SA households became R1 trillion richer after the first quarter of 2020, and the rich got richer

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The Momentum-Unisa Household Net Wealth report shows that SA households increased their net wealth by just over R1 trillion, thanks to the appreciation of financial assets.
Photo: Getty Images
The Momentum-Unisa Household Net Wealth report shows that SA households increased their net wealth by just over R1 trillion, thanks to the appreciation of financial assets. Photo: Getty Images
  • Momentum and Unisa's Bureau of Market Research released their latest Household Net Wealth report on Friday.
  • The report shows that collectively SA households increased their net wealth by just more than R1 trillion.
  • But it was households with financial assets like shares, investments and pension funds who got the gains.

South Africans have had it rough for several years, but 2020 takes the cake when it comes to misfortune with at least three million people known to be out of jobs.

But the newly released Momentum-Unisa Household Net Wealth report shows there is still something to celebrate, especially for wealthy households.

According to the report, South African households' real net wealth increased by an estimated R1.009 trillion between the onset of the second quarter of 2020, which coincided with the start of the lockdown, and the end of 2020.

This presented a significant bounce back from the estimated decline of R772.8 billion in households' real net wealth during the first quarter of 2020 at the onset of lockdowns in many countries. South Africa's lockdown also began just three days before the end of the first quarter on 27 March.

"This happened despite Covid-19, the lockdown, job losses and an economic contraction," noted the researchers, who compiled the report. The authors of the report included researcher and economist at Momentum Johann van Tonder as well as Professor Carel van Aardt and Jacolize Meiring from Unisa's Bureau of Market Research.

They said this increase was even more spectacular when measured in nominal terms or current prices, jumping to R1.95 trillion from the end of Q1 2020 to the end of Q4 2020.

What contributed to this net wealth increase?

Financial assets such as shares, pension funds and "other investments" were the biggest beneficiaries of this recovery, thanks to the JSE bouncing back much faster than the real economy. Non-financial assets on the other hand, especially residential property, showed less than a 1% change in real values during the year.

"The huge increase in household net wealth can mainly be ascribed 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," the researchers wrote.

They added that households that lost their jobs and had to cash out their pension fund benefits or other investments would not have benefitted from this appreciation of financial assets. Therefore, it was reasonable to assume that less people shared in the higher value of household assets, they said.

The wealthy got wealthier

The researchers noted that the wealthiest 2% households in the country owned almost 50% of the wealth just before the start of the pandemic. The top 10% owned 75.5% of household net wealth.

Looking at the assets that drove this wealth increase, it becomes evident that this 2% as well as people who contribute to retirement funds were likely the biggest beneficiaries of this net wealth accumulation.

The report showed that, on the other hand, households at the bottom of the wealth pyramid – the bottom 16% – ended 2020 with negative net wealth values, with more debt on their names than assets. The next group from the bottom had zero or minor improvements in their net wealth position. But combined, the bottom 57% of households accumulated 0% net wealth in 2020. They were essentially in the same position they were in 2019, or worst.

However, the researchers explained that the wealthiest 2% were not necessarily the top 2% income-earning households. But they were middle-income people who had more assets. On the other hand, some high-income earners lived beyond their means or were still in a wealth-accumulating stage, taking on more debt.

"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," the report read.

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