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Structural Guideline Interfacing Financial Literacy and Savings Behaviour of South African Households: a Study of Tshwane and Mahikeng Municipality Employees

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Structural Guideline Interfacing Financial Literacy and Savings Behaviour of South African Households: a Study of Tshwane and Mahikeng Municipality Employees Structural guideline interfacing financial literacy and savings behaviour of South African households: A study of Tshwane and Mahikeng municipality employees IFEANYI MBUKANMA Orcid.org/0000-0002-3037-8835 Thesis submitted for the degree Doctor of Philosophy in Business Management at the North-West University Promoter: Professor Ravinder Rena Co-promoter: Professor JJ Prinsloo Graduation: April 2019 Student number: 27662047 DECLARATION I, Ifeanyi Mbukanma, declare that the thesis entitled “Structural guideline interfacing financial literacy and savings behaviour of South African households: A study of Tshwane and Mahikeng municipality employees”, hereby submitted for the degree of Doctor of Philosophy in Business Management at the North-West University, South Africa, has not previously been submitted by me for a degree at this or any other university. I further declare that this is my work in design and execution and that all materials contained herein, have been duly acknowledged. ____________________________ IFEANYI MBUKANMA i DEDICATION I dedicate this thesis to God Almighty, “For the LORD giveth wisdom: out of his mouth cometh knowledge and understanding” (Proverbs 2:6), my parents, Mr and Mrs Frank Omeakaokwulu Mbukanma JP and my late sister, Mrs Chinedu Stella Emuomagho, for sacrificing all to see me succeed in life. I also dedicate this study to all members of the Frank Omeakaokwulu Mbukanma JP family, for their prayers and support. ii ACKNOWLEDGEMENTS Intellectual wisdom, knowledge and understanding cometh from above, all praise be to God Almighty, for his provision throughout this journey. All thanks to Him; indeed, without God, I cannot do anything. I acknowledge my promoters, Professors Ravinder Rena and JJ Prinsloo, for their support, guidance, professional advice, patience and encouragement during the course of this journey. I was privileged to work with both of them and may God reward their efforts. I acquired a lot of professional and academic skills from them, which has shaped my life in many ways. Working with them was enriching and a rewarding experience. My gratitude goes to Professor Victor Ojakorotu, for his support and love during the course of this journey. I thank my parents, Mr and Mrs Frank Omeakaokwulu Mbukanma JP, for letting me know that crime does not pay and that education is the key to success. I also thank them for their continuous prayers and encouragement. I wish to thank my wife, Mrs Fidelia Chekwube Ifeanyi, for her love, patience and understanding. I’m also grateful to all members of my family, Reverend Father Jude Mbukanma JP, Mr and Mrs Nwachukwu Mbukanma, Mr and Mrs Hilary Aniemeka, Mr and Mrs Ozo Eneanya, Mr and Mrs Raymond Ajaja, Barrister Isioma Onyeajunwanne, Mr and mrs Olika Matthew, Mr and Mrs Iyke Nwabudike, Mr Emefienem Anene, Nkwa Eboagwu, Engr. Justine Anene and Engr. Emeka Jerome Mordi for their prayers, support and encouragement. May God continue to bless you all abundantly. I wish to thank my friends, Dr Chinedu Wilfred Okonkwo, Dr Joshua Chukwuere, Dr Fisayo Popoola, Naana Mogotsi, Reginald Mbaegbu, Dr Kenneth Ohei, Dr Francis Onyebukwa, Dr Prince Enwereji, Dr Raymond Emekako, Tochukwu Nelson Agu, Dr Kelechi Ani, Dr Justine Ulohor, Ebiemi Allen Ekubo, Omoniyi Ibietan, Nnamdi Dickson Okolo, Olumide Enitan, Musanchi Sichembe and Ms Granny Mogotsi, for their support and encouragement. Finally, I want to thank the following library staff members: Mr Siviwe Bangani, Ms Dina Mashiyane, Ms Boitumelo Masilo and Mr Vuyo Ngayeka. I am sincerely thankful to all those who volunteered their time to complete the questionnaire during data collection. I appreciate your inputs and I am grateful for that. Thank you all and remain blessed. iii ABSTRACT The emergence of a credit economy in South Africa, gave birth to an environment where most households spend a great percentage of their earnings and even beyond, on immediate satisfactory goods and services. The literature reveals that most South Africans have several bank accounts, credit cards and debit cards, among others, thus making it difficult for them to understand their financial situation most of the time. As such, debts are incurred over a continuous period of time, giving room for little or no savings. As a result, a personal approach to cash management and the level of financial literacy among South Africans becomes a concern among academic scholars. Although, in theory, financial literacy was found as a core determinant of household savings behaviour, it is evident that though South Africans are familiar with financial knowledge and its terms compared to