WORDS ON WEALTH
Over the past couple of months, I have devoted several columns to consumer surveys, so you might be thinking "oh no, not another one!" But bear with me. The quarterly Momentum-Unisa Household Wealth Index is a valuable – and enlightening – indicator of the overall financial health of South African households.
Produced by Momentum's Insights Division in Partnership with the Unisa Bureau of Market research, the index draws on data from Statistics South Africa, National Treasury and the South African Reserve Bank, the JSE, the FNB House Price Index, and the Momentum-Unisa Household Finance Database.
The report for the second quarter of the year shows that household assets have declined, mainly through a drop in the value of retirement and investment assets as a result of worsening financial markets. On the other hand, there is a continuing quarter-by-quarter increase in our liabilities – in other words, what we owe – although this does seem to be slowing.
Household debt increased in the second quarter by an estimated R38.9 billion to R2.67 trillion, which is a rise of about 1.5%. This is a slowdown from the R70.2 billion increase (2.7%) in the first quarter.
Against our liabilities of R2.67 trillion, South Africans have personal assets of R15.75 trillion, mainly tied up in property and investments (including retirement savings), which account for over 70% of our wealth (see chart). This figure has dropped from R16.98 trillion in the first quarter.
The report states: “A decline of 10% in the value of household financial assets in Q2 2022 was the main reason for the decrease in household wealth. The value of financial assets, including pension funds and long-term insurance, and investments such as unit trusts, decreased on account of risk aversion. Risk aversion was caused by aggressive interest rate increases by central banks (to contain high consumer price inflation). However, this incited fears of an economic recession in major economies, which will negatively affect world economic growth.
“Consequently, the JSE All Share Index lost 12.3% (from the end of Q1 2022 to the end of Q2 2022) and the All Bond Index 3.7%. These declines resulted in a decrease of R553.7 billion in the value of pension funds and long-term insurance, and an even larger decrease of R776.9 billion in the value of other investments.”
Adjusting for inflation
Because inflation distorts the true picture of our wealth, the Momentum-Unisa report also publishes figures adjusted to 2015 prices. This data shows that, in real terms, our assets dropped by about 9% quarter-on-quarter, while our debt also dropped slightly, by about 0.9%.
Disappointingly, South Africans' real wealth has grown by only about 15% in almost 10 years (since the first quarter 2013), and our debt has remained almost constant over that time. One mustn't forget, however, that the data shows overall assets and liabilities – how those assets and liabilities are distributed across the population is another matter. I suspect that the rich got richer, the poor got poorer, while the people in the middle got more indebted.
What we owe
The Momentum-Unisa report says that all the main liability categories – mortgages, vehicle and other secured loans, unsecured loans and credit facilities, and other liabilities such as municipal debt and other accounts in arrears – increased in the second quarter. It estimates that outstanding amounts on mortgage loans increased by R19.2 billion, vehicle and other secured debt by R7.4 billion, unsecured loans and credit facilities by R6.2 billion and other liabilities by R6.1 billion.
Mortgages account for 46.1% of household debt; car loans and other secured debt account for 17.3%, unsecured personal loans for 10.3%, and credit cards, retailer credit and overdrafts for 8.2%; and other liabilities 18.1%.
PERSONAL FINANCE