Rich South Africans, including many high-profile IT and telecommunications executives, are leaving South Africa and taking their wealth with them.
The latest South African Wealth Report from New World Wealth and AfrAsia Bank shows that the number of millionaires living in South Africa continues to decline.
In the beginning of the year, there were approximately 38,400 people with a net worth of $1 million or more living in South Africa – down by 800 from the number recorded in 2019.
According to the report, there has been a decade long trend of high-net-worth individuals leaving the country.
The decline in wealthy individuals in South Africa is caused by wealthy people emigrating, a lack of new business formation, and the weakening residential property market.
The total private wealth held in South Africa declined by 6% from $677 billion in 2009 to $636 billion in 2019. This was at a time when the wealth in many other nations increased significantly.
Given the current state of affairs in South Africa and around the world with the coronavirus pandemic, the outlook for wealth creation does not look good.
“Our wealth forecasts are relatively poor for 2020/2021 due to the expected impact of the coronavirus on stock markets, the rand, salaries, and general business opportunities in SA,” the report said.
Top tech executives leaving South Africa
Many top IT and telecommunications executives form part of the high net worth individuals who are leaving South Africa.
Over the past year, numerous high-profile CEOs and CFOs have resigned and moved to other countries.
- Former MTN CEO Rob Shuter has stepped down before his contract expired and will move to the UK where he will serve as the CEO of BT Enterprise.
- Reunert executive director Mark Taylor has also moved to the UK where he was appointed as the CEO of Ricoh International.
- Former Webafrica CEO Tim Wyatt-Gunning stepped down from his leadership position at the ISP after he moved to the UK.
- Former Vodacom CFO Till Streichert left South Africa to move to Spain where he is now the CFO of Amadeus.
They join many other ICT executives who have emigrated to create a life for their family overseas.
The main reasons for the exodus of skilled South Africans are what many people would expect – political uncertainty, tough working conditions, affirmative action, BEE, and crime.
Bad news for South Africa
Gerbrandt van Heerden, an analyst at the Centre for Risk Analysis, said the exodus of rich individuals is a critical warning sign for the country.
Not only does this represent a loss in tax terms, as the rich take their investments and money elsewhere, but it points to what could be a worrisome trend.
The exodus of elites typically happened before a complete economic and social collapse in countries which ended up becoming failed states.
He highlighted that South Africa’s economic and political problems are linked to a few issues:
- Political instability as a result of factional battles within the ruling ANC.
- The country’s slide into junk status
- The absence of economic reforms in a sluggish economy
- Populist policy choices such as expropriation without compensation (EWC) scaring investment away.
“These factors have undoubtedly motivated an increasing number of South Africa’s rich to pack their bags,” said van Heerden.