Wealthy South Africans are leaving in droves
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 million 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 is not 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;
- 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 personal income tax revenue, 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, the 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 the government.
The 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.
South Africa’s wealthy taxpayers are leaving in their thousands (businesstech.co.za)
2022 Africa Wealth Report Reveals ‘Big 5’ Hold over 50% of the Continent’s Private Wealth | Business Wire