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Momentum/UNISA South African Household Wealth Index 2016

South African households’ real net wealth declined in 2016

  • Momentum/Unisa estimate that the real net wealth of households declined by R119.2 billion or 1.7% to R7 004.4 billion at the end of 2016.
  • At the end of 2016, real net wealth was also R102.5 billion lower than the value at the end of 2014.
  • Real net wealth per household is estimated to have declined by R18 382 or 4.3% to R411 941 at the end of 2016.
  • Real net wealth per household is now at a similar level as at the end of 2012.
  • These developments mean that fewer households will be able to retire with sufficient income to maintain their living standard. They will therefore have to reduce their standard of living once retired.
  • In addition, a growing share of households will not be able to cope with the challenges of unexpected or emergency expenses as they don’t possess sufficient liquid financial assets.
  • The weakened state of household wealth also has policy implications as the pool available for redistribution is shrinking. It also means that a growing number of households will be dependent on the government for grants, which will put pressure on future taxes to increase.
  • The main reason for the decrease in the real net wealth of households can be attributed to the decline in the real value of household assets, while the real value of their liabilities increased slightly.
  • The real value of household assets decreased for a number of reasons. This includes borrowing for purposes of consumption rather than for asset accumulation (to purchase property). Analysis shows that households spend almost 21 cents of every R1 of their gross income to repay debt. And about 70% of the 21 cents are used to repay consumption debt, with 30% going towards the repayment of mortgages and vehicle purchases.
  • As a result debt repayments and consumption expenditure erode the income available to save and invest for purposes of asset accumulation (i.e. retirement funds, annuities, purchase of property, etc.).
  • This situation was exacerbated by a lack of sufficient returns on their investments. The latter can be ascribed to poor economic growth and job creation, a lack of consumer and business confidence, relatively high consumer price inflation and an increasing tax burden.
  • For net wealth to start growing again, it is necessary that confidence and stability be instilled in the economy in order to increase the rate of investments, economic growth and job creation.