What South Africa can do to keep its millionaires 

South Africa has to improve the safety and security of its citizens and grow its economy for it to create new millionaires, keep its existing wealthy individuals, and attract foreign wealth. 

This is according to Henley & Partners in its ninth Africa Wealth Report. In the report, New World Wealth head of research Andrew Amoils outlined what makes a country attractive to wealthy individuals and how it can create them. 

South Africa has lost over 11,000 millionaires in the past decade, which is 20% of its millionaire population. 

Henley & Partners attribute this decline to a lack of personal safety and security, while the local economy’s poor performance has made it hard to create new wealth. 

As a result, many of South Africa’s elites have left the country for places with more stable politics and personal safety. 

High-net-worth individuals (HNWIs) tend to leave a country due to social, political, and economic instability. They prefer “safe haven countries” where their wealth can be protected easily. 

Amoils outlined what characteristics a country needs to have to create new millionaires, keep its existing millionaires and attract wealthy foreigners to its shores. 

Based on research done by New World Wealth, the top factors that encourage wealth growth include –

• Millionaire migration – the migration of wealthy people to a country helps to build its wealth, while wealth migration away from a country does the opposite. With the exception of Mauritius, African nations consistently lose large numbers of high-net-worth individuals annually due to emigration.

• Strong safety and security – the safety levels in a country and the efficiency of local police are among the most critical factors in encouraging long-term wealth growth over a 50+ year period. Concerningly, African nations often rank among the most dangerous countries on earth, especially when it comes to key metrics such as murder rates, women’s safety, and child safety. African countries also perform poorly on the Global Peace Index.

• Growth in key sectors – key wealth-creating sectors are those that generate foreign exchange, such as hi-tech, manufacturing, mining, and tourism. Most African countries perform poorly when it comes to hi-tech and manufacturing and are instead heavily reliant on mining, agriculture, and tourism to bring in forex. Mauritius is a notable exception as it generates significant forex via offshore banking and real estate.

• Competitive tax rates – globally, the UAE, Monaco, and Singapore provide examples of the power of favorable tax in encouraging wealth creation — all three wealth nexuses have very low tax rates. In Africa specifically, Mauritius and Namibia stand out as both countries have no capital gains tax and no estate duty (and both have residence-by-investment offerings).

• A well-developed banking system and stock market – an efficient banking sector and stock market encourages individuals to invest and grow their wealth locally. South Africa is successful in this regard, as it is home to one of the world’s top 20 stock exchanges.

• Media freedom – it is important that major news outlets in a country are neutral and objective. An established financial media sector is key in disseminating reliable information to investors, which ultimately contributes to wealth growth.

• Strong ownership rights – once assets are taken away, they tend to lose value, negatively impacting on wealth. Zimbabwe offers a case in point in this regard.

South Africa ranks highly on many of these factors. However, recent political and social instability, exemplified by the July Riots of 2021, scares away wealthy individuals. 

Growing concerns around education and healthcare are also factors in rich people wanting to leave the country. 

However, the future looks somewhat brighter for South Africa in terms of wealth, with Henley & Partners expecting the country’s wealth to grow by 60% over the next decade. 

Due to its affordability, the country will also begin attracting foreign millionaires and billionaires. 

In particular, Cape Town is expected to see an influx of HNWIs, with its current 7,400 millionaire population set to swell by 85% over the next ten years to 13,500 in 2033.