A tweet by ebullient Owen Nkomo of Inkunzi Investments got our regular blogger Khumbulani Mpofu thinking about financial literacy. Or, rather, the lack of it among many young South Africans. Drawing on his own experience as a banking intern, Mpofu wonders whether the idea of abandoning formal maths for practical financial literacy isn’t the most sensible way ahead. – AH
By Khumbulani Mpofu*
Let me start with a side story. A couple of weeks ago, I read a tweet which developed into a twitter conversation with a gentleman who runs an aspirational Investment and Stockbroking firm.
The company is not well known, but the gentleman in question, who is the CEO, appears to have a belief that modern enterprises should harness the power of social media to advance their business interests. He tweets in sprints, almost always seeming to be out of breath and most usually with exclamation marks at the end of each torrent of verbiage, creating the impression that the ordinary course of his business is full of excitement.
In the particular statement that I am referring to, he stated that he believed that financial literacy should be introduced into our education system and that math literacy should be removed from the curricula.
When I read this, I was in part agreement, but also in total disbelief because the statement wasn’t substantiated by any manner of research. But later I forgave the author. In part because earlier in my career that I, and many of my peers, were largely disadvantaged in our understanding of the country’s financial systems.
We were unsighted about the many mechanisms in which banks, lenders, retail stores, investment firms and many other corporate entities functioned in utilising various financial instruments of varying complexity to extract profit from our daily consumption.
I recalled my earlier days as a glorified intern in a respectable banking institution. When I was first made aware of the possibility of individuals having multiple credit cards, it was bewildering. So I expressed my confusion at this Retail Credit Strategy meeting. I could not get it; at the time I didn’t have the understanding that someone could be so out of pocket as to require further credit exposure at an incredulously compounded cost of credit.
Much later in my career in that respectable bank, I learnt that consumer spending habits, and the habits of their consumption would eventually lead to increased risk for the lender. To the point that credit is no longer made available to the borrower, who may, at that time have found themselves in financial distress, with everyone and their cat calling them to make arrangements to pay an amount that would have bounced at the bank with a debit order returned unpaid.
At this point, it becomes a vicious circle of debt and constant calls from collection agencies. Then micro-lenders enter the picture, charging an arm and a leg for some extension of credit to allow the individual to pay the other earlier creditors – or to buy bread and milk for the next day.
In severe cases, the consumer, still aspirational, could have purchased a house, secured a mortgage and a luxury vehicle. At the point of financial distress they become the objects to be first repossessed. The lenders obtain court judgements and the financial standing of the individual becomes impaired for an extended period.
Life hurts. To return to good financial standing after all this takes some resolve. For some, the trek back to financial health and the hardships along the way induce suicidal thoughts and deep depression. Added to this, the individual also becomes unemployable because of their poor credit record, so changing jobs to obtain a better income to settle those bills also becomes a challenge.
The government has resolved over the past few years, to make financial literacy part of the economic social decorum. I’m not an expert in matters of government policy, but I have recognised that things like the National Credit Act, regulation of micro-lending institutions, the initiation of Debt Counselling alternatives and the introduction of measures to reduce excessive and reckless lending have been done in good conscience.
So agreeing with the tweet by the exuberant aspiring CEO of the investment was in this regard and recognition that financial literacy is still lacking amongst the youth of this country. Most particularly, young and black Africans who were perhaps born into circumstances of life which prevented the understanding of monetary economics, credit cycles, behavioural risk indicators, borrowing limits and better yet, saving of disposable income to achieve and acquire the Audi, the 3 series BMW, the townhouse apartment and the fashion that becomes part of the aspirational lifestyle fed to us through clever marketing on big screen televisions and through the satellite TV channels.
Financial Literacy in the early learning system would yield greater benefits to the prosperity of the aspirational, black/previously economically disadvantaged youth of our country. This should perhaps be a part of the considerations in the overhaul of our country’s education system, acknowledging the mess that it is currently in, to prepare and provide insight and foresight for the generation that will become economically active in the future. A generation who will then not have to hope for the reprieve of a government manufactured credit record amnesty or suffer the consequences of queuing at the Department of Labour offices for unemployment grants.
I therefore agree with @owennkomo, in part, and perhaps after much consideration, in full.
- Khumbulani Mpofu is an IT Auditor during the day, Solutionist and Optimist every other time. Follow @Khumbulani on Twitter
