Global Wealth Survey: SA retains 38th spot as gap grows, Newsline

By Philippa Larkin

JOHANNESBURG – The gap between the rich and the poor widened further last year with South Africa retaining its position as the 38th richest country for the second consecutive year.

The latest Allianz Global Wealth Report this week said South Africa was the only cone in Africa that featured in the asset and debt survey of households in almost 60 countries.

The report said the US remained the wealthiest followed by Switzerland then Singapore. It said the average net financial assets per capita better illustrated the wealth divide: It was the highest at €198000 in North America and the lowest at €5160 in Eastern Europe. South Africa last year had net financial assets per capita of €7112 (R141 218), clearly edging towards the lower end of the wealth divide.

“It is quite worrying that the gap between rich and poor countries started to widen again even before Covid-19 hit the world,” says Allianz economist Patricia Pelayo Romero.

“Because the pandemic will very likely increase inequality further, being a setback not only to globalisation but also disrupting education and health services, particularly in lowincome countries.”

Allianz said the concentration of wealth remained in the hands of a few with the richest 10 percent – 52 million households with at least €240000 in net assets – owning roughly 84 percent. It said the top 1 percent – those with more than €1.2m to their name – owned almost 44 percent. It was “a bumper year”.

In 2019, gross financial assets jumped by 9.7 percent and reached €192 trillion.

“Never in the last 10 years, were we able to report such a big increase in wealth. Worldwide, gross financial assets grew by 9.7 percent in 2019, clocking the strongest growth since 2005. “This performance is astonishing given the fact that 2019 was marred by social unrest, escalating trade conflicts and an industrial recession. But as central banks reversed course and embarked on broad-based monetary easing, stock markets decoupled from fundamentals and soared by 25 percent, lifting financial assets in the process,” the wealth report said.

However, Allianz chief economist Ludovic Subran cautioned countries against complacency on structural reforms.

“For the moment, monetary policy saved the day. But we should not fool ourselves. Zero and negative interest rates are a sweet poison. They undermine wealth accumulation and aggravate social inequality, as asset owners can pocket nice windfall profits. It’s not sustainable,” he said.

South Africa also showed a strong recovery last year with gross financial assets of households rising 6.7 percent after declining nearly 4 percent the previous year.

The increase was, however, still below the average growth of 8.5 percent since the global financial crisis.

The report said last year’s recovery was mainly driven by the rebound in insurance and pensions as well as in securities, both swinging from -3.4 percent to 5 percent and from -9.4 percent to 8.1 percent, respectively. Growth in bank deposits, on the other hand, continued to be very robust at 8.7 percent.

The asset class, however, remained the least popular in South Africa, its portfolio share was a mere 15.6 percent, compared with 52 percent of insurance and pensions and around 30 percent of securities, it said.

“Thus, the savings behaviour of South African households diverge considerably from that seen in other Emerging Markets (EM) where on average bank deposits account for almost half of all financial assets.”

Liabilities in South Africa slowed down further last year, to 4.8 percent against 6.9 percent in 2018. Accordingly, the debt ratio (liabilities in percent of gross domestic product) remained almost flat at 44.7 percent, more or less in line with the average in EM (42.9 percent).

While households in other EM, such as Asia, embarked on a borrowing binge, South African households showed restraint, the report found.