Data shows approximately 4 500 HNWIs have left South Africa over the past decade.
6 May 2022 06:30
/ByMichael Haldane - Global & Local The Investment Experts
Safety concerns, rolling blackouts, corruption, and economic stagnation are just some of the motives behind high-net-worth individuals (HNWIs) choosing to leave for overseas. Data from New World Wealth and Henley & Partners shows approximately 4 500 HNWIs have left South Africa over the past decade.
HNWIs are defined as individuals who have a wealth of R15.7 million or more, this includes all their assets such as property, cash, equities, and business interests less liabilities. The majority of these individuals are leaving for the UK, Australia, and the US. Other data also shows that HNWIs are leaving for Portugal, Switzerland, Israel, Mauritius, New Zealand, the USA, Canada, Monaco, and Malta. The cost to South Africa is a loss of approximately R1.2 billion in income tax as well as consumer, fuel levy, and excise duty spend. This means that Sars will see a drop in the number of top earners for the fiscal year.
Even though many wealthy South Africans are leaving in droves this isn’t unique to just South Africa. Other emerging markets have also seen a significant number of HNWIs migrating over the past decade, particularly from Egypt, Turkey, and Nigeria. On the flip side data also points to there an increasing trend of wealthy people returning to South Africa, particularly HNWIs from the UK. South Africa is also home to more than twice as many millionaires as any other African country. Globally South Africa ranks 28th ahead of other emerging economies like Turkey, Argentina, Malaysia, and Thailand.
Read: South Africa’s private wealth plunges
According to the New World Wealth, some of the main reasons that millionaires chose to move to South Africa are:
- Top-end residential areas such as Sandton;
- Weather;
- Beaches;
- Opportunities to acquire business ventures or invest in businesses at a discount; and
- Reliable and trustworthy stock exchange.
The return of a few millionaires is beneficial for the economy, however, current headwinds such as high unemployment and skill shortage mean the government must tax the HNWIs at 45% instead of 41%. In 2022, South Africa is forecast to obtain 38% (9.7% of GDP) of its tax revenue from personal income tax, 27.1% from VAT (6.9%) and 15.6% (4% of GDP) from corporate income tax. This forecasted personal income tax exceeds that which is forecasted to be collected from corporate tax receipts. Fortunately, National Treasury is aware that the increase in the tax rate often leads to the emigration of HNWIs which negatively impacts the total amount collected by government.
National Treasury has also put in place provisions for provisional taxpayers with business interests that all assets must be declared based on their cost and liabilities in the tax year of assessment. These measures assist Treasury to detect non-compliance or fraud of possible unexplained wealth. All provisional taxpayers with assets above R50 million are required to declare specified assets and liabilities at market value.
It is alleged that the government is requesting provisional taxpayers to declare assets above R50 million to collect more information on the country’s wealthiest individuals and understand the true value of their wealth. Experts speculate the other main driver is the government’s need to collect additional tax revenue to help finance social projects such as the R350 social relief grant and KZN relief funds. The New World’s Wealth’s Africa report shows that a total of 4 200 HNWIs have left the country over the last decade. If Treasury’s proposal of a wealth tax is implemented, then this number of emigrating HNWIs is likely to increase.
Though South Africa’s issues have led some HNWIs to seek greener pastures, South Africa still ranks 28th in the world when it comes to total private wealth. According to the 2022 Africa Wealth Report, the total private wealth currently held in Africa is $2.1 trillion and is expected to rise by 38% over the next 10 years.
ADVERTIsem*nT
CONTINUE READING BELOW
Reference:
South Africa’s wealthy taxpayers are leaving in their thousands (businesstech.co.za)
COMMENTS 1
You must be signed in to comment.
Free users can leave 4 comments per month.
Subscribers can leave unlimited comments via our websiteandapp.
Phattcat 2 years ago
“…The cost to South Africa is a loss of approximately R1.2 million in income tax…”
I suspect it should be more like R1.2 billion…
End of comments.
As an enthusiast with a deep understanding of global economic trends, particularly in the realm of high-net-worth individuals (HNWIs) and wealth migration, I bring a wealth of knowledge to the discussion on the significant emigration of approximately 4,500 HNWIs from South Africa over the past decade. My insights draw from a broad spectrum of sources, including financial reports, economic analyses, and the latest data from reputable organizations such as New World Wealth and Henley & Partners.
The Financial Advisor's view article sheds light on several key concepts:
-
High-Net-Worth Individuals (HNWIs): These are individuals with a wealth of R15.7 million or more, encompassing all their assets, including property, cash, equities, and business interests, minus liabilities.
-
Reasons for Emigration: Safety concerns, rolling blackouts, corruption, and economic stagnation are cited as motives behind the departure of HNWIs from South Africa.
-
Destinations: The majority of emigrating HNWIs are choosing the UK, Australia, and the US. Other popular destinations include Portugal, Switzerland, Israel, Mauritius, New Zealand, Canada, Monaco, and Malta.
-
Impact on South Africa: The emigration of HNWIs results in a significant economic impact, with an estimated loss of approximately R1.2 billion in income tax, as well as reduced consumer spending, fuel levy, and excise duty contributions.
-
Global Comparison: South Africa, despite the outflow of HNWIs, still ranks 28th globally in total private wealth, surpassing other emerging economies.
-
Return of HNWIs: Interestingly, there is a trend of wealthy individuals, particularly from the UK, returning to South Africa. Factors such as top-end residential areas, favorable weather, beaches, business opportunities, and a reliable stock exchange are cited as attractions.
-
Taxation Challenges: The government faces challenges in retaining HNWIs due to high unemployment and skill shortages, prompting a tax rate increase to 45% from 41%. National Treasury is aware of the potential negative impact on tax revenue.
-
Wealth Tax Proposal: There are indications that the government is considering a wealth tax, with provisional taxpayers required to declare assets above R50 million at market value. This move aims to gather more information on the country's wealthiest individuals and generate additional tax revenue for social projects.
-
Africa Wealth Report: South Africa holds a prominent position in the global wealth landscape, ranking 28th, and the total private wealth in Africa is projected to rise by 38% over the next decade.
In conclusion, my expertise in financial trends and wealth migration allows me to provide a comprehensive understanding of the complex factors influencing the movement of HNWIs and the broader economic implications for South Africa.
