The super-rich are leaving SA

Biggest decline in the number of very wealthy people globally.
The latest Knight Frank Wealth Report demonstrates that SA has a crisis with regards to retaining the wealthy, says Nedbank. Image: Shutterstock

Globally the number of ultra-high-net-worth individuals (UHNWIs) increased by more than 9% from 2020 to 2021, adding 52 000 very wealthy people. However, in South Africa the number declined by 7% from 603 to 561 over the same period.

This decline is the highest of all the countries on the ranking of the latest Knight Frank Wealth Report (which is based on responses provided during October and November 2021 by more than 600 private bankers, wealth advisors, intermediaries and family offices who between them manage over $3.5 trillion).

Knight Frank expects this figure to remain flat over the next five years, dropping to 559 by 2026.

UHNWIs are worth at least $30 million (around R450 million), including their primary residence, compared to high-net-worth individuals who are worth $1 million including their home.

The decline demonstrates that SA has a crisis with regards to retaining the wealthy and improving the economy, according to the report.

SA’s shrinking tax base

The real issue for SA is that the number of people contributing to the tax base has been shrinking since 2012. During the “boom years” (2006-2012) taxpayer numbers grew by 7.5%, says Angelika Golinger, chief economist at EY Africa.

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There has been a decline ever since, reversing some of the gains made in the early 2000s, says Golinger, speaking at a recent webinar hosted by EY Africa and the South African Institute of Taxation (Sait).

The drivers behind the declining tax base are the muted economy (causing massive unemployment and loss-making companies) and emigration, she says.

Batho Makhakhe, partner at EY Africa, says the emigration trend started before the outbreak of the coronavirus. The pandemic just gave it legs.

Many South Africans are opting for English-speaking countries, mainly New Zealand, Australia and the US. Lately there is a lot of movement into Canada. The July unrest in KwaZulu-Natal and parts of Gauteng last year did not help matters.

Chasing people out of SA

“We do not have many people knocking on South Africa’s door, mainly because of our regulatory restrictions. It is easier to come into SA as an illegal immigrant or asylum seeker than as a scarce skilled person,” says Makhakhe.

Although government recently expanded its scarce skills list, the requirements are onerous, and some are almost impossible to satisfy. “We are our worst enemies as far as that is concerned,” Makhakhe adds.

Claude Baissac, CEO of Eunomix, whose scarce skills visa has not been renewed for the first time in 20 years, says the South African government has unrealistic assumptions about growth, expenditure and debt.

“Because we have an economy that is incapable of creating growth, government is effectively chasing people out of the country,” says Baissac. The South African economic base is systematically being destroyed. There are not enough people employed.

“Unless we address that, we are on a path where there will not only be a growth collapse, but also an economic collapse … At some point someone has to wake up and say that my money is in with someone who is generating negative growth on every revenue it has kidnapped.”

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Baissac quotes statistics which show that in countries like the Philippines and Indonesia there is a GDP gain of seven to eight units for every unit of government expenditure. In Malaysia it is around five. In South Africa it is close to one.

“At some point the big scam is going to be called. Then it is run for cover where you have a Greece or Argentina scenario, and everybody is in a world of pain in SA.”

Jéan Minnaar, co-managing director at Old Mutual Wealth, says skilled South Africans have become global citizens who see only two things – risk and opportunity.

Read: Emigration, delays, double tax and other worries

“Unfortunately, because of macro-economic factors we have a situation where the risks remain high while the opportunities are diminishing.”

Minnaar warns that many developed countries realise that they need different skills such as plumbers, truck drivers, forklift drivers and electricians. “We have to be careful.”

New compact

SA needs a new compact where government assures labour, business and the investment community that their primary and sole duty is to educate, protect and help people survive by getting them employed by private sector businesses.

“It will take 10 years of effort to prevent our economy from collapsing and people, on a regular basis, helping themselves in the shopping centres,” warns Baissac.

‘Reverse’ democracy

Sait CEO Professor Keith Engel says there is globally a reverse in the concept of “democracy”, where democracy means that government is working for the people rather than the people working for government.

Government is increasingly interested in itself, in order to perpetuate itself for its own benefit. Unfortunately, unless this changes we are going to feel estranged from government and the social contract will be broken.

“It is a hard thing to say, but it is where we are. You see some forces fighting back, notably the president and the ministry of finance. The question is whether they will win and whether they will win fast enough,” says Engel.

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The main vice of capitalism is the uneven distribution of prosperity. The main vice of socialism is the even distribution of misery.

Socialism is the philosophy of failure, the creed of ignorance, and the gospel of envy.

Socialism needs to pull down wealth; liberalism seeks to raise up poverty. Socialism would destroy private interests, Liberalism would preserve [them] … by reconciling them with public right. Socialism would kill enterprise; Liberalism would rescue enterprise from the trammels of privilege and preference. Socialism assails the preeminence of the individual; Liberalism seeks … to build up a minimum standard for the mass. Socialism exalts the rule; Liberalism exalts the man. Socialism attacks capitalism; Liberalism attacks monopoly.

WC

More than anything else, citizens of any country can only prosper if they feel safe.
Sadly this feeling of safety and security is not being felt by the people who provide for the livelihood of the
Majority.
When you are unable to trust your President his government AND fear for your physical safety, leaving is the only option. Zuma and his ANC have no idea how deeply they have destroyed the feeling of safety and prosperity in SA. I’m hoping it’s not too late for CR to pick up the pieces and bring back some confidence.
This is a beautiful country, with beautiful people and baskets full of potential and opportunity ( agriculture, resources,water, weather, diversity, technology) if it were a safe place to live again…everyone would prosper and no one would choose to leave!

Words that should be etched in stone, perfectly crystallized.

Well said Amanda, unfortunate all to true too.

“Government is increasingly interested in itself, in order to perpetuate itself for its own benefit.”

We all know this. How do we stay here and escape becoming a clone of Zimbabwe and states North?

I await the answer with anticipation …

People flee from abusive authorities. Our European ancestors chose to settle in South Africa after they experienced persecution by the Church authorities(French Hunegots), unemployment in the UK(British Settlers), a lack of opportunities in the Netherlands(Dutch Settlers), and wars(Jews, Italians, Greeks, Portuguese).

The descendants of these settlers are now fleeing South Africa for the same reasons. The combination of excessive taxation, discriminatory government policies, crime, socialist redistributive dogma, and racial prejudice destroy the economic opportunities for this group of people.

The Great Trek has been thrown in reverse. Where they traveled North with their ox wagons, bible under the arm, and rifle in the hand, they now travel South with their 4*4s, social media, and taser gun in the handbag.

If the ANC remains sleeping, the “noise” against illegal immigrants will come after them too.

End of comments.

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