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 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 (Arruda, W, 2019).
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 (Allan Gray, 2019).
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 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
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.
This article was written by Mary J Fourie and first published on HR Future in collaboration with the International Coaching Federation.
In 2020, the International Coaching Federation (ICF) celebrated 25 years as the global organisation for coaches and coaching. ICF is dedicated to advancing the coaching profession by setting high ethical standards, providing independent certification and building a worldwide network of credentialed coaches across a variety of coaching disciplines. Its 37 000-plus members located in 146 countries and territories work toward the common goal of enhancing awareness of coaching, upholding the integrity of the profession, and continually educating themselves with the newest research and practices.
ICF South Africa is a Chartered Chapter of ICF with 413 members of whom 323 – 78% – are ICF credential holders. (October 2020 figures). Mary J Fourie has served as a volunteer member of the ICF SA Charter Chapter since 2019, most recently in the role of Ambassador for Coaching in the Financial Services Sector.
- Allan Gray (2019) Developing your advice business: Manage the investor not the investment.
- Arruda, W (2019) Why your employees’ financial well-being affects your corporate brand.
- Old Mutual (2020) COVID-19 Special report.
- Raphahlelo, M.C. (2006) The nature and effects of financial problems on employees in the office of the Premier, Limpopo Province.
- SADAG (2021) Depression in the workplace.
- Spaull, N (2021) More than two million jobs returned when lockdown eased in 2020 – but hunger persists. NIDS-CRAM WAVE 3.
- Transunion (2020) The COVID-19 Pandemic’s financial impact on South African consumers.