South African households’ real net wealth increased by an estimated R1 009.1 billion (R1.009 trillion) from the onset of the second quarter of 2020 (Q2 2020) to the end of the year (Q4 2020). This happened despite COVID-19, the lockdown, job losses and an economic contraction.
This one of the key findings of the recently released Momentum-Unisa South African Wealth Index. As part of Momentum’s Science of Success campaign, the Household Wealth Index is produced in partnership with Unisa and aims to provide South Africans with information to assist with their journey to financial success. Data from previous Momentum-Unisa Household Financial Wellness Surveys of more than 20 000 deidentified households to estimate and distribute households’ assets, liabilities and net wealth.
According to the latest Index, recovery follows an estimated decline of R772.8 billion during Q1 2020 that resulted from the introduction of lockdowns in many countries (including South Africa) to limit the spread of COVID-19.
Momentum-Unisa estimates that the real value (expressed in 2010-prices) of household net wealth increased to R7 797.4 billion by the end of Q4 2020. This is R236.3 billion higher than a year before.
The increase in household net wealth was even more spectacular when measured in nominal terms (current prices). It is estimated that household net wealth increased by R1 958.8 billion (almost R2 trillion) from the end of Q1 2020 to the end of Q4 2020.
What can the increase be ascribed to?
The huge increase in household net wealth was mainly due to strong growth in the value of financial assets such as shares and bonds. Households’ pension funds and financial investments benefitted immensely from the increases in these financial instruments.
Jacolize Meiring from Unisa’s Bureau of Market Research points out that net wealth relates to the actuals of those households that do have assets and liabilities. “It is estimated that only 2% of all households in South Africa own almost half of all wealth (assets minus liabilities), so only those with investments (especially in financial assets, such as shares) could share in the growth, unfortunately,” she says. In contrast, the bottom 16% had negative net wealth values where their outstanding debts exceeded the value of their assets.
“These numbers should, however, be interpreted with caution. For instance, the wealthiest 2% are not necessarily the top 2% income earners. Many middle-income earning households formed part of the wealthiest 2% of households as they, among others, saved, invested, and insured in the right way, whilst not borrowing beyond their affordability thresholds. Contrastingly, some high-income earners had a negative net wealth position as they used their income sub-optimally from a wealth creation point of view,” Meiring concludes.
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