“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 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 & pensions)
  • Access to quality sanitation infrastructure and clean & running water
  • Access to affordable, quality education(primary, higher and further education)
  • Reliable and affordable energy (electricity)
  • Unemployment rate, inflation & interest rates
  • Stable political and financial factors (government’s role)
  • Affordable and properly structured efficient health care (both public & private)
  • Equality across all groups (all citizens)
  • Effective implement of government’s policies, programs and law enforcement level (effective policing & security of all citizens)
  • Access to affordable and reliable telecommunication (internet, cellphones, telephone)
  • Adequate, efficient, regular maintenance of infrastructure (roads, buildings/properties)
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Some or all of these factors affect chances of finding a job or creating entrepreneurship opportunities, enjoying access to clean and quality water & sanitation; access to all efficient health care & education(empower future leaders to solve economic & country’s challenges); stable political & financial factors which is the role of government, ensures that the citizens are safe and protected and financially not taken for granted(ride) such as financial systems that are stable and reliable and offer security to its citizens; access to proper, affordable health care ensures the citizens are healthy and can continue to contribute to the welfare of the state by contributing taxes and other income. To stretch the understanding further, we need to examine what causes these phenomena and how to work within the confines (restrictions) of limited resources.

Let us look at the inflation (market force that is mostly caused by 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. Inflation is an ongoing rise(increase) in general prices for all goods and services and it eats away at your standard of living; the more the inflation goes up, the less your savings, your lifestyle, your spend is worth – meaning your spending power decreases and it becomes difficult to enjoy what your money used to buy, because your money is worth less, eg. Take a R1000,00, 10 years ago, where you could fill up groceries,meat & vegetables in your trolley, compared to Today and see if you would be lucky to have 5 or 10 items in your basket with the same amount of money.

Inflation is mostly caused when demand for goods and services increases far much more than the supply and the sellers can then increase their prices without demand decreasing. Sometimes, inflation is caused by costs increase which will then force buyers to pay more and this can be caused by rapid wage increases, rising energy prices and rise in tax – value added tax (VAT).Not long ago, here in South Africa, our government raised VAT from 14%-15%, that led to increased prices of goods and services overnight, some few jobs were shed because the firms could not produce goods and services at the new price level and to top it all off, the economy of the country is in the doll drums (not performing at all). Every country experience inflation pressure, here in South Africa our Reserve Bank (SARB) has a target rate of inflation of between 4%-6%, so what it means, is that, if your savings account does not earn 4%-6% after tax and the bank charges, then it is worth less real value and you need to  shop around for a better investment/savings vehicle (instruments) that will deliver above the 4%-6% rate of return (remember this fact when you’re venturing for a savings vehicle).

Hyperinflation happens when a country is hit by high and increased rates of inflation which would lead to devaluing of the country’s currency. Let us take our neighbour up north, Zimbabwe, when 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 looks like), the Zimbabwean Reserve Bank (ZRB) had to abandon the Zimbabwean dollar and started adopting other currencies such as USA dollar and South African Rand.

Did you that know that our money and mood (consumer confidence index) gives us an indication of how confident we are about our future economy and how we will behave and participate in the economy; so the consumer confidence index is important that it establishes consumers’ current and expected attitudes of the state of the economy of the country, as participants, consumer consumption (buying groceries, car, clothes or furniture) is what drives economies and knowing how consumers feel allows business, government and individuals to plan better.

So, how does this consumer confidence index worked out, well the SA 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, washing machine, refrigerator or a car or a house in the next 12 months?

Scales used to rank the outcome is 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 the lifestyle, therefore my confidence is high. When it is a high confidence outcome, then it indicates that consumers are more likely to spend their cash, increase their spending on nice to have(high ticket items) items such as house,

Scales used to rank the outcome is 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 the lifestyle, therefore my confidence is high. When it is a high confidence outcome, then it indicates that consumers are more likely to spend their cash, increase their spending on nice to have (high ticket items) items such as house, furniture, appliances, new car, clothes. This ability depends on availability of the after tax income (disposable cash & credit available).

Low confidence: I worry that I do not have enough money to pay all my bills every month and now being retrenched 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, about pay increases, bonuses or having a job. 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 is simple interest(it is an additional cost that you will pay to a lender to borrow money; it is paid on the original amount borrowed also known as principal amount; and not on the interest owed on the loan). Fixed interest on the one hand, a loan or mortgage that has an interest rate that will remain at a predetermine rate for the whole term of that loan/mortgage,e.g. Bonds issued by government usually are considered fixed interest because they pay a fixed interest rate until the loan is repaid in full and again 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 (is the current interest rate deduct inflation, it gives investors in bonds/fixed income instrument an idea whether their interest will keep up with or beat or erode the purchasing power caused by inflation).

Did you know that for a consumer to enjoy the lifestyle now – instant gratification, he will have to pay an additional money called interest; sometimes assets such as cars, home, furniture with 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 an interest (income the lender wants while the borrower is prepared 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 cost) and heartache(stress).

The Central 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(lending rate used to lend consumers) and this lending rate is currently 10 %. In SA, 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, then it affects the consumer’s pocket (borrower); as you will not be able to repay the lender monthly installments (interest + capital) we call it excessive borrowing, which can be very dangerous to your pocket and your health and it can even be more stressful where you have many loans such as overdraft, 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.

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

The National Budget Speech delivered by the Minister of Finance in February and again Mid term budget in October each year in South Africa, indicates how our taxes (income) will be divided according to the essential needs of the public services and functions. Have you ever wondered what happens to your tax money that you contribute monthly on your payslip(paycheck)? It goes to government via SARS (linked to Treasury department and it is the responsibility of the Finance Minister to divide the income pie for those essential public service and functions).

Like your home budget which includes groceries, rent, transport, school fees, electricity & water just to mention a few; the National Budget is prepared exactly with the same principle, in mind, in the collaboration with the Treasury, through, a well thought out plan of the Finance Minister, to balance & satisfy the needs of the citizens of the country, goes through it with a fine tooth comb and at the same time 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(sector) such as education, water & sanitation, road infrastructure & development, health, housing, energy(electricity) and other sectors; 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 represent 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, your friends contribute to the country’s GDP; so in effect the GDP displays the following:

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 can become(potential), taking into all those socio-economic factors that come into play.

SA GDP for 2018/2019 was reported as -3,2%, according to the SARB website;  our economy is not growing at all, one of the many effects is the rise in 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 bubbling & explosive volcano, because the firms are not making profits and they shed jobs, as the economy cannot absorb all of the jobs in the market and that is why we need to change our thinking, differently, about how we approach our careers and creating entrepreneurship 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) and believing and being convinced that Budgeting (see chapter on the Road map to financial wellbeing Chapter 13) does not work, yet it reflects on your Life, your role in the economy, your self belief, your use, your control & management of resources.

Yet the methodical breakdown of the National Budget has been displayed and what it takes into account; to avoids chaos, unnecessary spending & stress and gives a clear vision of the of the path ahead, financial wellbeing, balance and freedom of choices that the country has within its confines. Having said, why are we are so quick to judge, to condemn, to demean, to criticize the government spending and allocation, as if our economic affairs are in all working perfectly, in tip top shape and we have it all together and under control, therefore let us not throw stones in glass houses. There is a very popular Ghanaian wisdom it state that “Look at your pot, because if you don’t, you will burn your food”.