South Africa was home to 28 200 millionaire households (2011: 25 800) last year.
This placed it in the 36th position on the list of countries with the highest number of millionaires, according to a report released by the Boston Consulting Group (BCG) on Thursday.
Michael Seeberg, principal at BCG, says a millionaire household is defined as one with financial wealth of at least $1m.
He explains that private financial wealth includes cash and deposits, money market funds, listed securities held directly or indirectly through managed investments, Life and pension reserves and other onshore and offshore assets. It excludes investors’ own businesses, residences, or luxury goods (see graphic).
Total private financial wealth in a country is calculated and then Lorenz curves (related to the Gini coefficient of wealth distribution in a country) are used to distribute the wealth to the different households.
Seeberg says South African millionaire households basically consist of two and a half groups. The one is traditional owners and entrepreneurs who have been in the country and in business for many years and have accumulated wealth over decades. The second group is an evolving new elite. There is also a smaller group – the employed executives in large companies, he says.
“Obviously this is a smaller group because as an employed person you tend to have a certain limit to your income,” Seeberg says.
He says there are basically two sources of wealth – the one is newly created wealth, which is linked to gross domestic product and savings rates, “it comes from income basically.”
And then there is wealth created by existing assets and this is linked to the performance of the stock market, bonds and cash deposits.
These two sources basically drive wealth generation. South Africans have roughly 27% of their wealth in equities and 21% in bonds, which means almost half of their wealth is linked to financial markets performance.
Source: Boston Consulting Group (CAGR = compound annual growth rate)
According to the report, ‘Maintaining Momentum in a Complex World: Global Wealth 2013’, the US topped the list with 5.9m millionaire households – the highest number globally. Japan and China were in second and third place with 1.5m and 1.3m respectively.
Some 0.9% of all households – 13.8m globally – had reached millionaire status by 2012.
“The highest density of millionaires was in Qatar, where 143 out of every 1 000 households had private wealth of at least $1m, followed by Switzerland (116), Kuwait (115), Hong Kong (94), and Singapore (82). The US had the largest number of billionaires in 2012, but the highest density of billionaire households was in Hong Kong (15.1 per million), followed by Switzerland (9.4 per million),” the report states.
What is evident from the report is that growth in private wealth differed significantly within the regions that were analysed. In terms of the Bric (Brazil, Russia, India and China) countries, only China found itself on the list of the top 15 wealthiest nations in 2007. Five years later, India was also added to the list.
“In 2017, China is projected to be ranked second, with India ranked ninth and Russia eleventh. By contrast, some old-world countries are losing ground. Switzerland, for example, dropped to thirteenth place in 2012 from eleventh in 2007, and is projected to fall to fifteenth in 2017,” it states.
The drivers of growth in global wealth
According to BCG, the primary driver of the growth in global private health last year was the robust gains in equity markets in many parts of the world, specifically during the latter part of 2012. The S&P 500 gained 13% last year, while the Nikkei rose 23%. The Euro Stoxx 50 surged 14%.
The local bourse also followed trends in international markets – the JSE All Share gained some 27%.
“Strong stock returns allowed existing assets to contribute far more than usual to the overall growth in wealth, particularly in mature markets. Only a few countries suffered equity market losses, among them European countries such as Spain and Slovakia and Middle-East and Africa countries such as Qatar, Morocco, and Bahrain.”
The percentage of assets allocated to equities rose 1.5 percentage points to reach 33.9% internationally last year. This is almost 5 percentage points below the level experienced prior to the global financial crisis, BCG says.
“The amount of private wealth held in equities grew globally by 12.6% in 2012 to $45,9trn, compared with 3.5% growth in bonds (to $27.6trn) and 5.7% growth in cash and deposits (to $60.8trn).”
“Looking ahead, global private wealth is projected to post a compou