In South Africa, the reality is that our lives are heavily taxed at every turn, raising the question of whether the value derived from these taxes truly enhances our standard of living. Unfortunately, the answer seems to be that the juice isn’t worth the squeeze.

Taxed to death

From the moment we wake up to the time we go to bed, taxes infiltrate our daily routines. Whether it’s turning on the lights, boiling the kettle, using water, wearing clothes, driving a car, buying groceries, or even watching TV, each activity is accompanied by a tax. Even after we pass away, we are subject to estate taxes, illustrating the pervasive nature of taxation throughout our lives.

Do we get value?

While taxes are necessary to fund essential public services and infrastructure, the burden of taxation in South Africa often seems disproportionate to the benefits received. Despite the significant tax contributions made by individuals, the impact on improving our standard of living is frequently called into question.

Tax on tax…..

Adding to the tax trap South African households have additional costs towards private services such as education, medical and security which compensate for the for the poor service delivery of essential service. These extra costs which are also taxed can be seen in themselves as a secondary layer of tax.

Tax is a cost if there’s no delivery

The prevailing sentiment is that the taxes we pay in South Africa do not always translate into tangible enhancements in our quality of life. The current tax system raises concerns about fairness, efficiency, and the overall value proposition for taxpayers, ultimately leaving many to feel that the juice isn’t worth the squeeze.

According to a survey conducted by the National Treasury in 2021, only 51% of South Africans are financially literate, highlighting a significant gap in understanding financial matters. This lack of knowledge poses challenges for individuals in making informed financial decisions and planning for their future.

**Gender Disparities in Financial Literacy**

Women in South Africa face particular challenges when it comes to financial literacy. Studies show that women are less likely than men to have access to formal financial education and often have lower levels of financial literacy. In fact, only 27% of women in South Africa are financially literate compared to 33% of men, according to the same National Treasury survey.

**Closing the Gender Gap in Financial Literacy**

To address the gender gap in financial literacy, targeted programs and initiatives are essential. These programs should focus on providing women with practical knowledge and skills related to budgeting, saving, investing, and debt management. By empowering women with financial education, we can help improve their financial independence and decision-making capabilities.

**The Path Forward**

As South Africa observes National Financial Literacy Month, it is crucial to prioritize efforts to improve financial literacy, especially among women. By investing in financial education programs tailored to the needs of women and promoting financial inclusion, we can work towards a more financially empowered and equitable society for all.

The National Financial Ombudsman (NFO) emerges as a pivotal entity in the financial landscape, designed to bolster consumer protection and streamline dispute resolution processes. Acting as a centralised authority, the NFO oversees various industry ombudsman schemes, ensuring uniformity and efficiency in addressing financial grievances across different sectors.

The primary function of the NFO is to provide a unified platform for resolving disputes between consumers and financial service providers. By simplifying the resolution process and offering a transparent mechanism for redress, the NFO aims to empower consumers and hold financial institutions accountable for their actions.

In practice, the NFO operates as a neutral mediator, investigating complaints, facilitating communication between parties, and striving to achieve fair outcomes. By offering a standardised approach to dispute resolution, the NFO promotes trust, transparency, and fairness within the financial sector, ultimately fostering a more equitable and responsible environment for all stakeholders involved.

The establishment of the NFO signifies a significant step towards enhancing consumer rights and strengthening regulatory oversight in the financial industry, underscoring its crucial role in safeguarding consumer interests and promoting a culture of accountability and integrity.

The concept of identifying the “best” investment is challenging due to the vast array of options, individual situations, objectives, and variables involved. In the Universe of Unit Trusts otherwise known as Mutual Funds there are literally thousands to choose from. Then there are so many options of types of investments structures such as retirement annuities, endowments, preservation funds etc…

– Instead of focusing on finding the absolute best investment, it is more sensible to prioritize selecting investments that are appropriate for individual circumstances, goals, risk tolerance, and time horizon.

