economic growth in the early 2000s. 

The Reserve Bank’s data also revealed where households invest their money, showing that the majority of it is heavily exposed to listed equity. 

Nearly half of all their investments are directly in listed stocks, while another 42% is invested in unit trusts or investment funds. 

Less than 5% is exposed to money market funds, which invest in fixed-income assets in the form of government debt or corporate bonds. 

The graph below shows where South Africans invest their savings. 

While most of their investments may be exposed to listed equity directly or through investment funds, South Africans have been pumping money into interest-bearing funds in 2024. 

Many South Africans have driven this trend by seeking to benefit from elevated interest rates, which have drastically increased the returns on fixed-income assets. 

The Association for Savings and Investment South Africa (ASISA) said interest-bearing funds experienced over R70 billion net inflows in 2023. 

This trend continued in the first quarter of 2024, with South Africans investing heavily in money market funds, which received around R22 billion of the R70 billion allocated to interest-bearing funds. 

ASISA’s Sunnette Mulder noted that net inflows into Money Market portfolios fluctuated wildly from quarter to quarter last year, depending on investor risk appetite and market opportunities.

However, this data is skewed by the interest earned on investments in these funds, which are considered ‘inflows’ but are not new investments. 

Increased investment into interest-bearing funds has been a decade-long trend, with the category growing from R167 billion in 2012 to R817 billion at the end of 2023. 

Senior Fund Analyst at Morningstar Michael Dodd said this is partly due to their predictable returns and, in South Africa’s case, the high yields from money market funds and government bonds. 

Partly driven by the consistent launch of new income funds, this category also benefits from the reduced volatility in their returns compared to traditional equity-only funds. 

Dodd said multi-asset income funds also allow for less constrained capital allocation, allowing managers to maximise income across a wider opportunity set of assets.