The Reserve Bank is now providing a range of data on SA household balance sheets. This is extremely useful, and continues the excellent work the Reserve Bank has undertaken on the SA economy. The Reserve Bank data is world class, and far superior to many other countries, including many OECD countries.
According to the Reserve Bank, the value of household assets amounted to R6 406 billion at the end of 2009. Most of this is in the form of financial assets (R4 522 billion) including, for example, bank deposits, pension funds, and unit trusts. The value of residential buildings amounted to R1 592 billion.
In contrast, household debt totaled R1 185 billion at the end of 2009. Most of the debt is in the form of mortgages (R753 billion). The remaining debt is represented by items such as car finance, overdrafts, personal loans, student loans, credit cards etc.
Correspondingly, household net wealth (assets less liabilities) was equivalent to R5 221 billion at the end of 2009. If durable consumer goods are included, household wealth rises to R5 618 billion. Interestingly, the net worth of residential property is a healthy R840 million.
Is the net wealth good or bad? Firstly, SA household net wealth is on the rise and has increased noticeably over the past four quarters, helped by a rise in both financial asset values (equities on the stock market) and house prices. Importantly, this is a broad but positive relationship between increases in household wealth and increased consumer activity. Secondly, using the international convention of comparing net wealth to income, SA’s net wealth is equivalent to 366% of disposable income. This is well above the recent low of 316% in Q1 2009 and above SA’s long-term average of 337%. Using the US as an unfair comparison, their net wealth is currently equivalent to 472% of disposable income (although it has previously spiked to over 600%, when they created either the Hi-Tech bubble or the more recent residential property bubble).
Overall, SA net wealth can be considered reasonable in the context of emerging markets. Of course, this says nothing about how unevenly wealth is distributed in SA. SA still has one of the world’s worst levels of income inequality.
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