Richest South Africans Cut Savings to Reduce Their Debts, Old Mutual Says

Old Mutual Plc, the biggest insurer in Africa, said the richest South Africans cut their savings this year to reduce debt levels as interest rates declined.

The top earners in Africa’s largest economy “are saving less,” Crispin Sonn, director of corporate affairs at Old Mutual in South Africa, said in the text of a presentation in Johannesburg today. “We’re not saving more because we have too much mid- to long-term debt.”

Household debt eased to 78.4 percent of disposable income in the first quarter, down from 79.9 percent in the previous three months, South Africa’s central bank said on June 24. The country’s top earners are using a 5.5 percentage-point reduction in interest rates since December, 2008, to pay off mortgages, personal loans and cars while those with little or no debt haven’t significantly increased their savings, Sonn said.

“South African households save way too little,” Rian le Roux, head of economic research for the Old Mutual Investment Group, said in a note. “Most assume their pension funds will provide sufficient retirement capital, but few ever bother to check whether this is true.”

Old Mutual, the London-based company that began selling insurance policies to South Africans in 1845, said its Old Mutual Savings Monitor does a twice yearly survey of South African savings behavior in cities, which aims to “foster a culture of saving.”

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net

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