Money stress worries most South Africans

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JEREMY MAGGS: South African companies spend heavily on medical aid, retirement funds, employee assistance programmes and wellness benefits. But I think the real question is whether those benefits are actually helping employees cope with the pressure they are currently facing.

The organisation Wealthbit says four out of five South Africans worry about money most of the time. Let me say that again. Four out of five South Africans worry about money most of the time, with financial stress damaging focus, energy and motivation at work. It argues that companies are paying for benefits that often fail to address the immediate financial strain carried by employees.

The CEO of Wealthbit is Alex Cook. Alex, this is a very important issue. Thank you very much for talking to us today. So companies spend billions on these benefits that people either don’t use or value. How strong is the evidence for that claim?

ALEX COOK: Jeremy, thank you. The evidence is overwhelming. We’ve conducted numerous surveys. Various other organisations have done multiple surveys, and it’s overwhelming that presenteeism and absenteeism within businesses is costing businesses a fortune.

The resources that are being allocated towards benefits are making a difference, but they’re not addressing the issue where it needs addressing, and that is in a person’s daily life.

You have medical aids and the medical aids sort out a person when the person’s sick. And then you’ve got death cover, so if a person passes away, there’s something there for the family. Disability cover – something there for the family. But all the damage is caused between now and the time that that incident happens.

Retirement is also often catered for. If the person ends up making unforced errors on their personal finances due to financial pressures, it can disrupt absolutely everything else.

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JEREMY MAGGS: Tell me where the balance is, then, between traditional benefits failing employees and salaries just not keeping pace with the accelerating cost of living.

ALEX COOK: I guess that balance is understanding what benefits the person has, first of all, what their current financial setup does look like, and then putting a plan together to figure out how to make everything work.

What we’re finding is that individuals are spending an enormous amount on debt; gambling is becoming more and more prevalent. The interesting bit is that it’s not just at the lower end of the workforce, it goes right up, where 80% of the workforce say that financial stress is affecting their focus, energy and motivation at work.

So what we’ve seen that has helped, is where people are able to put systems in place in their personal lives that make their situation better. So it’s just a systematic approach to making it better, rather than episodic-type intervention.

JEREMY MAGGS: Which also means taking the bull by the horns yourself. If four out of five South Africans are worrying about money most of the time, you’ve got to ask how much pressure can an employee realistically solve and become involved in?

ALEX COOK: Well, that’s exactly right. We see that manifest with many people starting to look for alternative employment, looking for jobs that offer just a small increase in pay. They’re very close to the breaking point.

The other thing that they’re often doing, that staff are often doing, is taking on additional roles outside of their normal work.

So they’re trying all they can do to put more money into the pot. But if a lot of the pot is disappearing towards debt repayments, it almost doesn’t matter how much you put into the pot; it’s never going to be enough. So we need to get to the root cause of individual problems to help them permanently solve it.

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JEREMY MAGGS: Talking about pots, let me ask you a question about the two-pot system, if I can. A lot of workers we know directly access savings through the system. It suggests to me that retirement benefits are no longer meeting the reality of monthly financial survival. We know that National Treasury says, for instance, the two-pot system allows limited access during financial distress, while preserving a retirement component. But that has become stretched to the hilt.

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ALEX COOK: Yes. We’re seeing more than 50% of people have actually accessed their two-pot opportunity. What this means is that people are going to be left with a lot less money at the end of the day than they thought.

ALEX COOK: This is really why our entire organisation started it. It was after countless conversations with individuals in their 60s, and the same words kept on being uttered, which was: ‘Why don’t they teach this stuff at school?’ ‘I’ve had an advisor my whole life, why have I no money?’

We realised that it’s an education thing. It’s an education thing – not right at the end of a person’s working life, but throughout their working life.

So we feel we’re quite well-positioned to be able to help people with this and, in doing so, help companies get their staff a lot more productive.

JEREMY MAGGS: Alex, are you able to tell me how the stress shows up in the actual workplace performance of a staff member as a result of this problem?

ALEX COOK: This was really just with the surveys we did, where people sort of anecdotally said that most of them, more than 80%, are financially stressed.

But in a workplace it’s worth just imagining what the situation looks like. You can imagine you aren’t able to put fuel into your car to come to work, or you aren’t able to feed your child before your child goes to school. When you go to work, the last thing in the world you’re thinking about is the job on hand.

If you’re a senior staff member and you are battling to pay your bond, concentrating at work – although that’s the way that you’re bringing money in – is very, very difficult.

So what happens is that people are there, but not really there. We call it ‘presenteeism’. And we also see that more people that are financially stressed take a higher number of absent days per year.

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But in total, in the South African workforce this now costs companies around R250 billion a year. It’s a big number.

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JEREMY MAGGS: Which means that they will inevitably become ill – which could be a consequence – which leads me on to medical aid, which remains, I think it’s fair to say, probably the most valued benefit.

But we also know, Alex, that premiums are rising rapidly, and it would suggest to me that employees are now paying more for cover that increasingly feels inadequate.

ALEX COOK: If you think about the likelihood of occurrence as being one element of a graph, and the financial impact being the other elements of a graph, think of the X axis and the Y axis. Your medical aid is very, very expensive and the reason it’s expensive is because you are very likely to have some medical incidents over the course of your life. That component is not going to go away, and it’s going to continue rising – which is placing additional stress.

An even more likely component is that – and it’s a good news story – is that you are more likely to reach the age of retirement before you die. In other words, you’re more likely to get to an age of 65 than to die before the age of 65, which is good. It’s a good news story.

The problem is that people haven’t catered for that very expensive event, which is retiring. That happens all the way along.

JEREMY MAGGS: Alex Cook, I’m going to leave it there. Thank you very much indeed for outlining that. Alex Cook is the chief executive officer of Wealthbit.

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