Cape Town - South Africa has the highest number of dollar millionaires on the African continent and this number is set to rise in coming years, according to Old Mutual’s New World Wealth Africa Report for 2015 released on Wednesday.
The report predicted an increase of 55 500 in the number of dollar millionaires in the country by 2017, despite a weakening local currency. The group had grown by nine percent since 2007.
This projection, said Luke Martins, a financial planner at Old Mutual Private Wealth Management was realistic, but dependent on the country’s future economic situation.
While individual attitudes toward building wealth, such as investing and having a clear vision plays a role in the success of high net worth (HNW) individuals, the performance of the local economy was equally important, he said.
Martins said there was great potential for South Africans to create wealth, despite educational and socio-economic challenges, which may slow down the growth of HNW individuals.
“The continued growth in numbers of high net worth individuals in South Africa can be attributed to a combination of factors, including the country’s continued position as a business and investment gateway into Africa and its appeal as a global investment destination, and its robust physical and financial infrastructure.”
According to the report, Africa is home to the world’s fastest growing high net worth individual market. The report indicated the the number of African individuals classified as HNW had increased by 145 percent over the past 14 years, compared to a global HNW growth of 73 percent over the same period.
The question said Martins, is what was fueling the wealth of so many South African individuals and how these conditions could be replicated to raise the living standards of all South Africans.
Martins indicated that while South Africa enjoyed its position as a gateway to business and investment in Africa, “these factors alone obviously don’t automatically translate into wealthy individuals”.
However, he explained that “it does mean that more South Africans who have the will and means to grow their personal wealth have enjoyed, and will continue to enjoy, significant opportunities to do so”.
Another financial planner for Old Mutual Private Wealth Management, Lesego Monareng, said South Africa’s Black Economic Empowerment (BEE) policies had done much to create wealthy South Africans.
“In South Africa, the political will to drive economic empowerment of previously disadvantaged persons has been a major contributor to wealth creation for many. It has both built the middle market as a feeder into individual wealth achievement and allowed many individuals to position themselves to take advantage of the resulting opportunities,” Monareng said.
She said that other factors apart from BEE policies such as educational opportunities, an entrepreneurial spirit and a willingness to take calculated risks played a role in the success of HNW individuals.
Both Martins and Monareng said they believed that it was possible to replicate the formula for wealth creation across South African society for while there were differences between how people become wealthy, there were also many similarities in the success stories of the country’s rich.
The main similarities, said Martins, consisted of “a clear vision of what success comprises, a thorough, goal-oriented plan to serve as a map to that success destination, a diversity of income streams, and a dogged determination to avoid short-term, high-interest debt.”
One element of success in wealth creation said Monareng, is the importance of creating a strong network of financial and business experts, and protecting that wealth. “Nobody is an expert in every aspect of business and finance,and more often than not, it’s the person who admits this early on, and outsources key functions to professional consultants, who achieves financial success the soonest,” she said.
To protect wealth and continue to grow it, Martins and Monareng urged South Africans to stick to their investment plan, avoid making emotional decisions and diversify.
ANA