Envisioning a future where every South African employee is financially free

The dilemma – a lack of financial freedom; a risk for increased fraud.

The majority of South African’s are not financially free. Whilst the definition of financial freedom might differ from person to person, a widely accepted view is that financial freedom is achieved when an individual no longer lives from paycheck to paycheck, as they have sufficient assets to generate an income on which to fund their lifestyle. South African’s have a notoriously bad reputation when it comes to saving towards retirement or financial freedom and the impact of COVID-19 has compounded this problem.

A Transunion Financial Hardship publication titled the “Wave 10 Report” (2020) paints a grim picture. Specifically, the following were noted:

84% of respondents remained concerned over their ability to pay bills and loans
82% of respondents indicated that their household income had been impacted by the pandemic
37% of impacted respondents expressed concern about how they would pay rent and utilities
35% of respondents were using savings to pay their bills
25% of respondents were borrowing from friends and family to pay bills
20% of respondents did not know how they would pay their bills.

These findings are backed up by the Old Mutual Savings and Investment Monitor (2020) which reported the following significant findings:

The percentage of personal loans taken increased from 21% to 43% between 2019 and 2020
On average 32% of respondents had fallen behind in their loan repayments
28% had fallen behind in their credit card repayments, up from 15% in 2019
26% had fallen behind in their loan or rent payments, up from 6% in 2019

To paint a more human picture, 69% of consumers reported that their household finances were worse than they had planned for. 52% of those who reported losing their jobs were millennials, with 40% of these being in Gauteng.

Young adulthood is a time for engaging with the world in ways that build confidence and competence. Losing your job in a stressed economy, with barriers to self-employment is dis-spiriting. It is unsurprising that the South African Depression and Anxiety group (SADAG) report increasing levels of mental ill-health in the workplace. Depression in the workplace alone costs South Africa more than R232 billion or 5.7% of its GDP due to lost productivity related to being absent or under-performing at work.

Of further concern is research released in February 2021 from Wave 3 of the NIDS-CRAM survey (Spaull, 2021). It alerts us to the following vicious cycles that employees face.

Employees are getting themselves into more debt in order to fund their short-term wants and needs. Cash-flow is an issue. The cash flow dilemma is caused by competing financial responsibilities and desires, compounded by a lack of financial and emotional literacy.

This results in people getting trapped in debt cycles that can end up in garnishee orders being granted against their salary. This then becomes a burden to HR to administer.

Also, business risk increases as financially stressed employees are more likely to commit fraud (Raphahlelo, 2006)). For HR and employers these factors play out as employees becoming increasingly likely to undervalue or under-appreciate the company benefits provided for them as they focus only on the amount of cash in their bank.

Towards financial responsibility and freedom: how coaching can offer a way out of this dilemma

The way forward from this dilemma does not lie in providing more financial benefits, but rather in investing in opportunities for employees to increase their financial and emotional literacy. This increases their ability to manage their existing cash-flows and build confidence and resilience in their ability to handle future financial challenges and setbacks. It also reduces fraud, shrinkage and employee dissatisfaction with company benefits instead of increased salary.

Developing employees’ financial and emotional literacy can be achieved through the implementation of financial literacy programmes in the workplace accompanied by individual and group coaching. Financial coaching is a growing niche of coaching practice offered by skilled and qualified professionals with backgrounds in financial planning or accounting as well as proven competence to coach and facilitate learning for their clients, not simply advise them.

Engaging with a new niche in coaching: reducing risk and increasing quality assurance for HR

As this is a newly establishing niche of coaching practice it is important to be sure that someone who calls themselves a Financial Coach has the necessary skills, qualifications and experience in order to ensure that the desired results for employees, and the business, are delivered. Some simple steps one can take to confirm this are to request confirmation of:

Qualifications in both financial and coaching skills. When a coach offers an International Coaching Federation (ICF) accredited coaching qualification, risk is reduced given the gold standard quality assurance that this offers – at least 60 hours of coach specific training focused on coaching core competencies. When a coach offers an ICF credential, whether ACC, PCC or MCC level, HR is assured that the coach has passed a globally recognised coach knowledge assessment and has demonstrated competence in coaching.
Membership of both financial and coaching professional organisations such as The Financial Planning Institute of South Africa (FPI) and The International Coaching Federation (ICF).
A designation or credential issued by both financial and coaching professional organisations eg. FSA™, RFP™or CFP® from the FPI and ACC, PCC or MCC from the ICF.
A CV detailing previous related projects or work experience.

HR professionals are uniquely positioned to be able to identify the need for, motivate for and implement supportive and empowering financial and emotional literacy programmes.

Be part of the opportunity to drive a solution to creating a future where every employed South African, and their family, are moving towards becoming financially responsible and free.

Mary J Fourie is a millennial change-maker who aims to positively impact the world and create freedom for herself and others by living her values of connection, contribution and responsibility. She helps people to think about and plan their money and their life in an integrated, whole-person approach incorporating mind, body, and soul. Her vision is to inspire change-making; working with her clients to shift the way that they earn and spend their money to align with what feels most purposeful and meaningful to them. Mary J holds an ICF ACTP qualification and an ICF PCC credential.

Article References

1. Allan Gray (2019) Developing your advice business: Manage the investor not the investment.

2. Arruda, W (2019) Why your employees’ financial well-being affects your corporate brand. https://www.forbes.com/sites/williamarruda/2019/08/04/why-your-employees-financial-wellbeing-affects-your-corporate-brand/?sh=1a426f6c40f5

3. Old Mutual Savings and INvestment Monitor (2020) COVID-19 Special report.

4. Raphahlelo, M.C. (2006) The nature and effects of financial problems on employees in the office of the Premier, Limpopo Province.

5. SADAG (2021) Depression in the workplace.

6. Spaull, N (2021) More than two million jobs returned when lockdown eased in 2020 – but hunger persists. NIDS-CRAM WAVE 3.

7. Transunion (2020) The COVID-19 Pandemic’s financial impact on South African consumers.
https://content.transunion.com/v/financial-hardship-report-sa-wave-ten

The International Coaching Federation (ICF) is the world’s largest organization leading the global advancement of the coaching profession and fostering coaching’s role as an integral part of a thriving society. Founded in 1995, its 35,000-plus members located in more than 140 countries and territories work toward common goals of enhancing awareness of coaching and upholding the integrity of the profession through lifelong learning and upholding the highest ethical standards. Through the work of its six unique family organizations, ICF empowers professional coaches, coaching clients, organizations, communities and the world through coaching.