SA households better off but debt levels remain high

SOUTH African households are the 39th richest in the world, based on net per capita financial assets, but slowing asset growth and debt levels remain stubbornly high.

This is according to the seventh Global Wealth Report (GWR) released by German financial services company Allianz this week.

The GWR assessed the asset and debt situation of households in more than 50 countries. Switzerland was ranked number one, followed by the US and UK.

Michael Heise, the chief economist at Allianz said the development of financial assets had reached an important moment and monetary policy was falling short.

“Extreme monetary policy is losing its impact even on asset prices. As a consequence an important driver for asset growth no longer exists.

“Interest rates continue their remorseless slide, deep into negative territory.

“For savers, the outlook is not rosy,” Heise said.

The report said South Africa had seen its smallest increase in wealth since 2008 with asset growth slowing down markedly from 9.3 percent in 2014 to 3.7 percent last year.

It said debt growth had contributed to the debt pile doubling since 2007, charging that South Africa had one of the highest debt levels among developing countries.

“At 48 percent, South Africa has one of the highest debt ratios (liabilities as a percentage of gross domestic product) among emerging markets. In Latin America or eastern Europe, for example, no country matches South Africa in this regard,” Heise said.

Sasha Naryshkine, an analyst at Vestact, said while the debt levels were worrying, they needed to be put into context.

“You have to remember that there was a big infrastructure roll-out associated with the world cup, that infrastructure is in large part used often! The report found that 6 million South Africans had achieved middle class status…

“All the roads and byways transport goods and services,” Naryshkine said.

Naryshkine said the slow- down in asset growth could be attributed to the depreciation of the rand against the dollar over the past few years.

“The marked slowdown in growth is due to asset price depreciation in hard currency terms, they are measured in one global currency, the dollar, while the rand has depreciated 24 percent against the dollar since 2015,” Naryshkine said.

The report said it had investigated the share total of assets held by the middle class and how this share had developed over time.

It found that 6 million South Africans had achieved middle class status in recent years.

Naryshkine said he believed that was an accurate assessment of the country’s situation.

“While it appears that the world hasn’t made progress, we definitely have,” he said.

Econometrix chief economist Azar Jammine said while the report suggested that South Africans had been borrowing at an accelerated rate, it surprisingly found that the debt pile had doubled since 2007.

“The ratio of household debt to disposal income as measured by the Reserve Bank is more or less where it was in 2007, or even lower, the GWR conclusion appears inconsistent with this,” Jammine said.