FINANCIAL ADVISOR'S VIEW

The Global Wealth Report summarised

South Africa contributes US$0.77 trillion or 0.21% to the total global wealth.

17 February 2020 11:22 / By Michael Haldane - Global & Local Investment Advisors

According to Investopedia, wealth is defined as follows: “Wealth measures the value of all the assets of worth owned by a person, community, company or country. Wealth is determined by taking the total market value of all physical and intangible assets owned, then subtracting all debts.”

In simple terms, WEALTH is usually a measure of net worth. For example, if Jacob has the following:

House: R1 000 000
Car: R650 000
Investments: R500 000
Savings/Bank Account: R50 000
Loan: R150 000
Bond: R800 000
Amount owned on the car: R250 000

Jacob’s net worth (assets less liabilities) would be R1 000 000. Why is this important? If Jacob is earning a salary of R500 000 per annum he may be considered wealthy, however he might have other expenses such as children’s school fees, groceries, petrol, electricity etc and does not have much to save for retirement. Having a high income does not make one “wealthy” as you own very little of the true value.

In the same way, a country’s or the world’s WEALTH could also be determined. It is not only the assets of the privately-owned household or companies but also includes what is owned by the public such as e-tolls, substations, planes, trains etc.

“Ten years ago, the Credit Suisse Research Institute launched the first Global wealth report providing the most comprehensive and up-to-date survey of household wealth. Since then the global wealth report has become the standard reference point to monitor wealth growth across countries and the extent to which wealth inequalities are widening or narrowing.”

Credit Suisse released a new “Global Wealth Report 2019” in October based on data which it had received mid-2019.

Some of the key points from the Credit Suisse report:

“Total world worth grew by US$9.1 trillion to $360.6 trillion which equates to a 2.6% increase from the previous year.
Financial assets suffered the most during the financial crisis, in the last year the value rose in each region and contributed 39% of the gross wealth worldwide.
Non-financial assets were the most consistent in recent years and it grew faster than financial assets.
Household debt rose even faster at 4.0% overall.
The estimates for mid-2019 show 46.8 million millionaires worldwide.
Emerging Markets have become increasingly important to the world economy.
The global financial crises mark a turning point in the history of wealth creation.
China and other Emerging markets have seen the fastest growth in millionaires.
Global wealth is projected to rise by 27% over the next 5 years reaching US$459 trillion by 2024.”

What does the report say about South Africa?

As per the Credit Suisse Global Wealth report, “Household wealth grew strongly prior to the global financial crisis. The country exceeded its 2007 wealth level for a single year in 2010 but has since declined to mid-2019. This is due to the rand depreciating against the USD as it has lost half its value since 2010. In local currency, wealth per adult rose by 55.9% between 2010 and 2019 although, after correcting for inflation, there was a fall of 0.1%. i.e. virtually no change.
Personal wealth is largely comprised of financial assets, which contribute 65% to the household portfolio. This reflects a vigorous stock market and strong life insurance and pension industries.
They estimate that 51 000 South African’s are members of the top 1% of global wealth holders and 46 000 are USD millionaires.
The overall level of wealth inequality is high.”

Where does South Africa fit in with comparison to the rest of the world?

South Africa contributes US$0.77 trillion or 0.21% to the total global wealth. Some of the other big regions which contribute less than this is Iran (US$0.76 trillion), Chile (US$0.76 trillion), Philippines (US$0.76 trillion), Bangladesh (US$0.7 trillion), Malaysia (US$0.68 trillion), Romania (US$0.67 trillion), Columbia (US$0.56 trillion), Czech Republic (US$0.55 trillion), Pakistan (US$0.46 trillion) and the lowest being Nigeria at US$0.44 trillion or 0.12%.

What’s interesting to note is that countries such as Greece, Vietnam, Saudi Arabia, Egypt, Brazil, Turkey all contribute more than South Africa to global wealth.

Where is all the wealth?

The United States contributes the most US$105.99 trillion or 29.39% followed by China and Japan with US$63.83 trillion and US$24.99 trillion respectively. Asia collectively has a higher net worth than the United States at US$141.21 trillion or 39% of the world’s total.

Interestingly the United States and China combined account for almost half of the world’s global wealth. Is this a potential reason for the “Trade Wars”? Each county is trying to be the dominant nation in the world.

Sources:

For a graphical visualisation of the global wealth visit https://howmuch.net/articles/distribution-worlds-wealth-2019

The full Global Wealth Report 2019 is available on the following website: https://www.credit-suisse.com/