SA financial assets buck global trend, expand by 1.7%

Global household wealth suffered a significant decline in 2022, the most severe since the 2008 global financial crisis, according to the latest Alliance Global Wealth Report. The report reveals that the value of financial assets dropped by 2.7%, totaling a loss of EUR 6.6 trillion, reducing the global wealth to EUR 233 trillion by the end of the year. However, in a surprising turn of events, South Africa's household wealth increased by 1.7%, defying the downward trend observed globally. Arne Holzhausen, the Head of Insurance, Wealth and Trend Research at Allianz, shed light on the factors contributing to this divergence during an interview with CNBC Africa. Holzhausen emphasized that 2022 was particularly difficult for global savers due to heightened volatility across asset prices and inflation pressures stemming from events such as the Russian invasion of Ukraine. Despite elevated savings resulting from a reopening of economies post-pandemic, the nominal decline in financial assets was exacerbated by record high global inflation, averaging 8%. This led to a significant loss in wealth for individuals worldwide, with regions like North America experiencing a nearly 15% decline and Germany facing a 12% drop. In contrast, South Africa's 1.7% growth, although modest in comparison, showcased resilience amidst the challenging economic landscape. The unique characteristic of South Africa's wealth management strategy lies in its focus on long-term financial planning, with over 55% of financial assets allocated to insurance and pension funds. This strategic investment approach, uncommon in many emerging markets, allowed South African savers to diversify and benefit from collective growth opportunities. Despite facing a 7% inflation rate within the country, the growth in insurance and pension assets outperformed many other global markets, underscoring the value of a balanced and forward-thinking savings approach. Looking ahead to the current economic climate in 2023, Holzhausen expressed optimism regarding the outlook for global household wealth. With equity and bond markets showing signs of recovery, and central banks nearing the end of their interest rate hike cycles, savers can expect a more stable investment environment compared to the turbulence of 2022. However, the persistent challenge of combating inflation remains a top priority for long-term wealth preservation. As interest rates are projected to stay at elevated levels, savers must adapt their strategies to navigate a landscape where beating inflation becomes increasingly complex. In conclusion, the contrast in global wealth dynamics and South Africa's positive financial growth highlights the importance of prudent financial planning and diversified investment portfolios in mitigating economic uncertainties. As the world economy continues to evolve, savers are advised to remain vigilant, adapt to changing market conditions, and prioritize strategies that safeguard their purchasing power over the long term.