their peers in emerging economies, they have not inculcated this knowledge into making the right financial decisions with regard to savings and wealth creation. Consequently, the rate of personal savings in South Africa has been on a continuous decline, thus affecting the growth of the economy. As such, this study sought to ascertain financial literacy variables that have statistical significant impact on household savings behaviour. Thus, to achieve this objective, financial literacy micro-variables were used to obtain quantitative data from two municipalities (City of Tshwane and Mahikeng) in South Africa. The variables tested in this study were grouped into independent (financial literacy variables) and dependent variables (variables that measure household savings behaviour). These variables were statistically tested and analysed to ascertain the statistical significant impact of financial literacy on household savings behaviour. Correlation statistical analysis was performed to ascertain the relationship between dependent and independent variables as well as aiding pre-selection of variables for the Structural Equation Model. In addition, factor analysis was performed to identify micro-variables that have a statistical significant impact on household savings behaviour as well as a confirmatory factor analysis through structural equation modelling. The results revealed that most of the financial literacy micro-variables extracted from financial control, financial planning and financial knowledge as well as understanding, have positive statistical relationships with variables that measure household savings iv behaviour. Although it was also ascertained that the more South African households are knowledgeable and make use of financial and credit products, the lesser they are likely to save. Hence, the researcher succeeded in obtaining empirical results that statistically support the logic that financial literacy is a core determinant of household savings behaviour. As such, it is recommended that stakeholders in charge of financial literacy and savings campaigns in South Africa should employ the contribution of this study, which identifies savings literacy as the way forward to improve household savings behaviour. Keywords: Financial literacy, household savings behaviour, savings literacy, rate of household savings, economic growth v TABLE OF CONTENTS DECLARATION ........................................................................................................... i DEDICATION ..............................................................................................................ii ACKNOWLEDGEMENTS .......................................................................................... iii ABSTRACT ................................................................................................................ iv TABLE OF CONTENTS ............................................................................................. vi LIST OF FIGURES .................................................................................................... xii LIST OF TABLES ..................................................................................................... xiv CHAPTER ONE ......................................................................................................... 1 INTRODUCTION TO THE STUDY ............................................................................. 1 1.1 INTRODUCTION .............................................................................................. 1 1.2 RATIONALE FOR THE STUDY ....................................................................... 2 1.3 BACKGROUND TO THE STUDY .................................................................... 2 1.4 PROBLEM STATEMENT ................................................................................. 8 1.5 OBJECTIVES OF THE STUDY ........................................................................ 8 1.6 RESEARCH QUESTIONS ............................................................................... 9 1.7 SIGNIFICANCE OF THE STUDY ..................................................................... 9 1.8 RESEARCH METHODOLOGY ...................................................................... 10 1.9 STRUCTURE OF THE STUDY ...................................................................... 10 1.10 SUMMARY OF CHAPTER .......................................................................... 11 CHAPTER TWO ....................................................................................................... 13 LITERATURE REVIEW ............................................................................................ 13 2.1 INTRODUCTION ............................................................................................ 13 2.2 GLOBAL REVIEW OF THE NATIONAL STRATEGY ON FINANCIAL LITERACY EDUCATION .........................................................................................
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