When it comes to private wealth, SA is a big loser

THE 2022 edition of the Africa Wealth Report, published by Henley & Partners, a global specialist in residence and citizenship by investment, in partnership with South African wealth intelligence firm New World Wealth, was published this week.

Although the report focuses on the wealthy – high-net-worth individuals (HNWIs, defined as US-dollar millionaires); multi-millionaires ($10 million+); centi-millionaires ($100 million+) and dollar billionaires – it holds lessons for all of us, offering thought-provoking comparisons between South Africa and other African countries in terms of wealth, prosperity and progress.

Private wealth refers to individuals’ assets (property, investments and business interests) minus their liabilities (debts). Africa’s total private wealth over the past 10 years has remained static, at about US$2.2 trillion.

However, over that period some countries have gained private wealth while others have become poorer in this respect. South Africa, unfortunately, falls into the latter category. It still leads in terms of overall private wealth ($651 billion, against Egypt’s $307 billion and Nigeria’s $228 billion), but it has lost 12% of this wealth over the past decade. Mauritius has the highest average wealth per person in Africa, at $34 500, followed by South Africa ($10 970) and Namibia ($9 320).

In an article accompanying the report, “The new world of African wealth”, Vusi Thembekwayo, CEO of MyGrowthFund Venture Partners, writes: “While the number of millionaires on the continent over the past decade has not increased exponentially, the number of centi-millionaires and billionaires has shot up. This theme supports the idea that the continent needs to deal with the legacy industries whose ownership structures perpetuate inequality. It also supports the notion that the continent needs to increase the exposure of and education regarding financial markets to ordinary households. The populations of most countries on the continent have asymmetric knowledge of finance, which constrains the growth of retail participation in financial markets.”

Thembekwayo notes that new wealth creation has been strongest in smaller emerging economies such as Mauritius and Rwanda. “Key drivers of this trend are the recognition by these economies that they can attract substantial capital if they have the right regulatory framework. This regulatory regime includes preferential terms for capital gains tax and inheritance tax and an environment that allows for ease of doing business,” he says.

Migrating millionaires

There are currently 136 000 HNWIs living in Africa, along with 5 110 multi-millionaires, 305 centi-millionaires and 21 billionaires. South Africa is home to a large proportion of these individuals, but the numbers have been declining: it had 44 800 HNWIs in 2011 and 39 300 in 2021, a drop of 12%.

The report offers some reasons as to why our numbers have fallen over the past 10 years:

¡ A declining currency – the rand depreciated from R8.10/US$ at the end of 2011 to R15.90/US$ at the end of 2021.

¡ A local property market – prime residential indices are down significantly when measured in US dollars.

¡ The closure of a large number of local businesses during the period, especially in the small and mediumsized enterprise sectors; and

¡ The ongoing migration of wealthy people out of the country.

The report notes that while South Africa lost about 4 500 HNWIs over the decade 2011 to 2021, it is by no means alone in losing wealthy people.

“All the Brics countries have lost large numbers of HNWIs to migration over the past decade. Egypt, Turkey and Nigeria have also lost a substantial number,” the report says.

Growth prospects

The compilers of the report say they expect total private wealth held in Africa to rise by 38% over the next 10 years, reaching US$3 trillion by 2031. “We expect Mauritius, Rwanda and Uganda to be the strongest performing wealth markets in Africa during this period (60%+ growth). Strong growth is also forecast in Kenya, Morocco, Mozambique and Zambia (50%+).”

Despite the overall decline, there were still a number of South African areas that experienced positive US-dollar private wealth growth over the past decade, which are expected to continue performing well.

“The Cape Whale Coast was the top performer, driven by strong HNWI growth in the Hermanus area. The Cape Winelands towns of Paarl, Franschhoek and Stellenbosch also grew strongly, as did the Garden Route (especially Plettenberg Bay). There was also solid HNWI growth in Umhlanga and Ballito in KwaZulu-Natal.”