Life begins when you get out of the grandstand into the game – be a player. Life is not a spectator sports – get into the game, love the game, get dirty, make mistakes, take knocks, train hard, play hard, make your mind strong, make it better.”


We are meant to hold decent conversations around the socio-economic factors that are part of both local and global economies that affect our lives, our finances that control what our money’s worth, and the real value that can buy goods and services in today’s era.

However, it is not an easy-flowing conversation to hold, particularly if you are not well versed or “educated” about these issues and do not understand how it works and affects your money’s decisions daily, weekly, monthly or even years to come.

It is important to understand how these factors affect us as citizens(participants) of a country:

  • Poverty (reduction)
  • Service delivery to communities (local municipality service delivery, social grants, and pensions)
  • Access to quality sanitation infrastructure and clean and running water
  • Access to affordable, quality education(primary, higher, and further education)
  • Reliable and affordable energy (electricity)
  • The unemployment rate, inflation, and interest rates
  • Stable political and financial factors (government’s role)
  • Affordable and properly structured efficient universal health care
  • Equality and Race Relations across all groups (all citizens)
  • Effective implementation of government’s policies, programs, and law enforcement level (effective policing and security for all citizens)
  • Access to affordable and reliable telecommunication (internet, cellphones, telephone)
  • Adequate, efficient, regular maintenance of infrastructure (roads, buildings/properties)

Investing In Rental Properties Made Easy

Some or all of these factors influence the likelihood of finding sustainable work or starting a business; effective policing and security for all citizens; having access to safe, quality water and sanitation; and being able to access high-quality health care and education (empowering future leaders to address economic and national challenges).

Stable political and financial factors, which is the role of the government, ensure that the citizens are safe and protected and that they are not financially taken for granted, such as financial systems that are stable and reliable and offer security to their citizens;

They have access to proper, affordable health care ensure all the citizens are healthy, and can continue to contribute to the welfare of the state by contributing taxes and other income.

To stretch our understanding further, we need to examine what causes these phenomena and how to work within the confines (restrictions) of limited resources.


By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. John Maynard Keynes

Let us look at inflation (the market force that is mostly caused by the demand and supply of goods and services), which is a factor in every economy and country, and unfortunately, it controls what your money’s worth and what it can buy every day.

Inflation is a continuous rise (increase) in general prices for all goods and services that erodes your standard of living; the more inflation rises, the less your savings, lifestyle, and spending power are worth.

The more inflation rises, the less your spending power decreases, and it becomes difficult to enjoy what your money used to buy because your money is becoming worthless by the day.

Take R1,000 ten years ago, when you could fill up your grocery cart with food, meat, and vegetables, versus today, you’d be lucky to have 5 or fewer items in your basket with the same amount of money.

Inflation is most commonly caused when demand for goods and services exceeds supply, allowing sellers to raise their prices without decreasing demand. Sometimes, inflation is caused by cost increases, which will then force buyers to pay more. This can be caused by rapid wage increases, rising energy prices, and a rise in value-added tax (VAT).

On 1 April 2018, here in South Africa, our government raised VAT from 14% to 15%, which led to increased prices of goods and services overnight. A few jobs were shed because the firms could not produce enough goods and services at the new price level, and to top it all off, the economy of the country was already in the doldrums (not performing at all).

Can you guess in which year the haircut was 10c?

Every country experiences inflation pressure. Here in South Africa, our Reserve Bank (SARB) has a target rate of inflation of between 4% and 6%. What it means is that, if your savings account does not earn 4%-6% after tax and additional bank charges, then it is worthless in real value and you need to shop around for a better savings vehicle (instruments) that will deliver above the 4%-6% rate of return (remember this fact when you’re venturing for an investment vehicle).

Hyperinflation is the worst that can hit a country

Hyperinflation happens when a country is hit by extremely rapid and continuous increases in inflation, which would lead to a devaluation of the country’s currency. Let us take our neighbor up north, Zimbabwe, back in November 2008.

They were hit by high inflation of 79,6 billion% (can you even get that wrapped around your head to even understand what it even looks or read like).

