Wealth continues to decline in S Africa
But less than second quarter
THE MOMENTUM/Unisa South African Household Wealth index has continued to show a negative trend as it declined by 0.9 percent in the third quarter of 2016. Although the index has reported a decline in the wealth index, it is much better than the 2.7 percent decline reported in the second quarter of 2016.
Momentum, in collaboration with Unisa, measures the state of South African households’ wealth on a quarterly basis.
The Momentum/Unisa index said the fall is a continuation of a long-term and volatile trend that started in 2014.
The index showed that the main reason for the decline in the household net wealth to disposable income ratio can be ascribed to a decline in the real value of household assets.
“The real value of household assets declined at an annualised pace of 0.8 percent between the second quarter and third quarter of 2016, following a decline of 2.4 percent in the previous quarter,” the report said.
It was at R8.41 trillion at the end of the third quarter of 2016, down R15.7 billion from the second quarter of 2016.
The lower value of real household assets can be ascribed to proportionally lower contributions to retirement funds and annuities that are invested in, among others, companies listed on the JSE as well as a lack of growth on such investments.
Momentum/Unisa analysis shows that households’ contributions to retirement funds and annuities declined to 12.1 percent of their estimated after-tax income in the third quarter of 2016, down from 12.2 percent in the second quarter of 2016 and 12.9 percent a year before.
“In addition, the JSE all share index, which serves as an indicator of the growth achieved on such investments, was 2.5 percent lower at the end of the third quarter of 2016 compared to the second quarter of 2016, while it was only 1.3 percent higher than a year before,” the report said.
However, there were encouraging signs in the liabilities/debt index as the households managed to monitor their debts.
In the last quarter, households on average succeeded with the goal of keeping their liabilities in check, but their assets failed to grow, a trend that has been continuing for more than two years.
“The Momentum/Unisa Household Liabilities Index accelerated by only 0.2 percent in the third quarter of 2016. In addition it was 0.9 percent lower compared to a year ago, (third quarter of 2015),” the report showed.
The above analysis shows that although households are reducing their debt in relation to their disposable income, they remain vulnerable to unexpected shocks.
A number of household don’t have sufficient emergency funds available, while at the same time they are not saving sufficiently for retirement.