Super rich dump SA
07 March 2016
Posted by: Author: Katharine Child
Author: Katharine Child (Times Live)
The super-rich are fleeing the country, taking their money with them and weakening an already overstretched tax base.
Experts believe that the exodus will continue as taxes on the rich - including on their often hidden offshore assets - continue to be increased.
New Wealth Management, which tracks the movement and ownership of high net-worth individuals, estimates that 950 dollar millionaires left South Africa last year, up from 600 in 2014.
It said the exodus was similar to that of the very wealthy who fled Zimbabwe before it s economy collapsed.
Andrew Amoils, New Wealth's research head, said high net-worth individuals had been leaving since 2000 but the numbers were now spiking.
Colen Garrow, an economics analyst at Lefika Securities, said: "South Africa is the poorer for this migration.
"Loss of productivity weakens the GDP and the tax base."
He said more money was being shifted offshore.
"The Reserve Bank released a statistic last year that indicated that, for the first time, funds held offshore by South Africans exceeded funds held in South Africa by foreigners."
The preferred destinations of people with a net worth of $ 1-million or more have been:
- the UK, 36%;
- Australia 15%;
- the US 11%;
- Canada 8%;
- Mauritius 5%; and
- Israel 4%.
The top reasons for leaving included worries about their children's safety and future, crime - in particular rape and hijacking - the quality of the education system and broad-based black economic empowerment.
Garrow said that as the tax base shrinks the government is looking for new ways to stem the outflow.
"This is what happened in the [latest] Budget.
"It again called for a voluntary disclosure of assets held by South Africans offshore."
The government wants rich South Africans to pay tax on assets shifted abroad secretly.
Garrow said that, instead of clamping down on these transgressions, the government should ask what policy mistakes it had made that caused the wealthy to flee.
Amoils said that although China and India were experiencing a similar outflow, their economies were growing and producing more super rich people annually.
According to New Wealth, the number of dollar millionaires in South Africa dropped from 46500 in 2014 to 38500 in 2015.
The Knight Frank International Report, released last week, found that the number of super wealthy (worth $30-million and above) in South Africa decreased from 670 to 639.
Amoils said among the reasons for the drop were the weakening rand, in which many held their wealth, and migration.
Garrow said: "It's important to determine why they leave."
South Africa had higher tax rates compared to other emerging markets in Africa and abroad, said Amoils.
Leon Isaacson, Global Migration SA's managing director, said immigration lawyers had noticed a spike in people wanting to leave South Africa over the past few months who cited "political and economic uncertainty".
Immigration lawyer Chris Watters said he and colleagues "have noticed a significant increase in US investor-category applications" which allow people with over $500000 to buy residency in the US.
This article first appeared on timeslive.co.za.