Has your jaw dropped when you’ve seen that yet another R100 million-plus house has been sold? Or when you see the restaurant bills of the rich and famous entering into the tens of thousands of dollars?
It’s undeniable that the way the world’s super wealthy spend their money can be incomprehensible to those of us who have more humble takings at the end of the month. But when it comes to spending money, it’s all relative.
The way we spend and view money changes with the more money we have. As your income increases, so do your costs, as you adopt higher standards of living.
But there comes a point in wealth terms where understanding the relative value of money gets a bit silly – to the point we cannot even comprehend how someone could casually purchase a house for R290 million – or on the more altruistic side, simply give significant portions of their money away.
This disconnect between the ‘everyman’ and the super wealthy was demonstrated recently, when the world’s richest man, Bill Gates, featured on the Ellen Degeneres talk show, where he was asked to guess the price of items everyday people would use.
In most cases, Gates overestimated the value of the item by some margin – presumably because such lowly priced items don’t feature in his life.
But as someone who could probably spend over $1 billion a year without too much trouble, it makes sense.
The idea of relative value to money is nothing new, and is seen across all levels of wealth. For example, in South Africa, middle class households spend a significantly smaller portion of their monthly budget on things like groceries compared to poorer households.
When you have more money, the basics start becoming less of an issue – things you reserved as ‘treating yourself’ may start becoming the norm, and you stop counting the cents and price checking when you hit the shops.
How South African billionaires value money
So how does a billionaire in South Africa see a rand compared to the average worker?
The most recent billionaire data from Forbes shows that South Africa’s five billionaires have a combined net worth of just under R250 billion – which works out to an average of roughly R50 billion per person.
Using a ‘conservative’ withdrawal rate (the presumed rate of total savings someone would withdraw each year upon retirement), we can assume that the average South African billionaire would be getting around R2 billion per annum for 25 years, should they cash it all in. After tax (at the highest tax rate of 45%), this comes to approximately R1.1 billion.
Using the latest data from BankservAfrica, we can calculate that the average take-home salary in South Africa as of January 2018 is at R176,100 per year.
That means for every rand the average South African has, the average billionaire has R6,246. Or put another way a rand to a billionaire might as well be 0.0001 cents.
In relative terms, when a billionaire in South Africa casually forks over R150 million for luxury property in Cape Town, its relative value is about the same as R24,000 is to us common folk.
And the relative cost of a R97,000 first-class flight to Paris, is the same as buying a slab of chocolate (R15.50).
Below are a few examples of high-class luxury living that the super wealthy might enjoy here in South Africa – and their relative value.
Note: this is an exercise in relativity, and does not presume South African billionaires actually view the world like this.
South Africa’s most expensive house ever sold
- What billionaires pay: R290 million
- Relative value: R46,430
A Ferrari F12 Berlinetta Coupe AT
- What billionaires pay: R9.9 million
- Relative value: R1,585
That R2 million whiskey that Makro was selling that one time
- What billionaires pay: R2 million
- Relative value: R320.20
Annual school fees as South Africa’s most expensive school
- What billionaires pay: R265,680
- Relative value: R42.54
A week stay at a luxury Llandudno villa via Airbnb
- What billionaires pay: R92,950
- Relative value: R14.88
The monthly premium on Discovery’s Executive medical aid
- What billionaires pay: R5,950
- Relative value: R0.95
- What billionaires pay: R809
- Relative value: R0.13