Although sufficient information about households' income and expenditure is available, very little is known about the way in which households use their income to acquire assets and how such assets are financed. The primary objective of the research will be to construct a balance sheet of the assets and liabilities of South African households.
Prof Bernadene de Clercq, head of the PFRU, says the information obtained from the research will assist the country in many ways. It will assist policy makers in drafting the correct policies based on sound research, as well using the correct policy instruments to achieve a specific outcome.
Currently, policies are drafted without taking into account the impact they may have on the assets and liabilities of households. For example, when the electricity tariff increases were determined a few years ago, the regulator had no knowledge on the impact it would have on household finances generally, as well as the ability of households to save and acquire sufficient assets for retirement.
Likewise, when the government determines tax rates or introduces new taxes, this is done without being aware of the impact it may have on the retirement planning of households. This has major implications for the economy and job creation. When households pay more for electricity or toll roads, economic theory dictates that they will have less income to save, which reduces their ability to retire financially independent. This places additional burdens on the government to increase taxes in an attempt to assist these households after retirement. In addition, as households save less, economic theory states that it may put pressure on the country's current account deficit to increase, which adds pressure to the rand exchange rate to weaken. This in turn may cause inflation and interest rates to increase. Consequently, Clercq says that households may be doubly affected if the correct policy measures are not introduced.
She adds that although it is possible to make assumptions about the impact of policy measures on household assets and liabilities, currently there is no idea of the actual impact in rand and cents on households' balance sheets, as well as wider economic and socioeconomic impacts, which in turn have consequences for future policy decisions. "We hope that through this research to assist the authorities and other role players in the economy in their decision making processes," she said
Amongst other things, researchers will attempt to construct household balance sheets for the different income and age groups in the various provinces. Numerous resources will be used to undertake the research. Households will be requested to complete questionnaires, which will be treated as confidential information. Information will be gathered through visits to household homes as well as via telephone calls to randomly selected households. This information will be complemented with publicly available information from, such sources as the South African Reserve Bank, the National Credit Regulator, annual reports of companies and other sources.
The PFRU at the Bureau of Market Research (BMR) was established in 2010, specialising in research across all areas of personal finance, mainly from a consumer perspective. It is not affiliated with any financial institution or government body other than Unisa and aims to generate ethical, reliable and innovative research. It is anticipated that the work of the unit will impact on government policies, as well as business strategies and academic knowledge creation.
