Cape Times

Wealth continues to decline in S Africa

But less than second quarter

- Sandile Mchunu

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.

Real value 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.

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