House­holds net wealth is same as 2014

The Star Early Edition - - BUSINESS NEWS - Sandile Mchunu

THE Mo­men­tum/Unisa House­hold Wealth In­dex for the first quar­ter of 2017 has shown that house­holds net wealth in South Africa in­creased marginally as com­pared with the fourth quar­ter of 2016, but it is still lower than a year ago.

Mo­men­tum, in col­lab­o­ra­tion with Unisa, mea­sures the wealth of South African house­holds on a quar­terly ba­sis.

The in­dex showed the com­bined real net value of all the goods house­holds own (in­clud­ing res­i­den­tial prop­erty) and the money they saved and in­vested in­creased marginally to R6.99 tril­lion in the first quar­ter of 2017, up from R6.96trln in the fourth quar­ter of 2016. This fig­ure was 1.3 per­cent lower than a year ago.

The in­dex showed the small quar­terly in­crease oc­curred for lots of right and some “wrong” rea­sons, ac­cord­ing to the re­port.

“On a macro level the right rea­son is be­cause the real value of house­holds’ as­sets in­creased to R8.37trln, up from R8.36trln in the fourth quar­ter of 2016, which is 0.4 per­cent higher. The main rea­son for the in­crease in the real value of house­hold as­sets can be at­trib­uted to a bet­ter per­for­mance of their fi­nan­cial as­sets, which mainly is in­vested in re­tire­ment funds,” the re­port said.

Dur­ing the pe­riod the JSE all share in­dex in­creased by a quar­ter-to-quar­ter growth rate of 2.1 per­cent be­tween the fourth quar­ter of 2016 and the first quar­ter of 2017.

De­spite the mar­ginal im­prove­ment in the quar­ter, the re­port showed that the real value of house­holds net wealth is at the same level as it was three years ago, which is the first quar­ter of 2014.

“This means that house­holds lost three years of wealth ac­cu­mu­la­tion. The con­se­quences of this loss of real net wealth are far reach­ing and are neg­a­tively af­fect­ing the econ­omy and ev­ery house­hold in the coun­try.”

Shrink­ing, or slow-grow­ing real house­hold net wealth re­sults in less con­fi­dence and more fi­nan­cially vul­ner­a­ble con­sumers. This in turn causes slower eco­nomic growth and job cre­ation, while it also slows the pace of trans­for­ma­tion. It also means that house­holds’ stan­dard of liv­ing will be lower than it could have been dur­ing their work­ing life and in re­tire­ment.

It also in­hibits their abil­ity to im­prove their fi­nan­cial well­ness, the re­port stated.

The other pos­i­tive as­pect in the re­port is that house­holds are re­duc­ing the ex­tent of their in­debt­ed­ness.

The real value of house­holds li­a­bil­i­ties which should be sub­tracted from their as­sets to ob­tain their net wealth has de­clined in the first quar­ter of 2017 com­pared to the last quar­ter and the first quar­ter of 2016.

“This in­di­cates that house­holds are re­duc­ing the ex­tent of their in­debt­ed­ness, which is pos­i­tive for wealth ac­cu­mu­la­tion. In this re­spect the ra­tio of house­hold li­a­bil­i­ties to their dis­pos­able in­come shows a de­cline to 73.9 per­cent in the first quar­ter of 2017 from above 75 per­cent in the fourth quar­ter of 2016 and al­most 76 per­cent com­pared to the first quar­ter of 2016,” the re­port said.

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