South Africans are getting richer – but there is a catch

South African households saw their financial assets grow by 8.3% throughout 2023. However, when adjusted for inflation, this increase is only 2.2% in real terms. 

Allianz revealed this in the 15th edition of its Global Wealth Report, released on Wednesday. 

Europe’s biggest insurer said the global growth in financial assets was surprising given the losses experienced in 2024 and anticipated investment outflows. 

In particular, the company’s analysts flagged rising interest rates as a reason household wealth was expected to decline. 

South Africa’s Reserve Bank hiked rates by 475 basis points from November 2021, leaving them at 15-year highs for over a year. 

This tightening was mirrored in developed markets, with the US Federal Reserve undergoing its most aggressive hiking cycle in history. 

Such aggressive tightening was expected to translate into higher debt-servicing costs for consumers, reduce disposable income, and minimise investment inflows. 

However, economies and households proved resilient and financial markets even boomed. Global financial assets of private households recorded strong growth, with an increase of 7.6%. 

Overall, total financial assets amounted to €239 trillion at the end of 2023.

The recovery in 2023 was broad-based, with only two countries – New Zealand and Thailand – recording negative growth rates. 

Moreover, growth was relatively uniform across all regions, not least in Asia and North America, which both grew by over 8% – with the USA (8.6%) growing even more strongly than China (8.2%). 

As a result, the growth advantage of the emerging economies over the advanced economies has shrunk significantly again. In six of the last seven years, emerging economies have largely lost their growth lead.

The strong growth seen in 2023 marked the end of three lost years for savers, with high inflation eating away at returns and investable income. 

The financial assets of South African households increased by 8.3% in 2023, posting a strong recovery after the dismal year of 2022, when wealth only grew by 0.1%. 

The main driver was pensions and retirement funds, which grew 9.5%. These remain the dominant asset class in South African households’ portfolios, making up nearly half of all wealth.

Allianz noted positive reforms to South Africa’s pension system as one of the key drivers for this growth. In recent years, local asset managers have been able to increase their offshore exposure to 45% of all assets. 

Two other asset classes showed solid growth – bank deposits increased by 7.5% and securities by 7.0%, reflecting increased use of the traditional financial sector. 

However, the picture is less rosy in real terms. Adjusted for inflation, financial assets increased by only 2.2% in 2023. 

Compared to the pre-pandemic level of 2019, the purchasing power of financial assets was 12.3% higher at the end of 2023. 

This is in sharp contrast to many European economies where savers suffered four lost years in real terms.

“The comparatively weaker growth of poorer countries reflects the new reality of a fragmenting world,” said Ludovic Subran, chief economist of Allianz. 

“Until 2017, the year in which the trade disputes between the USA and China broke out, poorer countries still had a growth advantage of 10 percentage points or more over richer countries – this has shrunk to 2%.”

“We will all pay a price for decoupling, but it is the emerging economies that will feel it most. A less connected world is a more unequal world.”

While growth in financial assets is solid, distribution remains the Achilles heel of South Africa, Allianz said.  

In fact, it is the country with the most unequal distribution of wealth, with the richest 10% of the population owning 85% of total net financial assets.