- FNB Private Wealth and RMB Private Bank say Covid-19 has forced "massive lifestyle and behavioral shift" among wealthy customers.
- Some have depleted their personal wealth to keep their businesses afloat, with some now looking offshore to recover losses.
- AfrAsia Bank and New World Wealth said South Africa had approximately 5 000 fewer dollar millionaires by the end of June 2020 compared to December 2019.
Wealthy South Africans have not been spared as Covid-19 moved many households to lower income brackets and pushed those already struggling to make ends meet, deeper into poverty.
According to Eric Enslin, CEO of FNB Private Wealth and RMB Private Bank, many of their wealthy and high-income clients have seen their fortunes shrink to the extent that some will now need to postpone their retirement plans and will be staying put locally with their families as they try to rebuild.
At the entry-level of private banking, Enslin was talking about people who earn between R750 000 and R1.5 million a year but are still in a wealth building phase. At the private wealth level, these are individuals who have net asset value of at least R15 million or earn above R1.5 million a year.
"The economic impact affected on all segments of the society, whether it is salaried people, self-employed people, people with lots of wealth, it has impacted everyone," said Enslin.
Wealth wiped out
He said RMB Private Bank and FNB customers in the restaurant and hospitality industries who relied on overseas travel have emptied their personal nest egg to stay afloat as the lockdown drags on. Meanwhile many have lost a substantial value of their investments just before the lockdown when the equity market crashed in mid-March. While the JSE recovered some of the losses, it is still below where it was at the start of 2020.
"What's interesting is many of them came back to say they must look at their emergency funding and access to cash because a lot of clients went into their personal wealth to maintain salaries of their staff to the extent that many of them have depleted that," said Enslin.
This has caused a "massive lifestyle and behavioural shift" from working longer than initially envisaged to wanting more liquid assets as opposed to fixed assets like properties to keep them afloat should a crisis like Covid-19 recur, added Enslin.
SA now has 5 000 fewer dollar millionaires
While FNB and RMB Private Bank's observations were limited to its client base, AfrAsia Bank and New World Wealth, who, together track fortunes of dollar millionaires in 90 countries, also said that South Africa's high net-worth individual levels have dropped by around 14% in the first half of 2020 in US dollar terms.
AfrAsia Bank and New World Wealth are due to publish their annual Africa Wealth Report soon but has revealed that South Africa's HNWIs declined to around 33 000 in June 2020 compared to 38 000 in Dec 2019. Their definition for HNWIs is people who have net wealth of US$1 million or more.
Colin Grieve, chief representative officer at AfrAsia Bank's office in South Africa also attributed this wealth reduction in the country to Covid-19 which drove depreciation in the rand to R19/US$at its weakest levels in April, but also the sovereign downgrade by Moody's in March.
Grieve agreed that the equity market crash made things worse for South Africa's wealth when expressed in US dollar terms as JSE-listed shares faced a double whammy from falling values and a depreciating currency.
"Other assets such as local property as well as the value of business owners' private equity would also have fallen as the lockdown severely impacted on local manufacturing and trading," said Grieve.
Looking offshore for recovery
With a weak currency and many SA Inc stocks that that are vulnerable to the projected double decline in SA's GDP for 2020, Enslin said more of their private banking and private wealth clients were looking at "externalising" their investments more.
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Taking money offshore was a trend that had gained a lot of traction in the past 18 months, but Covid-19 has accelerated it, said Enslin.
"It's a function of a lot of uncertainty and instability from a SA perspective. When you speak to a lot of these clients, depending on what industries they are in, and how they see the SA economy, and they are not seeing an opportunity," he said.
Enslin said this search for recovery abroad, whether through offshore investments or emigration cuts across demographic groups and young and old have been exploring it. But when it comes to emigration, it is typically people who have accumulated enough wealth to be able to live comfortably in countries with much stronger currencies. But also professionals were increasingly moving abroad where they were getting "lucrative" opportunities before Covid-19.
"Another category is people whose decision to emigrate is based on their kids and education," he said.
Enslin, however, said there were probably more people moving back to South Africa than people would think.