Over recent months, South Africans have faced several, harsh challenges. The state of the country’s economy painting a bleak picture for the future.
Such is the state of affairs, that a report published by Statistics South Africa (Stats SA) during the month of September reflects the pressing situation the country finds itself in.
According to Stats SA, the second quarter of 2020 will most likely become known as the pandemic quarter.
The national statistical service states, “South Africa’s economy suffered a significant contraction during April, May and June, when the country operated under widespread lockdown restrictions in response to COVID-19.”
Such was the impact, that Gross Domestic Product (GDP) fell by just over 16% between the first and second quarters of 2020, giving an annualised growth rate of ‑51%.
Additionally, Stats SA elaborates, “This contraction dwarfs the annualised slowdown of 6,1% recorded in the first quarter of 2009 during the global financial crisis. Historical data from 1960, sourced from the South African Reserve Bank, show that the second quarter of 2020 experienced the biggest fall in GDP since that year, far steeper than the annualised 8,2% decline in the fourth quarter of 1982.”
With South Africa’s economy taking a substantial knock, it seems the country’s wealthier residents are leaving in search of greener pastures.
This can be seen in the report, 2020 Global Wealth Migration Review. The report is sponsored by the Mauritius based banking group, AfrAsia Bank, with data and findings in the report provided by the wealth intelligence firm, New World Health.
The report examines recent worldwide wealth migration trends and analyses the potential impact of the COVID-19 outbreak on wealth migration going forward.
The group explains that it compiles a global wealth migration review, as wealth migration figures are important to gauge a country’s economic health. It says, “For instance, if a country is losing a large number of high net worth individuals (HNWIs), it is probably due to serious problems in that country. It can also be a sign of bad things to come, as HNWIs are often the first people to leave – they have the means to leave, unlike middle-class citizens.”
In fact, the group adds that if one looks at any major country collapse in history, it is usually preceded by a migration of wealthy people away from that specific country.
When looking at the inflows and outflows of HNWIs, it seems that Australia is the biggest recipient of wealthy people moving to the country’s shores. Approximately 12 000 well-off people moved to the country over the past year.
Australia is followed by the United States with 10 800 affluent people making the states their home, with Switzerland and Canada placing in fourth and fifth place respectively.
Countries experiencing a high number of wealthy people leaving includes China, India and the Russian Federation. South Africa also falls into this list, with the report showing that just over 100 millionaires left our shores.
According to the report, Portugal continues to attract a high number of wealthy people from South Africa, China, Brazil and Russia due popular investor visa program.
Common contributing factors to why HNWIs leave their mother countries include the following:
- Safety, especially women and children
- Financial concerns
- Schooling and education opportunities for their children
- Work and business opportunities
- Healthcare systems
- Oppressive governments
- Standard of living
Looking to the future and the pandemic, the report shows that in light of the coronavirus outbreak, it is likely to become more difficult to get HNWIs to buy into traditional investor visa programs. Therefore, as a result, many programs are now expected to reduce their entry requirements for 2020/2021.
Additionally, the group expects both Australia, the US and Switzerland to remain the preferred destinations for the affluent who are looking for a new place to call home.
As a number of South Africa’s more well-to-do citizens seek to leave the country, the question now stands, can the government ensure our economy doesn’t collapse further? Or are we on a oneway path?
Author: Quinton Boucher
Edited: Calvin Swemmer