South Africa – The Future of HNWIs to 2016: The Rise of African Wealth
This report is the result of WealthInsight’s extensive research covering the HNWI population and wealth management industry in South Africa. It provides market sizing and forecasts of local HNWI and UHNWI populations. The report also leverages WealthInsight’s HNWI Database, to provide key demographic breakdowns such as sector and city specific data.
Wealth management in South Africa
- The global private banking industry is estimated to have assets under management (AuM) of just over US$16.5 trillion in 2011. The South African wealth management sector accounts for US$55 billion of this, making it the largest African country by AuM.
- WealthInsight’s research shows that over 20% of South African HNWI is held offshore. Most of this wealth is held in the UK, Switzerland and the Channel Islands.
- The local wealth management sector is set to benefit from strong growth in HNWI wealth in other African countries which have less-developed banking systems – HNWIs in these countries are likely to use South African wealth managers and private banks.
- The South African multi-family office market is relatively undeveloped with only two companies offering multi-family office-type services in the country, namely Family First in Cape Town and UK-based Stenham.
- Absa and Investec are the two largest private banks in South Africa by local AuM.
Asset allocation of HNWI investments
- In 2011, real estate was the largest asset class for HNWIs in South Africa (27.8% of total HNWI assets), followed by equities (25.0%), cash (13.8%), business interests (12.8%), fixed income (12.8%) and alternatives (7.7%).
- Business interests recorded the strongest growth over the review period, driven by new business formation, particularly in the BEE arena.
- Alternative allocations were boosted by a strong gold and general commodities market – the commodity holdings of South African HNWIs increased from 1.6% of total assets in 2007 to 2.4% in 2011.
- Over the forecast period, WealthInsight expects a movement away from real estate, cash and fixed-income investments and towards equities and business interests.
The geographic distribution of HNWI investments
- In 2011, HNWIs in South Africa held 17.4% (US$33 billion) of their wealth outside of South Africa. This is below the global average of approximately 30%.
- Equities and alternative products had the highest foreign allocations, of 24.6% and 24.8% respectively, in 2011.
- In 2011, Europe made up the largest share of the foreign assets of South African HNWIs at 28.9%. This was followed by North America (27.9%), the rest of Africa (23.4%), Asia-Pacific (9%), Latin America (7%) and the Middle East (4%).
- The share of foreign assets that South Africa’s HNWIs allocate to the rest of Africa increased substantially from 16% in 2007 to 23.4% in 2011. A large portion of new investment went into Mozambique, which is an emerging business location for South Africans. HNWI investment into Ghana, Uganda, Nigeria and Kenya also increased substantially.