In SA, private wealth has declined by 12% over the past decade.
By Amanda Visser 26 Apr 2022 09:05
The ongoing migration of wealthy people out of South Africa is making the country poorer.
Total wealth in Africa has fallen by 7% over the past decade mainly because of poor returns in the three largest markets, namely South Africa, Egypt and Nigeria.
According to the latest Africa Wealth Report there is optimism for the future, with a predicted rise of 38% in private wealth held in Africa to $3 trillion by 2031.
The Africa Wealth Report is published by the global firm Henley & Partners and the South African wealth intelligence firm New World Wealth.
Mauritius was the fastest growing wealth market in Africa in percentage growth terms of 74% between 2011 and 2021.
It also has the highest wealth per capita of $34 500 compared to South Africa’s $10 970, says Amanda Smit, managing partner of Henley & Partners SA.
According to the report SA’s performance over the past decade has been poor, with total private wealth declining by 12% from $739 billion in 2011 to $651 billion in 2021.
The main reasons behind the decline include the depreciation of the rand from R8.10 per dollar to R15.90 during the review period, a sluggish property market with prime residential indices down significantly in US dollar terms, a large number of businesses closing down, and the ongoing migration of wealthy people out of the country.
Approximately 4 500 high-net-worth individuals (HNWIs) left the country between 2011 and 2021 – moving to the UK, Australia and the US as well as Portugal, Switzerland, Ireland, Mauritius, New Zealand, the United Arab Emirates, Canada, Monaco and Malta.
However, of the Big Five wealth markets in Africa (South Africa, Egypt, Nigeria, Morocco and Kenya), SA has twice as many millionaires – 39 300 – than any other African country.
Egypt has the most billionaires on the continent (seven).
“A large number of South African billionaires have left the country over the past 10 to 20 years. Notably, there are 15 South African born billionaires in the world, but only five of them still live in SA,” according to the report.
“On a positive note there is a trend of wealthy people returning to SA, in particular from the UK,” says Andrew Amoils, head of research at New World Wealth.
“We will probably only have solid data on that next year in the 2023 Africa Wealth Report,” he adds.
“It is notable that most of the returning HNWIs are buying properties on top-end lifestyle estates and in luxury apartment complexes.”
Hermanus is currently the fastest growing town for HNWIs (people with private wealth of at least $1 million or around R15.7 million). Wealthy individuals from Cape Town, Pretoria and Johannesburg have relocated to the town in the last decade.
The Paarl, Franschhoek and Stellenbosch area combined is considered one of the fastest growing areas for HNWIs. Umhlanga in KwaZulu-Natal has been the top second-home hotspot for wealthy Johannesburg residents since the 1970s. Apartments on Lagoon Drive are some of the most exclusive in SA.
Ballito is seen as a world leader in estate living, with Plettenberg Bay, Knysna, George, Wilderness and Nature’s Valley described as up-and-coming millionaire hotspots.
Pricey suburbs in SA
The most expensive suburbs in SA include Clifton, where a square metre is priced at R80 000, followed by Bantry Bay (R75 000), Fresnaye (R58 000) and Camps Bay and Bakoven (R52 000).
Almost half (48%) of South African high income earners either live or have a second home on a lifestyle estate. In 2011 this figure stood at around 30%.
According to the report affluent buyers are increasingly moving into estates with apartments rather than houses and most new luxury estate developments focus on apartment living rather than houses.
Lifestyle estates with parklands and wilderness areas have become more popular. Many HNWIs have chosen to work remotely and live in smaller towns. For instance, a large number of South African HNWIs are now working remotely from affluent small towns such as Hermanus, Plettenberg Bay and Franschhoek. Lifestyle estates in these towns have benefitted.
Wealth and fund managers indicate that equities remain the largest asset class for HNWIs, accounting for about 30% of all their assets, followed by real estate (23%), business interests (20%), cash and bonds (14% ), private equity holdings or venture capital investments (10% ) and collectibles (3%).
The average South African HNWI currently holds around 24% of their wealth offshore compared to 15% a decade ago.
At the end of last year South African millionaires held approximately $520 million worth of fine art. This makes the country the 18th largest art market in the world. Irma Stern is the country’s most valuable artist. Her paintings can fetch up to R50 million each, with an average price of R6 million per painting.
New World Wealth expects the value of Gerard Sekoto, Sydney Kumalo and Maggie Laubser’s works to appreciate “significantly” over the coming decade.
Africa’s future wealth hotspots
Smit says the Mauritius Residence by Investment Programme is attracting a great deal of interest from investors. The only other country in Africa with a similar programme is Egypt.
Growth projections for Mauritius remain strong, with wealth growth of 80% expected for the island. This will make it one of the fastest growing high-income markets in the world over the next decade and places it in the same league as Australia, New Zealand, Switzerland and Malta.
Rwanda and Uganda are also expected to experience strong wealth growth in the next decade with growth rates of more than 60%.