How wealthy are South Africans?

The year 2018 has been described as one of the most financially devastating years for South African households. According to the Momentum/Unisia South African Household Index Q4 for 2018, households saw a drastic reduction in net wealth, with a staggering loss of 449 billion rand. This equates to a 6.3% decrease in real net worth in just one year. Johann van Tonder, Researcher & Economist of the Consumer Insights Division at Momentum, sheds light on the impact of the economic slowdown on South African households. The measurement period for the index spans from January 1 to December 31, 2018. Van Tonder explains that household wealth is calculated based on assets minus debts, with financial assets such as pension funds and savings accounting for a significant portion of total assets. The decline in net wealth in 2018 can be attributed to various factors, including the international trade war between the US and China initiated by President Donald Trump. This trade war had a ripple effect on emerging markets, causing share prices to plummet and reducing the purchasing power of household wealth. Additionally, rising inflation further eroded the value of assets, making it challenging for households to maintain their financial stability. Perceptions about the reserve bank also played a role in negatively impacting people's wealth. The proposal to nationalize the reserve bank led to a loss of market confidence, resulting in a depreciation of the rand and financial resources. The importance of market stability and prudent economic policies is highlighted as crucial for maintaining and enhancing household wealth. Looking ahead to 2019, there is optimism that many of the adverse forces that influenced wealth decline in 2018 may be reversing. The nearing resolution of the US-China trade war is expected to have a positive impact on share prices and overall market sentiment. Van Tonder suggests that if households continue to make sound financial decisions, invest wisely, and plan for retirement effectively, they have the potential to recover some of the losses incurred in the previous year. While paper losses may exist in the short term, the long-term outlook for South African households remains cautiously optimistic. By prioritizing financial literacy, prudent investment, and long-term planning, households can navigate economic uncertainties and safeguard their wealth for the future.