– Investment decisions are subjective and influenced by personal factors such as financial goals and risk appetite.

– Predicting the future performance of investments is inherently uncertain, as it requires navigating through a complex web of variables and unknowns.

– Hindsight bias often clouds judgment, making it easier to identify successful investments in hindsight than to predict outcomes accurately in advance.

– The key to successful investing lies in aligning investment choices with one’s unique financial situation and objectives.

– By considering personal circumstances and goals, investors can make informed decisions that increase the likelihood of achieving their financial objectives.

Skimpflation and Shrinkflation: A Response to High Cost of Living

In the face of the relentless high cost of living in South Africa, businesses are resorting to tactics such as skimpflation and shrinkflation to protect their profit margins. Skimpflation involves reducing the quantity or quality of products without lowering prices, while shrinkflation entails maintaining prices while offering smaller products. These strategies aim to navigate the economic challenges but come at the expense of consumers.

Diminished Purchasing Power

South African households, particularly the middle class, are feeling the brunt of skimpflation and shrinkflation. With the need to pay the same price for less or lower-quality goods and services, consumers’ purchasing power diminishes. This not only impacts their standard of living but also contributes to a sense of economic strain and dissatisfaction.

Economic Consequences

The ramifications of these practices extend beyond individual households. Decreased purchasing power leads to reduced consumer spending, which can hinder economic growth and stability. The prevalence of skimpflation and shrinkflation exacerbates financial challenges for the middle class, perpetuating a cycle of economic strain and diminished quality of life.

Urgent Need for Solutions

Addressing the issues of skimpflation and shrinkflation is crucial to safeguarding the economic well-being of South African households and promoting sustainable growth. Finding solutions to mitigate the impact of these tactics on consumers is essential to ensure a more equitable and prosperous future for all.

In the realm of personal financial planning, artificial intelligence (AI) is revolutionising the landscape, offering consumers a myriad of benefits and shaping the future of wealth management.

More personalised planning

One of the most significant impacts of AI is its ability to provide personalised financial advice tailored to individual needs. Through advanced algorithms, AI analyses vast amounts of data, including spending habits, income streams, and investment preferences, to offer customised recommendations for saving, budgeting, and investing.

More in depth information

Moreover, AI-powered tools empower consumers with greater financial literacy and awareness. Interactive chatbots and virtual assistants provide instant answers to queries, offer insights into complex financial concepts, and educate users on prudent financial practices.

Closely monitored portfolios

Additionally, AI enhances risk management strategies by continuously monitoring market trends and assessing potential risks to investment portfolios. This proactive approach enables individuals to make informed decisions and mitigate financial vulnerabilities effectively.

AI will keep on improving as it learns

Looking ahead, AI is poised to further streamline personal financial planning processes, making them more accessible and efficient. From predictive analytics to automated asset allocation, AI technologies will continue to optimise wealth management strategies, ultimately empowering consumers to achieve their financial goals with confidence and ease. As AI evolves, so too will its capacity to enhance the financial well-being of individuals, ushering in a future where personalised financial planning is more intuitive, responsive, and rewarding than ever before.

A recent report by Experian reveals that upper-income groups in South Africa are struggling with debt repayments, contrary to the common perception of financial stability in this demographic. The report shows that a growing number of individuals in these groups are facing challenges in managing their debt, with factors such as high debt levels, rising living costs, and stagnant wage growth contributing to their financial strain.

Key statistics from the report include 27% of upper-income individuals having late payments, 15% experiencing defaults on their debts, and a breakdown of debt types showing 42% in unsecured loans, 28% in credit card debt, and 30% in other forms of borrowing. Urgent action such as financial literacy programs and debt management counseling is needed to help these individuals regain control of their finances and avoid further financial distress.

Leasing and installment sales represent two distinct approaches to acquiring a motor vehicle in South Africa, each with its unique features and financial implications.

