While South African household wealth has grown by 12% in the past decade, this compares dismally with the rest of the world. Yet the Treasury now wants to introduce a wealth tax.
The South Africa Household Wealth Index for Q4 2023, published by Momentum and UNISA, paints a concerning picture of stagnation in the nation’s household wealth generation. The data is clear: virtual stagnation has set in.
Household wealth has experienced very little real growth over the last decade: When keeping prices constant to the prices of Q4 2021, total household wealth in South Africa has increased from R15.28 trillion in Q4 2014 to R17.16 trillion in Q4 2023. This represents a 12.3% growth in total household wealth in 9 years. This growth has been charted out below using data from Momentum’s report.
Without putting too fine of a point on it, this is abysmal. To add some perspective, in this same time frame, US household and non-profit wealth grew 78.16% or about 6.3 times as quickly. The gap between South Africa and the developed world has long been a vast chasm, and it seemingly only grows deeper and wider, regardless of the metric used to measure it.
Among developing nations, we don't fare well either. In this time frame, India's household wealth has about doubled. While a decline in household wealth post-pandemic has been a global trend, South Africa stands out, as our economic woes were deeply entrenched long before COVID-19 arrived.
In real terms, this translates to stagnation. South African households are barely moving forward, while our competitors and aspirations continue to race ahead, leaving us in their wake.
Despite the apparent static nature of household wealth, the National Treasury and SARS have begun contemplating a new wealth tax. Like trying to draw blood from a stone, the government relentlessly seeks to squeeze every last bit of value from the South African taxpayer, leaving little room for relief. Instead of focusing on wealth generation, the government has again turned its attention to carving up its share of this stale pie.
This proposed tax has a well-documented history of triggering capital flight, brain drain, and job losses even in developed nations such as France. Subsequently, it undermines the fragile growth reflected in the data and poses a real threat to our future wealth creation prospects.
Perhaps most troublingly, the small degree growth we have experienced does not keep up with our population growth.
In the same time frame (2014-2023), the population has steadily grown from 54.27 million to 62.2 million individuals, a 14.6% increase. Less than the 12.3% increase in household wealth. This means that the population expansion is outpacing the growth in household wealth. As a result, average household wealth per capita has declined since 2014, falling from approximately R281k to R275k—an indication that South Africans are, on the whole, becoming poorer.
The data presented by the report should be a loud wake-up call to the new Government of National Unity. It is tremendously clear that the fundamental problem facing South Africa is our lack of wealth generation. The success or failure of the GNU quite possibly rests on whether they can breathe new life into this motionless variable.
The household is the fundamental building block not only of a healthy society but also of a strong economy. Neglect it at your peril.
