South Africa – country has a poverty problem not a wealth problem

News24

Lameez Omarjee

(iStock)

Johannesburg – Growth in South Africa’s wealth population over the past decade was a dismal 8%, according to a report.

The Wealth Report by New World Wealth revealed that South Africa’s ultra-high net worth individuals (UHNWI) population growth is the second lowest, after Spain. The research looks at growth between 2006 and 2016. Spain’s growth actually declined by 9% during the period.

UHNWI are people whose net assets are worth over $30m (about R390m), the report explained. Worldwide the number of UHNWI rose by 6 340, boosting the world’s population to 193 490 people. The report reveals that the total number of billionaires grew by 45% to 2 045 people over the past 10 years.

Vietnam had the highest growth in its UHNWI population at 320%. This was followed by India, with 290% and China at 281%.

Other African countries on the top 20 list include Kenya, with a wealth population growth of 93% and Nigeria, with a growth of 40%. Overall growth in Africa was 33%.

“Of the 20 countries whose ultra-wealthy populations have grown most rapidly over the last decade, 11 are in Africa,” said the report.

South Africa’s UHNWI population is projected to grow by 30% over the next 10 years to the year 2026.

Sharper rises are expected in Mauritius, Ethiopia, Tanzania, Uganda, Kenya and Rwanda, although this will be from a low base, explained Andrew Amoils, head of research at New World Wealth.

Mauritius tops the list, with growth projected at 130%, due to its reputation as a safe, business-friendly country with lower tax rates than many countries in Africa. It is expected to remain a popular retirement hotspot for the wealthy, said the report.

A wealth report by British company Knight Frank indicates that these ultra-wealthy people are likely to migrate to countries which offer a “fiscal and political safe haven”. Popular choices include Australia, New Zealand, Canada, Malta, the United Arab Emirates, Qatar, Monaco and Israel.

In his commentary on the Knight Frank report, BizNews founder and editor Alec Hogg pointed out that the higher tax rates announced for individuals earning more than R1.5m, would deter the wealthy from settling in South Africa. “A pity SA politicians cannot grasp their problem is excessive poverty, not one of too many wealthy people,” he said.

READ: Taxpayers hit with highest marginal rate since ’94

Finance Minister Pravin Gordhan increased the tax rate for these individuals to 45%. Analysts are of the view that Gordhan chose this path instead of choosing to raise VAT, which is a politically contentious issue.

Raising VAT by 2% could have generated enough revenue to close the R28bn tax gap, according to head of tax at Norton Rose Fulbright, Andrew Wellsted.

ALSO READ: VAT could generate more revenue than wealth tax – expert

Professor Thabo Legwaila from the University of Johannesburg’s department of Mercantile Law, previously told Fin24 that the personal income tax is favoured as VAT is perceived as regressive, affecting the poor the most and not the rich.

In South Africa the tax base is 14m people, only half of these people (7m) actually pay tax. And of these only about 100 000 qualify to pay the 45% tax.

“This means taxes must be increased by a huge percentage (5%) in order to meet financial objectives, which could be met by increasing VAT by half a percentage,” he said.

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