The Zimbabwean Reserve Bank (ZRB) had to abandon the Zimbabwean dollar and start adopting other currencies such as the US dollar and South African Rand at some point. That forced the migration of citizens to flee and find greener pastures.

Consumer confidence index

Did you know that our money and mood (consumer confidence index) gives us an indication of how confident the citizens are about their future economy and how they will behave and participate in that economy?

So the consumer confidence index is important because it establishes consumers’ current and expected attitudes toward the state of the economy of the country.

As participants, consumer consumption (buying groceries, cars, clothes, or furniture) is what drives economies, and knowing how consumers feel allows businesses, governments, and individuals to plan better.

Sometimes they get it right, and other times they get it wrong.

So, how does this consumer confidence index work out, well the South African Bureau for Economic Research (SABER) conducts personal home interviews amongst citizens by asking structured questionnaires (series of questions) and some of the sample questions asked are:

  • How do you expect the financial position of your household to grow and change in the following year?
  • How do you expect the general economic conditions of SA to change during the next 12 months?
  • Are you planning to purchase any domestic appliances such as furniture, a washing machine, a refrigerator or a car, or a house in the next 12 months?

Scales used to rank the outcome are the following: Improved considerably, improved slightly, deteriorate slightly, deteriorate considerably, or don’t know.

High confidence: I am confident that I have a good job and enough cash to spend on my lifestyle, so my confidence is high.

When it is a high confidence outcome, then it indicates that consumers are more likely to spend their cash and increase their spending on nice-to-have (high ticket items) items such as a house, furniture, appliances, a new car, and clothes.

This ability depends on the availability of after-tax income (disposable cash and credit available).

Low confidence: I worry that I do not have enough money to pay all my bills every month and now being retrenched or my business has been shut down, I can only buy necessities (my confidence is LOW).

When it is a low confidence result, then it indicates that consumers are worried about their future, pay increases, bonuses, having a job, or keeping their businesses.

We tend to cut back on necessary spending and just spend on basic necessities (food, transport, school fees, and debt repayment) just to get by.

How much does it cost to borrow – interest rates

First, let us understand what simple interest is (it is an additional cost that you will pay to a lender to borrow the money; it is paid on the original amount borrowed, also known as the principal amount, and not on the interest owed on the loan).

Fixed interest, on the one hand, is a loan or mortgage that has an interest rate that will remain at a predetermined rate for the whole term of that loan or mortgage, e.g., Bonds issued by the government are usually considered fixed interest because they pay a fixed interest rate until the loan is repaid in full.

We also refer to nominal interest (the interest rate that has not been adjusted for inflation; it is the actual interest charged by the lender on a loan in nominal terms).

On the other hand, the real interest rate (the current interest rate minus inflation, gives investors in bonds or fixed-income instruments an idea of whether their interest will keep up with or beat or erode the purchasing power caused by inflation).

Did you know that in order for a consumer to enjoy a lifestyle now, they must pay additional money known as interest? Sometimes, assets such as cars, homes, or furniture have a big-ticket tag (too expensive to buy outright), so you pay them off little by little for the use of those assets.

The borrower (you) will be charged interest (income the lender wants while the borrower is willing to pay for the right to use and enjoy the asset because they need it now).

However, if we save for these assets (delayed gratification), we will save ourselves interest (extra borrowing cost at exorbitant rates) and heartache (stress).

The Central Bank South African Reserve Bank – SARB uses the interest rate as a tool to either stimulate or cool off the economy of a country, for instance, the SARB can raise the interest rates as it does from time to time when inflation rises or it can also raise or lower the repo rate (this is the rate that the Central Bank lends to commercial banks – also known as the base or repo rate).

Commercial Banks add another 3,5% above the repo rate (profit margins) costs. This is also known as a prime rate (the lending rate used to lend to consumers), and this lending rate is currently 10 % at the time of writing this blog. In South Africa, the SARB repo rate is 6.5% currently in 2019 and the prime rate at Commercial banks is 10%.

Please note that when interest rates keep going up, it then affects the consumer’s pocket (especially the borrowers).

