Investment is not only for the wealthy. It is possible to invest as a low income earner in South Africa. In fact, investment has never been limited to high income earners as we will show you in this article.

low income investment south africa

A shanty town in Cape Town. Creative Commons photo via Wikipedia by Chell Hill.

Low income in South Africa

  • According to the Congress of South African Trade Unions (COSATU), 60% of workers in South Africa earn no more than R5,000 a month.
  • According to a study by the Organisation for Economic Co-operation and Development (OECD), it will take nine generations for SA’s low income earners to reach an average income.
  • More than 30.4 million South Africans live on less than 992 rand (about $75) per person per month.

It is advisable not to choose an investment option you know very little about. If possible, seek advice from a fund mananger. However, there are consulting costs involved.

Investment for Low Income Earners in South Africa

Unit Trust

Unit Trust is a form of collective investment under a trust deed. A unit trust pools money from many investors into a single fund, which is managed by a fund manager. Unit trusts does the hard work for you by investing your money in a various assets such as bonds, shares and property.

There are around over 1,500 locally managed Unit Trust in South Africa such as Old Mutual, Allan Gray and South African commercial banks.

Stokvel

Stokvels are invitation-only clubs of twelve or more people serving as rotating credit unions or saving schemes in South Africa where members contribute fixed sums of money to a central fund on a weekly, fortnightly or monthly basis. In the past, they were informal savings agreements, but South African banks are now offering Stokvels products. Stovel investment usually gives good returns on savings and interest rates.

Property

In most cases, property investment is lessy risky. As a low income earner, you can try to invest ina real estate investment trust (REIT). For instance, Equity REITs allow investors to pool their money to fund the purchase, develop and manage real estate properties. with as little as €50, you may invest in international peer to peer property investment platforms such as Bulkestate and Crowdestate.

Bitcoin

The value of Bitcoin has gone up by more than 2000% in the past five years. This is a much better performance than what stocks and gold have returned. Find these 7 reasons to invest in Bitcoin.

While we believe that Bitcoin is an excellent asset, you should be warned that it is also a highly volatile product. Therefore, we recommend that you have a long-term view when you are investing in it.

A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990’s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. –Satoshi Nakamoto

Shares

A share is an indivisible unit of capital, expressing the ownership relationship between the company and the shareholder. It entitles the shareholder to an equal claim to the company’s profits. According to the type of share you have opted for, you may have a right to vote at the company’s annual general meetings and other official meeting.

You don’t need to be an high income earner to invest in shares in South Africa since you are not buying the company but a share in the company.

Fixed Deposit

investment for low income earners south africa

A fixed deposit is a financial instrument provided by banks, which provides investors a higher rate of interest than a regular savings account at the maturity date.

You can put your money in a fixed deposit account for a specified period of time and gain interest on it. For example, Capitec offers 4.85 % for deposits starting from as little as R1, Standard Bank offers 5.90% for a minimum deposit of R250 while African Bank offeers interest of 8.67% for a 12-month fixed deposit with a minimum deposit of R500. There is usually a penalty for withdrawing your funds before the specified period. You may also be required to give 24 hours’ notice or 7 days’ notice before early withdrawal depending on the bank’s policy.

investment for low income south africa

Comparison of interest rates for fixed deposit in South Africa. Source: Intellidex Research.

Old Mutual is one of the leading investment and savings group in South Africa. With Old Mutual, you can invest as low as R250. You can see some of options in the table below:

OPTION 1OPTION 2OPTION 3OPTION 4OPTION 5
UNIT TRUSTSOLD MUTUAL INVEST TAX FREE PLANFLEXIBLE PLANOLD MUTUAL FUTUREINVEST 4 MY GOALMAX INVESTMENTS
MinimumsR500/monthR250/monthR350/monthR250/monthR350/month
Can I access my investment anytime?YesYesYesNoNo
Can I stop my investment if I need to?YesYesYesYesYes
Can I invest online?YesYesYesNoNo
Can I invest via an adviser?YesYesYesYesYes

RSA Retail Savings Bond

An RSA Retail Savings Bond is an investment with the Government of South Africa which earns fixed or inflation linked interest for the term of the investment. The minimum amount that can be invested is R1 000.00 and the investment may not exceed R5 million. You have two options:

  • Fixed Rate Retail Savings Bond. Consists of bonds with 2-year, 3-year and 5-year terms. Fixed Rate Retail Savings Bonds earn a market-related fixed interest rate payable on the interest payment dates until maturity. Different interest rates apply to each of the maturities in the series.
  • Inflation Linked Retail Savings Bond. Consists of bonds with either a 3-year, 5-year or 10-year maturity. Capital amounts invested in Inflation Linked Retail Savings Bonds are inflation adjusted over the term, and a floating interest rate is payable every 6 months on the interest payment dates.

Conclusion

With a clear financial goal in mind, you can invest in any of these options as a low income earner in South Africa and improve your standard of living.