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That portion of an individual's income which he/she saves. The national savings rate is important because those savings can be used by businesses to expand their businesses and grow the economy. Countries, like Japan, which traditionally had a very high savings rates also tended to have strong growth. South Africa has a very low savings rate and thus has to depend on foreign direct investment (FDI) for capital injections. The savings rate also impacts on what economists call the "multiplier effect" in the economy. The multiplier determines the income effect of an injection into the economy. If an amount is introduced into the economy from an outside source, then, depending on the savings rate, a percentage of it will become income for someone else in the economy - and then that person will save a portion of it and spend the rest which becomes income in the hands of someone else. For example, suppose that you receive R1000 in an inheritance from an overseas relative. If the savings rate is 5% then, in theory, you will save R50 of that and spend the other R950 - which becomes income for someone else who will save 5% of it or R47.50 and spend the rest and so on. In the end, the effect of the injection on total income is the reciprocal of the savings rate - so if the savings rate is 5% (i.e. 1/20) then the impact on total income will be 20 times the original injection - or R20 000. As indicated above, the savings rate in South Africa has always been and continues to be very low – which accounts for our relatively low growth rates, especially in the last decade. In any economy there are generally three internal sources of savings – that of consumers, businesses and the government to which must be added FDI. In the 4th quarter of 2023, FDI was 15,5% of gross capital formation – considerably more than in 2022 when it was 3,5%. The national savings rate was 14% in 2023 down from 2022’s 14,9% =- and in the 4th quarter of 2023 the rate got down to 12,7%. The average for emerging market economies is 34%. In South Africa, households were a miserable 1,7% in 2023 and businesses managed 15,9% while the government dis-saved by 3,6%.

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