As you will not be able to keep up with the repayments of the monthly installments (interest + capital), we call it excessive borrowing, which can be very dangerous to your pocket and your health as it can even be more stressful where you have many loans such as overdrafts, credit cards, personal loans, clothing accounts, that must be paid and you cannot afford to do so.

However, on the other hand, it is good news for savers and investors, as they will be happy, smiling all the way to the bank, and satisfied with rising interest rates for their savings and investments because their monies are growing.

Interest rates

Did you know that in South Africa, back in 1998, the interest rates went up to 25,5%, and in 2002 it was 17%? It caused financial chaos and misery amongst the borrowers who were heavily indebted; some even lost their homes and cars. However, the savers were smiling all the way to the bank as their savings paid off.

National Budget Speech – Slicing up your taxes

The National Budget Speech, delivered by the South African Minister of Finance in February and again at the Midterm Budget in October each year, indicates how the sum of all collected taxes (income for the government coffers) will be divided according to the essential needs of the public services and related functions.

Have you ever wondered what happens to your tax money that you contribute monthly on your payslip (paycheck) or the tax return that you submit once a year?

It goes to the government via SARS (South African Revenue Services linked to the Treasury Department) and it is the responsibility of the Finance Minister to divide the national income pie for those essential public services and functions).

Your budget

Like your household budget, which includes groceries, rent, transportation, school fees, electricity, and water, to name a few items, the National Budget is prepared in collaboration with the Treasury, through a well-thought-out plan of the Finance Minister, to balance and satisfy the needs of the citizens of the country, go through it with a fine-tooth comb, and keep the citizens and other stakeholders happy.

He announces and informs the citizens of the country what and how the government will spend on each area (economic sector) such as education, water and sanitation, road infrastructure and development, health, housing, energy (electricity), and other sectors; he projects these and cascades them on to government departments, to provinces, and then to municipalities.

Included in the speech will be the Gross Domestic Product (GDP), which represents the monetary value of all the goods and services produced within the borders of our country over the specified time period.

That means Agriculture, Mining, Manufacturing, Banking, Foreign Investments, and other industries, you, your family, colleagues, and your friends contribute to the country’s GDP.

Of course, this assumes that the government is doing its work properly (following adequate governance principles), as it should be expected, and performing with due diligence as responsible custodians and citizens of the country laying out a well-thought-out plan for its fellow citizens to benefit.

Health & growth potential of a country

Indicator of government’s policy formulation, planning, and decision-making and thus gives an idea (reflection) of the direction of what is the size of the economy and what can become(potential), taking into all those socio-economic factors that come into play.

SA GDP: According to the South African Reserve Bank (SARB) website, the Gross Domestic Product for 2018/2019 was reported as (-3,2%), meaning our economy is not growing at all.

One of the many effects is the rise in the unemployment rate, which is sitting at an all-time record high rate of 27% (socio-economic factor), and it must be addressed quickly.

If allowed to continue, it will brew like a bubble and become an explosive volcano because the firms are not making any sizeable healthy profits and they are shedding jobs, as the economy cannot absorb all of the jobs in the market.

That is why we need to change our thinking about how we approach our education, careers and create entrepreneurial platforms to create much-needed jobs.

If the Finance Minister can deliver the National Budget speech in public, being transparent on how the country’s money will be spent, so why is it that some people believe and avoid (participating in their own personal budgeting exercise) then believing and being convinced that Budgeting does not work, yet it reflects on your Life, your role in the economy, your self-belief, your use, your control and management of your own resources, with all factors being considered and equal.

Yet the methodical breakdown of the National Budget has been displayed and what it takes into account to avoid chaos, unnecessary spending, and stress, gives a clear vision of the path ahead, financial well-being, balance, and freedom of choices that the country has within its confines.


Be as it may, why are we so quick to judge, condemn, demean, and criticize government spending and allocation as if our economic affairs are all working perfectly, in tip-top shape, and we have it all together and under control?

Therefore, let us not throw stones at a glasshouse. There is a very popular Ghanaian proverb that states, “Look at your own pot because if you don’t, you will burn your food.”

Thank you for taking the time to read this blog post. Please leave a comment or share your understanding of how you participate in and contribute to the economy in your country, and we will gladly engage with you. Thank you once again for gracing us with your presence.