4 reasons for South Africa’s shrinking private wealth

Data from New World Wealth and Henley & Partners shows South Africa has continued to lose millionaires over the last decade, with net wealth also declining precipitously over the same period.

The report focuses on high net worth individuals (HNWIs) with a wealth of $1 million (R15.70 million) or more. Total wealth refers to the private wealth held by all the individuals living in each country. It includes all their assets – property, cash, equities, business interests – less liabilities.

The data shows the country had 39,300 HNWIs in 2021, approximately 5,500 fewer individuals than in 2011 (44,800).

Over the same time period, total private wealth held in the country declined by 12% from $739 billion in 2011 to $651 billion in 2021. The country has approximately 2,080 people with a net worth of $10 million+ (R158 million) and 94 centi-millionaires with a net worth of $100 million+ (R1.58 billion).

New World Wealth said that this drop in wealth over the last decade can be attributed to several factors, including:

  • A declining currency – the rand depreciated from R8.10/dollar at the end of 2011 to R15.90/dollar at the end of 2021 (This has since weakened to R16.28 In May 2022);
  • A sluggish local property market – prime residential indices are down significantly when measured in dollar terms;
  • A large number of local businesses closed down during the period, especially in the small and medium-sized enterprise sectors;
  • The ongoing migration of wealthy people out of the country, New World Wealth’s data shows approximately 4,500 HNWIs have left South Africa over the past decade.

“In particular, a large number of South African billionaires have left the country over the past 10 to 20 years. Notably, there are 15 South African-born billionaires globally, but only five of them still live in South Africa,” New World Wealth said.

The safety levels in a country and the efficiency of the local police are probably the most critical factors in encouraging long-term wealth growth, the report showed, once area that has a miserable track record in South Africa, and is a big reason why many have left.

Economic growth is another reason to stay, and prosper, while government tampering in the business sector also creates large inefficiencies within an economy, said the report’s authors.

“Government-owned enterprises and parastatals can pose problems – as in the case of electricity utility Eskom in South Africa.”

It stressed that South Africa is by no means alone in losing wealthy people. All the BRICS countries (Brazil, Russia, India, China and South Africa) have lost large numbers of HNWIs to migration over the past decade. Egypt, Turkey and Nigeria have also lost a substantial number, it said.

On a positive note, the group said there is a trend of wealthy people returning to South Africa, particularly from the UK. “This is a notable trend that we are tracking, and we should have more statistics available for this in the next report,” the report’s authors said.

Read: South Africa’s rand is undervalued – here’s where it is heading right now, according to Absa

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4 reasons for South Africa’s shrinking private wealth