Why millionaires are calling it quits on South Africa

 ·19 Dec 2023

Data tracking millionaire migration over the last few years has pointed to South Africa bleeding wealth, with thousands of high-net-worth individuals (HNWIs) having already left, and hundreds more expected to follow suit this year.

While the exit of the rich is driven by various factors – social, political and economic – analysts at New World Wealth say that when it comes to HNWIs, money talks.

Specifically, the wealthy will look to emigrate to destinations that give them favourable tax conditions and economic opportunities to expand their wealth.

According to the group, approximately 120,000 of the world’s millionaires migrated to a new country in 2023. Popular destinations for them included the likes of the UAE, Australia, USA, Singapore, and Switzerland.

For the purposes of their assessment, New World Wealth considers millionaires to be high-net-worth individuals with investable wealth of USD 1 million or more.

The benefits of this migration to these destination countries are extensive and wide-ranging, the group said.

Major benefits include:

  • Forex revenue – millionaires are a vital source of forex revenue as they tend to bring their money with them when they move to a country. For instance, a migrant who brings USD 10 million with them is equivalent to a country generating USD 10 million in export revenue, as both transactions bring USD 10 million of forex revenue into the country.

  • Many migrating millionaires (around 25%) are entrepreneurs & company founders who may start new businesses in a new country and therefore create local jobs. This percentage rises to over 60% for centi-millionaires (USD 100m+) and billionaires (USD 1 bn+).

  • Millionaires boost the local stock market via their equity investments. Also, some millionaires list their companies on the local exchange.

  • Perhaps most importantly, millionaires indirectly create thousands of jobs via their spending power, especially in high value sectors such as luxury hotels, prime property, family offices, hedge funds, private equity and wealth management.

It is important to keep track of these migration patterns because millionaires moving to a country is a very good economic and political sign as it generally signals that the country has strong business opportunities and good safety and security.

When a country is seeing a net loss of millionaires, however – as is the case with South Africa – it could be pointing to the exact opposite.

“The benefits of inward millionaire migration are particularly noticeable in the top safe haven countries of the world, namely: Australia, Switzerland, Monaco, Singapore, the UAE, New Zealand, Malta and Mauritius, which have all positively transformed their economies via encouraging wealthy people to move there,” New World Wealth said.

A “safe haven country” is a country with good safety and security that is shielded from the world’s economic and political problems, it noted.

Taxing issue

According to Sovereign Trust director Coreen van der Merwe, one of the primary drivers behind the departure of HNWIs from South Africa is the pervasive economic uncertainty and political instability in the country. South Africa has faced challenges such as sluggish economic growth, high unemployment rates, corruption scandals, and policy unpredictability.

For HNWIs seeking stable investment environments and favourable economic conditions, these uncertainties have become deterrents, leading them to consider more secure options elsewhere.

There are also key concerns over personal security and safety, including rising rates of crime and violence, as well as worries about education and healthcare – which are foundational considerations for high net-worth families.

According to Van der Merwe, the government’s growing focus on taxing the wealthy is also now a major factor.

In recent weeks, the government has escalated talk of hiking taxes to fund some of its more doomed policies such as the National Health Insurance: the health department has made it crystal clear that the government will turn to payroll taxes and other employment taxes – while also getting rid of medical aid tax credits – to fund the NHI.

Meanwhile, think tanks have started getting louder on calls to introduce wealth taxes to fund more social grants.

National Treasury announced in November that R15 billion more will be raised in taxes in 2024.

Read: These are the richest people in South Africa at the end of 2023

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