Financial services group Allianz Global has published its latest Global Wealth Report, tracking the concentration, growth and distribution of wealth around the world.
The group’s data shows that, for the first time, gross financial assets in emerging markets have declined, and at a rate of -0.4% was also more pronounced than in industrialised countries (-0.1%).
The narrowing of wealth disparity between “rich” countries and “poor” countries has also halted, the group said, showing how the global economy has been hit by ongoing political tensions and trade wars between major economies.
“The weak development in China, where assets fell by 3.4%, played a key role in this. However, other important emerging markets such as Mexico and South Africa also had to absorb significant losses in 2018,” it said.
South Africans are getting poorer
The gross financial assets of South African households declined by 3.2% in 2018, marking the first decline since the financial crisis back in 2008.
The decline was triggered by a sharp fall in insurance and pensions (-2.0%) and other assets (-9.5%), Allianz said.
Bank deposits, on the other hand, grew at a relatively healthily rate of 7.8% – but account for only 15% of all financial assets.
“Growth in liabilities accelerated to 6.9%, the fastest increase in six years. As a result, the debt ratio of households etched up to 44.3% at the end of 2018, well above the average of emerging markets of 40.3% – but still ten percentage points below the pre-crisis peak,” Allianz said.
As result of declining assets and rising liabilities, net financial assets in South Africa fell by 6.4% in 2018.
With net financial assets per capita of €6,470 euros (R104,500), South Africa remained at the 38th place in the ranking of the richest countries (financial assets per capita), just ahead of Brazil (39).
At the top, the US replaced Switzerland again, not least thanks to the strong dollar.
Middle class freeze
For the first time in over a decade, the global wealth middle class did not grow, Allianz noted.
At the end of 2018, roughly 1.04 billion people belonged to the global wealth middle class – which is more or less the same number of people as one year before.
Six million South Africans fall into this range – just over 10% of the population, Allianz said.
Allianz measures the middle class in terms of net financial assets. For 2018, the asset thresholds for the global wealth middle class is between €7,600 and €45,600 (R122,700 and R736,000).
This classification is based on global average net financial assets per capita: €25,360 (R409,500) in 2018.
Allianz’ data provides a global perspective on the middle class, but the group specifically mentions wealth distribution as one of the key factors playing into the numbers on a more local scale.
For example, if populous countries like India and Brazil had a more equal wealth distribution, around 200 million more people would be able to move up from the low-wealth band into the middle class band.
In countries where wealth distribution is highly unequal (the US, and South Africa) movements in the opposite direction are noted – where people more often fall from middle class to low-wealth.
According to Allianz’ data, the richest 10% globally own roughly 82% of total net financial assets, while the richest 1% – with average net financial assets of above €1 million (R16 million) – own almost 43%.
On the other end of the spectrum, the lower half of the population, about 2.5 billion people, own a mere 1% of global net assets.
The group noted, however that this must be interpreted with caution, as those with the fewest assets also include many people from the richest countries who are in debt; the “poorest” global population decile actually has negative net financial assets, but high levels of debt can not necessarily be equated with poverty.
“The Scandinavian countries are a good example of this. Households in Denmark and Sweden are among the most highly indebted worldwide, with up to 30% of the population there having higher liabilities than financial assets.
“However, these high debts are generally likely to be offset by tangible assets, particularly property,” the group said. “A happy home owner in Denmark should not be confused with a penniless day labourer in India.”
To illustrate the overall change in wealth and prosperity over time, the group has formed the Allianz Wealth Equity Index, which measures the concentration, growth and distribution of wealth. A lower score (out of 7) is seen as better.
The Wealth Equity Index looks at the following factors:
- The share of the national wealth middle class in total net financial assets – a measure of the middle’s participation in national prosperity;
- The share of the richest decile of the population in total net financial assets and the change since 2000 – a measure of the concentration of wealth at the top;
- The share of the lower half of the population in total net financial assets and the change since 2000 – a measure of the so-called “trickle-down” effect;
- Median net financial assets as a percentage of average assets and the change since 2000 – a measure of the degree of distortion in wealth distribution;
- Growth in net per capita financial assets since 2000 – a measure of the general increase in prosperity;