South African households got wealthier in the first quarter of 2015 despite difficult economic conditions.
This is according to the Momentum/Unisa Household Wealth Index which revealed the average net wealth of a South African to be R114,547. This figure is up from R103,229, five years ago.
The research found that debt repayment as a percentage of income stood at 23.48%, while the average contributions to retirement funds as a percentage of income was 4.55%.
Real per capita net wealth of South Africans increased by 0.8% from R113,634 at the end of the fourth quarter of 2013 to R114,547 in Q4 2014, the report said.
In current prices, South Africa’s household net wealth per capita increased by 6.1% to R145,904 over the year to Q4 2014.
Over the year household assets increased by 7.4% and liabilities by 5.5%, the Index said.
Financial assets – mostly investments for retirement – comprised 70.4% of total assets, while residential assets made up 24.4%, Momentum and Unisa’s data found.
SA household liabilities
A household’s net wealth is calculated by subtracting its liabilities from its assets.
A household’s liabilities consist of all outstanding debts – that is, loans/credit and unpaid incidental accounts such as municipal, cell phone, medical and school fee arrears.
Household debt is primarily used to finance residential assets and durable goods such as motor vehicles, furniture and electronic equipment.
South African households’ total liabilities were estimated at R1 795.7 billion at the end of Q4 2014. This represents an increase of 5.5%, or R94.2 billion compared to Q4 2013.
However, real liabilities per capita declined by 1.3% or R323 to R25,897. This means that the use of liabilities per person of the population declined when measured in terms of the purchasing power thereof.
SA household assets
The ratio of household assets as a percentage of disposable income was 430.1% – the same as in 2013.
The driver for SA’s household assets included:
- household disposable income;
- compulsory contributions to retirement funds; and
- real value of new investments in residential property.
The value of households’ liquid assets (mostly deposits) was equal to 3.8 months of after-tax income, the Index found.
Required debt repayments/instalments amounted to 23.5% of SA household’s after-tax income.
Momentum noted an alarming observation in the increase in borrowing to finance daily consumption.
It said that the fastest growing debt type is credit card debt which was 9.7% higher than a year ago. Contrastingly, instalment sales credit grew at almost half the pace (5.9%), while the growth in unsecured loans (3.7%) and mortgages (2.7%) also levelled off (3.7%).