SOUTH Africa’s financial wealth grew by 4.5 percent from 2015 to 2020 to $0.7 trillion (about R10.3trl) and was expected to grow by 3.9 percent to $0.8trl by 2025 despite the economy devastation wrought by the Covid-19 pandemic.
The new report by Boston Consulting Group, titled “Global Wealth 2021: When Clients Take the Lead”, found that despite the pandemic’s enduring financial impact, global prosperity and wealth grew significantly throughout the crisis and was likely to continue to expand significantly over the next five years, in line with the emerging economic recovery.
Adam Ikdal, Johannesburg Boston Consulting managing director and senior partner, said even though Africa as a whole typically lagged behind other regions overall, with $4.1trl in total financial assets, real assets and liabilities in 2020, compared to $11.1trl in the Middle East, for example.
“The continent enjoyed higher levels of growth in these areas than any other region globally between 2015 and 2020,” said Ikdal.
Financial assets, real assets and liabilities in Africa grew at a compound annual growth rate (CAGR) of 10.3 percent, from $2.1trl to $4.1trl between 2015 and 2020, compared to a global CAGR growth rate of 6.7 percent globally.
Africa’s financial assets, real assets and liabilities were forecast to grow at a CAGR of 7.1 percent to $5.8trl by 2025, above the global forecast of 4.8 percent and second only to Latin America’s forecast growth of 7.8 percent.
This is also the case for South Africa, particularly for ultra-high-net-worth individuals (ultras) and the middle class, also known as the “simple-needs segment” in the report. South Africa was predicted to see an overall growth of 4 percent in financial wealth between 2020 and 2025.
Last year, more than 6 000 people worldwide became ultras. That was on the back of year-on-year growth of 9 percent since 2015, representing steady growth in the segment. As it stands, South Africa had a small pool of ultras compared to the world, and Middle East and Africa average.
The country’s ultras comprised 8 percent of its financial wealth segments, compared to 13 percent and 27 percent, respectively. This translates to 130 ultra-high-net-worth individuals in South Africa, which was expected to grow at a CAGR of 5 percent to about 160 by 2025.
“Despite the relatively small number of ultra-high-net-worth individuals in the country, they are the fastest growing financial wealth segment – and their wealth increased due to the lockdown,” said Ikdal. “They also make up 4.7 percent of South Africans’ wealth, and this will grow to 5 percent by 2025.”
South Africa’s ultra-high-net-worth individuals account for 25 percent of the continent’s ultras, but forecasts indicate that this number would decrease slightly to 23 percent in 2025, because the number of ultra-high-net-worth individuals in Africa were growing even more quickly, at a rate of 6 percent. They also account for more of the continent’s overall wealth, making up 10.8 percent in 2020 and were expected to increase to 11.2 percent by 2025.
Ikdal said what united these ultras in South Africa, across the continent and more broadly was that they were global citizens and increasingly young, with the rise of the next-generation segment. These individuals, between 20 and 50 years of age, have longer investment horizons, a greater appetite for risk, and often a desire to use their wealth to create positive societal impact, as well as earn solid returns. They also did not want to be treated like their parents, and expect bespoke, exclusive opportunities, specialised lending, and in-depth investment expertise.
Likewise, even non ultra-high-net-worth individuals such as the simple-needs segment had come to expect personalisation. Called the simple-needs segment because it was made up of individuals with simple investment needs and financial wealth between $100 000 and $3 million, this group’s needs were often underserved, because they were offered a standardised set of products, and the result was a poor client experience with no “wow” factor.
“This is essentially a missed opportunity, particularly in South Africa, where the middle class are cautious, but evolving and also managed to increase their wealth during the pandemic to disperse it from the ultra-wealthy and place it in the hands of more South Africans,” said Ikdal.
BUSINESS REPORT