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27 Jun 2019

The 2019 South Africa Wealth Report describes growth at home as moderate

The Durban, Ballito and Umhlanga corridor is the fastest growing wealth market in South Africa, with wealth held in the area rising by 25% over the past decade to $54 billion in 2018, according to AfrAsia Bank’s South Africa Wealth Report for 2019.

Total wealth in the Durban, Ballito and Umhlanga area rose from $43 billion in 2008 as the area thrived, thanks to a construction boom that has encouraged investment in the sub-tropical beachscapes of the KwaZulu-Natal North Coast. The Durban, Ballito and Umhlanga corridor is now home to 3,300 high net worth individuals (HNWI), defined at those with $1million or more of investable assets, and 210 multi-millionaires, people with $10million or more of investable assets.


“Our research shows that over the last ten years South Africa’s two main wealth markets, namely Johannesburg and Cape Town, have performed relatively poorly” said Andrew Amoils, Head of Research at New World Wealth. “Johannesburg has lost a large number of HNWIs to other parts of the country while more recently, Cape Town has been harmed by the ongoing drought which has hurt the city’s real estate market and deterred migration to the city.”


AfrAsia Bank’s South Africa Wealth Report 2019 also notes that Umhlanga has been the top performing residential market in SA over the past 10 years with square meter prices in the Pearls luxury apartment complex now reaching similar levels to top apartments in Bantry Bay and Clifton in Cape Town. There has also been an uptick in prices in surrounding areas such as Ballito, La Lucia and Zinkwazi, most likely driven by the fact that many local and foreign tourists are now holidaying in northern KwaZulu-Natal due to the negative impact of the drought on Cape Town and the Western Cape.


While Johannesburg and Cape Town still contain the largest number of wealthy people and the greatest wealth by dollar value in the country, growth in their wealth markets have been fairly muted compared to new areas such as the Whale Coast and the Paarl, Franschhoek and Stellenbosch district which saw growth of 22% and 21% respectively over the last 10 years. Although Johannesburg is still the richest city in South Africa with its total wealth valued at $248 billion in 2018, this was only 9% up from a decade earlier when the city’s total wealth was estimated at $228 billion. Cape Town is the next richest city in South Africa with total wealth of $133 billion last year, 11% up from the $120 billion it had in 2008.


In some ways, the relatively poor performance of South Africa’s two main wealth markets mirrors the performance of its overall economy, which underperformed over the last decade, with World Bank data showing gross domestic product (GDP) per capita in dollar terms rising just 7% from $5,700 in 2008 to US$6,100 in 2018, and down from a peak of $7,900 in 2011.


Nevertheless, South Africa is still the largest wealth market in Africa and the 31st largest worldwide with total private wealth held by individuals of approximately $649 billion, of which about 42% or $275 billion is held by HNWIs. According to AfrAsia Bank’s 2019 Wealth Report, South Africa is home to approximately 39,200 HNWIs, each with net assets of US$1 million or more. In addition, the country has 2,070 multi-millionaires; 94 centi-millionaires (those with net assets of US$100 million or more); and just five-dollar billionaires (individuals with US$1 billion or more).


“We consider wealth to be a far better measure of the financial health of an economy than GDP,” said Ravi Teji, the Head of Business Development Africa for AfrAsia Bank. “GDP is quite a static measure - it tends to only move slightly year on year. As a result, it is not a great gauge of the performance of an economy.”


Ravi Teji says the trouble with using GDP to measure the health of the economy is that a large portion of economic output often flows to the government, particularly in developing countries, resulting in little impact on the financial wealth of private citizens. GDP also counts items multiple times.


“For instance, if someone is paid $100 for a product or service and they then pay someone else that $100 for another product or service, then that adds $200 to a country’s GDP, even though only $100 has been produced at the start,” he says. “GDP also ignores the efficiency of the local banking sector and as well as the impact of property prices and the stock market, both of which obviously have a big impact on private wealth.”


South Africa has over twice as many millionaires as any other African country and has a wealth per capita level of $11,500, the second highest after Mauritius. Factors that attract HNWIs to South Africa include lifestyle aspects such as climate, wildlife, beaches, weather and scenery; the quality of private schooling and healthcare; the availability of luxury retail and food outlets; and the fact that English is widely spoken.


“South Africa has very strong fundamentals for wealth growth ranging from its sophisticated financial system, a large financial media that helps disseminate reliable information to investors and one of the 20 biggest stock exchanges in the world in terms of market capitalisation,” says Colin Grieve, AfrAsia Bank’s South African Chief Representative officer. “However, there are negative issues such as load shedding which has a massive influence over the economy as well as policy uncertainty over nationalisation of land and certain industries. The threat of violent crime is probably South Africa’s biggest problem as personal safety is arguably the most important driver of wealth growth in a country.”

View the report here