SA households’ real net wealth up R300bn in H1 2019

South African households have seen a significant increase in their net wealth in the first six months of 2019, according to the Momentum/Unisa Household Net Wealth Index. The report highlights that despite the challenges faced by many companies due to pressure on consumer spending, households are actually getting richer and not poorer as commonly perceived. This can be attributed to the distinction between income and wealth, where income reflects immediate financial gains while wealth accumulates over time through investments and assets. The report is based on secondary data collected from sources like the Reserve Bank and the National Credit Regulator, which is then analyzed to determine the overall wealth trends. It takes into account contributions to pension funds, investments in residential property, the performance of the JSC, and the status of credit and liabilities held by households. The net wealth is calculated by subtracting liabilities like mortgages and personal credit from assets like homes and investments. While the overall wealth of South African households has shown a slight improvement in the first half of 2019, the long-term view reveals that households are still struggling to recover the wealth they had several years ago. The performance of the JSC and challenges faced by fund managers have impacted the returns on investments, making it difficult for households to see substantial growth in their wealth. One of the key aspects affecting household wealth is the balance between assets and liabilities, with the gap narrowing since 2014. The report notes a decrease in unsecured debt growth, signaling a positive trend in asset-backed debt. However, access to unsecured credit remains a concern, as it is usually more expensive and can hinder wealth accumulation. Looking ahead, the outlook for South African household wealth growth remains subdued. Factors such as limited income growth, constraints on the economy, and tighter regulations on credit access are expected to dampen wealth creation in the medium term. Households are advised to be cautious with their financial decisions, especially during times like the upcoming festive season, to avoid excessive consumption expenditure and further strain on their financial stability. In conclusion, the report suggests that while there has been a modest improvement in household net wealth in the short term, the overall trend indicates a challenging environment for wealth accumulation. With uncertainties surrounding income growth and economic conditions, South African households are urged to adopt a more conservative approach to managing their finances to navigate the complex financial landscape.