Globally the number of ultra-high-net-worth individuals (UHNWIs) increased by more than 9% from 2020 to 2021, adding 52 000 very wealthy people. However, in South Africa the number declined by 7% from 603 to 561 over the same period.
This decline is the highest of all the countries on the ranking of the latest Knight Frank Wealth Report (which is based on responses provided during October and November 2021 by more than 600 private bankers, wealth advisors, intermediaries and family offices who between them manage over US$3.5 trillion).
Nedbank Private Clients expects this figure to remain flat over the next five years, dropping to 559 by 2026.
The decline demonstrates that SA has a crisis with regards to retaining the wealthy and improving the economy, Nedbank says.
SA’s shrinking tax base
The real issue for SA is that the number of people contributing to the tax base has been shrinking since 2012. During the “boom years” (2006-2012) taxpayer numbers grew by 7.5%, says Angelika Golinger, chief economist at EY Africa.
There has been a decline ever since, reversing some of the gains made in the early 2000s, says Golinger, speaking at a recent webinar hosted by EY Africa and the South African Institute of Taxation (Sait).
The drivers behind the declining tax base are the muted economy (causing massive unemployment and loss-making companies) and emigration, she says.
Many South Africans are opting for English-speaking countries, mainly New Zealand, Australia and the US. Lately there is a lot of movement into Canada. The July unrest in KwaZulu-Natal and parts of Gauteng last year did not help matters.
Chasing people out of SA
“We do not have many people knocking on South Africa’s door, mainly because of our regulatory restrictions. It is easier to come into SA as an illegal immigrant or asylum seeker than as a scarce skilled person,” says Makhakhe.
Although government recently expanded its scarce skills list, the requirements are onerous, and some are almost impossible to satisfy. “We are our worst enemies as far as that is concerned,” Makhakhe adds.
“Because we have an economy that is incapable of creating growth, government is effectively chasing people out of the country,” says Baissac. The South African economic base is systematically being destroyed. There are not enough people employed.
“Unless we address that, we are on a path where there will not only be a growth collapse, but also an economic collapse … At some point someone has to wake up and say that my money is in with someone who is generating negative growth on every revenue it has kidnapped.”
Baissac quotes statistics which show that in countries like the Philippines and Indonesia there is a GDP gain of seven to eight units for every unit of government expenditure. In Malaysia it is around five. In South Africa it is close to one.
Jéan Minnaar, co-managing director at Old Mutual Wealth, says skilled South Africans have become global citizens who see only two things – risk and opportunity.
“Unfortunately, because of macro-economic factors we have a situation where the risks remain high while the opportunities are diminishing.”
Minnaar warns that many developed countries realise that they need different skills such as plumbers, truck drivers, forklift drivers and electricians. “We have to be careful.”
New compact
SA needs a new compact where government assures labour, business and the investment community that their primary and sole duty is to educate, protect and help people survive by getting them employed by private sector businesses.
“It will take 10 years of effort to prevent our economy from collapsing and people, on a regular basis, helping themselves in the shopping centres,” warns Baissac.-moneyweb
