South Africans’ limited financial literacy has been identified as a significant factor exposing them to predatory lending, financial scams, and inappropriate financial products or services, according to Finance Minister Enoch Godongwana. The 2020 Financial Sector Conduct Authority Baseline survey revealed that South Africans, on average, have a financial literacy score of 52 out of 100.
Godongwana emphasized that this lack of financial knowledge exposes individuals to various risks, including predatory lending and financial scams. He highlighted the need for comprehensive financial consumer education programs and additional consumer protection measures.
In response to questions from EFF MP Eugene Mthethwa about identified loopholes allowing bogus financial services and potential swindling by medical insurance companies, Godongwana stated that the National Treasury had not been made aware of bogus medical insurance companies. However, he acknowledged that several loopholes, including financial literacy, disadvantage vulnerable individuals.
The rapid pace of digitalization has introduced new risks for consumers, especially those with low financial and digital literacy. The Finance Minister cited challenges related to financial and banking crimes, including contact crimes, digital offenses, application fraud, and card fraud, based on the SA Banking Risk Information Centre’s annual crime statistics for 2022.
Godongwana warned against get-rich-quick schemes, with scammers exploiting conventional systems like stokvels. He emphasized the importance of caution and vigilance, especially with the emergence of crypto-based Ponzi schemes. The National Treasury, through the National Consumer Financial Education Committee, has been conducting financial education awareness campaigns since 2018, addressing various topics, including scam awareness.
The Financial Sector Conduct Authority regularly issues warnings about fraudulent companies, urging the public to verify the authenticity and registration status of service providers. Godongwana concluded by emphasizing the need for greater vigilance and caution when engaging with the financial system, particularly in the context of emerging financial technologies.