Data from the Momentum/Unisa South African Household Index showed that household purchasing power had shrunk by R449.8 billion between the last quarter of 2017 and the last three months of 2018.
Unisa/Momentum said the plunge in real wealth, the largest since 2008, was attributable to an increase of R21.2bn in the real value of their liabilities, mostly from outstanding debt and a R428.6bn decline in the real value of their assets, which mostly consist of retirement savings.
According to the index, the main reason behind the decline in retirement funds and other savings and investments was the sharp decline in share prices of JSE-listed and non-listed companies.
Johann van Tonder, researcher and economist at Momentum, said the reduction in financial assets demonstrated how vulnerable the South African economy and financial markets were to domestic and offshore events.
“Domestic events that contributed to declining financial assets include weak economic growth of only 0.8 percent in 2018, including a brief recession, renewed load shedding in the fourth quarter of 2018, and investor fears created by proposed land expropriation without compensation,” Van Tonder said.
He said the impression that the SA Reserve Bank’s independence was in danger, consumer price inflation and growing public debt also dealt a blow to households in the period under review.
The decline in household wealth does not bode well for consumer confidence and contributes to slower economic growth and job creation.
Fitch Solutions, a unit of the Fitch Group, this week warned that South Africa’s high level of unemployment would continue to weigh on private consumption and real gross domestic product (GDP) growth this year.
Merrill Lynch said that it expected the all share index (Alsi) to hit the 61 000 mark this year and earnings per share to grow by 12 percent.
The Alsi last week breached the 58 000 mark for the first time since September. Preliminary estimates point to a reasonable recovery in the real value of household net wealth in the first quarter of this year as share prices recovered.
The Alsi had posted its best first quarter since 2007, signalling that it had bounced after the JSE’s worst year since the financial crisis.
Gielie de Swardt, head of retail distribution at Sanlam Investments, said local markets shouldered the emerging market concerns better but escalating Eskom power cuts reduced business confidence.
“The financial sector of the JSE was one of the worst performers in March, while commodities boosted markets.
"The first quarter did end on a positive note, and investor sentiment remains largely positive as lowered market prices present an opportune time to buy shares,” De Swardt said.
“For the year to date, the Alsi and ALBI returned 7.97 percent and 3.81 percent respectively.
"Listed property returned 1.45 percent and cash returned 1.77 percent. Internationally, the MSCI World Index returned 12.48 percent in dollars."