For all the economic devastation wreaked in 2020 by the COVID-19 pandemic and subsequent nationwide lockdown, South Africa actually found itself in a fairly strong position in terms of financial asset wealth in 2019, ranking 38th in the Allianz Global Wealth Report.
The report aims to put asset and debt situations in household all over the world under the microscope in a bid to better understand the global wealth divide, and while South Africa’s economy contracted overall in 2019, it has been revealed that household wealth grew by 6.7%.
Global wealth enjoys increase in 2019
Allianz said that the increase in wealth worldwide was the biggest in over a decade, with gross financial assets having grown by 9.7%.
“This performance is astonishing given the fact that 2019 was marred by social unrest, escalating trade conflicts and an industrial recession,” said Allianz in the report summary.
The growth is attributed to broad-based monetary easing by central banks and success in global stock markets.
The asset class (which refers to investments that exhibit similar characteristics and are subject to the same laws and regulations) of securities increased by a whopping 13.7% in 2019.
“Never was growth faster in the 21st century,” they said. “The growth rates of the other two main asset classes were lower – but still impressive. Insurance and pensions reached a plus of 8.1%, mainly reflecting the rise of underlying assets, and bank deposits increased by 6.4%.”
South Africa clings to household wealth
South Africa rallied from a 4% decline of gross financial assets of in 2018 to record a 6.7% rise, which, while it still falls below the global average of 8.5%, indicated a strong impetus for household saving.
While growth in bank deposits continued to be very robust at 8.7%, this asset class remains the least popular in South Africa. Its portfolio share is a mere 15.6%, compared with 52% commanded by insurance and pensions, and around 30% of securities.
The motivation for South African households to save money is noted as a significant outlier in terms of global trends relating to emerging markets.
“The savings behaviour of South African households diverges considerably from that seen in other Emerging Markets where on average bank deposits account for almost half of all financial assets,” Allianz said.
Liabilities continued to slow
South Africa’s growth of liabilities, on the other hand, slowed down further in 2019, to 4.8% against 6.9% in 2018. Accordingly, the debt ratio (liabilities in % of GDP) remained almost flat at 44.7%, more or less in line with the average in Emerging Markets (42.9%).
Just before the great financial crisis of 2008, growth of liabilities were still 10 percentage points higher in South Africa and almost three times the average in Emerging Markets at that time.
Allianz said that while households in other emerging markets – notably in Asia – embarked on a “borrowing binge”, South African households showed restraint.
Net financial assets increased by 7.4% in 2019, after falling by 7.3% in the previous year. With net financial assets per capita of 7,112 euros, South Africa remained 38th place in the ranking of the richest countries in terms of financial assets per capita.
Wealth gap continues to grow
Michaela Grimm, co-author of the report, said that there remains a worrying wealth gap that will only be exacerbated by the recent turmoil brought on by the COVID-19 pandemic.
“It is quite worrying that the gap between rich and poor countries started to widen again even before COVID-19 hit the world,” she said.
“Because the pandemic will very likely increase inequality further, be setback not only to globalisation but also disrupting education and health services, particularly in low-income countries. If more and more economies are turning inwards, the world as a whole will be a poorer place.”
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