Leasing involves renting a vehicle for a predetermined period, typically 2-5 years, with monthly payments covering depreciation and interest. At the end of the lease, the vehicle is returned to the lessor. Pros of leasing include lower initial costs, as down payments are usually smaller than those for installment sales. Maintenance costs are often included in the lease agreement, providing additional convenience. Furthermore, leasing allows for frequent upgrades to newer models, appealing to those who enjoy driving the latest vehicles. However, cons of leasing include mileage restrictions, potential additional fees for excessive wear and tear, and no ownership at the end of the lease term.

Conversely, an installment sale involves purchasing the vehicle over time, usually 3-7 years, with ownership transferring upon final payment. Pros of installment sales include eventual ownership of the vehicle, no mileage restrictions, and the ability to customize the vehicle to suit personal preferences. However, cons may include higher monthly payments compared to leasing, responsibility for maintenance and repairs, and potential depreciation affecting resale value.

For example, consider a car with a purchase price of R300,000. If leased over a 3-year term with a residual value of R150,000, monthly payments may amount to R3,500. In contrast, with an installment sale over the same period, monthly payments could be around R6,000, assuming a 10% interest rate. While leasing offers lower monthly payments, an installment sale results in eventual ownership of the vehicle, making it a more financially rewarding option in the long run.

Ultimately, the choice between leasing and installment sales depends on individual preferences, financial circumstances, and long-term goals when acquiring a motor vehicle in South Africa.

The budget speech delivered this week may well have been left to:

The old woman who lived in a shoe

Who had so many children She didn’t know what to do.

She gave them some broth without any bread.

And whipped them all soundly and put them to bed.

Whipped financially we all are with the tax scales, medical credits and tax thresholds all left unchanged for the next tax year which simply means we all will be poorer.

Here are three reason why:

1. Inflation Impact: The government’s decision to maintain last year’s tax scales and credits in 2025 without adjusting for inflation puts a burden on South African households. This means that the fiscal drag has not been adjusted to account for the rising prices and increased cost of living over the past year.

2. Financial Pressure: As a result of the stagnant tax rates and credits, households may find themselves with less purchasing power as their incomes are effectively being taxed at the same rates which are not adjusted to compensate for inflation. This will lead to financial strain, making it harder for families to cover their expenses and save for the future.

3. Budgeting Challenges: South African families need to be aware of the impact of unchanged tax scales and credits on their budgets. It is important for households to adjust their financial plans, prioritise spending, and seek ways to cope with the increased cost of living to ensure their financial well-being in the face of these economic challenges.

So the children in the shoe will be left with nothing more this year. Just have to do with the little they have.

A recent article in The Sunday Tribune cautioned readers to be aware of financial red flags that could affect relationships. 

Healthy relationships are based on trust and confidence in each other. This includes being transparent and responsible with financial matters. Working openly towards financial goals, keeping sound financial behaviours encourages great partnerships. There are signs and behaviours which raise red flags between couples. If ignored these can ruin a relationship:

Minimal discussion over money matters

 If a partner refuses to discuss money matters, it may mean that they are hiding something and do not want the other partner to know something about their financial situation. This raises questions which creates doubt, fear or worry which negatively impacts on the relationship. 

Ongoing financial woes

If a partner has ongoing financial troubles such as large amounts of debt, low credit scores, or overspending, it can lead to financial stress in the relationship.

Having an unstable financial track record affects creditworthiness which makes in difficult to get credit on the important things such as a home loan or car finance. 

Reckless spending

Spending without considering your affordability can only stress out a partnership. Ignoring expenses relative to income points to financial distress and uncertainty. 

Fly now pay later…… I want it because I deserve it….. We’ll worry about it later……

are symptoms of not being able to delay gratification. Being spontaneous and having no concern over affordability creates potential financial problems down the road which will harm partnerships. 

So It’s imperative for partners to be open and honest about their financial situations at all times. If they work together openly they can create a synergy which will only improve their relationship.