How South Africa’s richest 1% make their money

Wealth-X has published its wealth report for 2021, detailing how the world’s richest people make their money.

In contrast to often-popular conceptions of wealth, most wealthy individuals across the globe are self-made, and created their fortunes without an inheritance, the report shows.

This is particularly true at the very high net worth (VHNW) level, where more than eight in every 10 individuals are self-made. Wealth-X defines this group as those with a net worth of $5 million to $30 million.

Of the remainder, around two-thirds have net worth that stems from a combination of inherited and self-created wealth, with only a small proportion relying solely on inheritance.

How South Africans make their money 

Data published by New World Wealth in April shows that there are are currently 36,500 dollar millionaires living in the country – down by 1,900 from the number recorded in 2020.

Data from 2020 shows that the largest portion of the country’s HNWIs acquired their wealth through the financial and professional services (including banks, law firms, accountants, fund managers and wealth managers), closely followed by the real estate sector.

However, the data shows that these HNWIs typically studied either law, finance or accounting degrees when at university.

The University of the Cape Town is the most popular university among HNWIs (20%), followed closely by the University of the Witwatersrand (18%), and Stellenbosch University (12%).

How millionaires make their money globally

The international data shows that South Africa largely matches global trends, with banking and finance the primary industries for wealth creation in North America, Asia and Europe

Business and consumer services ranks second, in combination accounting for well over a third of all industries.

“Banking and finance dominates, reflecting the significant role that financial services has played in generating overall wealth in recent decades,” Wealth-X said.

“Business and consumer services has been bolstered by the continued commercial opportunities offered by the growing middle class in emerging markets over the past two decades, although Covid-19 has brought a hiatus to this in many markets, as well as the dominant role of services and increasing digitalization in developed economies.

Real estate is also popular, boosted by continued urbanisation, the increasing spread of rentier capitalism, and the persistent low-interest rate environment.

The not-for-profit sector ranks in the top five among all three regions. As careers or businesses reach maturity, or in line with their own life-cycle progression, an increasing number of VHNW individuals choose to spend a large proportion of their time on philanthropic initiatives.

“Small changes occur on a year-to-year basis but, over time, new economic and industry trends can result in substantial changes to the rankings of the main industries,” Wealth-X said.

“In North America, the huge growth of technology companies of all sizes — in Silicon Valley and many other tech hubs, such as Austin and Seattle — has created new VHNW individuals and wealth, with technology featuring in the top five for the first time.”

Read: Only one South African billionaire has climbed the global wealth rankings – and he’s now the third richest man in the country