Momentum, in collaboration with Unisa, measures the wealth of South African households on a quarterly basis.
The index showed the combined real net value of all the goods households own (including residential property) and the money they saved and invested increased marginally to R6.99 trillion in the first quarter of 2017, up from R6.96trln in the fourth quarter of 2016. This figure was 1.3percent lower than a year ago.
The index showed the small quarterly increase occurred for lots of right and some “wrong” reasons, according to the report.
“On a macro level the right reason is because the real value of households’ assets increased to R8.37trln, up from R8.36trln in the fourth quarter of 2016, which is 0.4percent higher. The main reason for the increase in the real value of household assets can be attributed to a better performance of their financial assets, which mainly is invested in retirement funds,” the report said.
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During the period the JSE all share index increased by a quarter-to-quarter growth rate of 2.1percent between the fourth quarter of 2016 and the first quarter of 2017.
Despite the marginal improvement in the quarter, the report showed that the real value of households net wealth is at the same level as it was three years ago, which is the first quarter of 2014.
“This means that households lost three years of wealth accumulation. The consequences of this loss of real net wealth are far reaching and are negatively affecting the economy and every household in the country.”
Shrinking, or slow-growing real household net wealth results in less confidence and more financially vulnerable consumers. This in turn causes slower economic growth and job creation, while it also slows the pace of transformation. It also means that households’ standard of living will be lower than it could have been during their working life and in retirement.
It also inhibits their ability to improve their financial wellness, the report stated.
The other positive aspect in the report is that households are reducing the extent of their indebtedness.
The real value of households liabilities which should be subtracted from their assets to obtain their net wealth has declined in the first quarter of 2017 compared to the last quarter and the first quarter of 2016.
“This indicates that households are reducing the extent of their indebtedness, which is positive for wealth accumulation. In this respect the ratio of household liabilities to their disposable income shows a decline to 73.9 percent in the first quarter of 2017 from above 75 percent in the fourth quarter of 2016 and almost 76 percent compared to the first quarter of 2016,” the report said.
BUSINESS REPORT ONLINE