A growing number of High-Net-Worth Individuals (HNWIs) in South Africa are looking at second passports and other options to leave the country.
This is according to the 2022 World Citizenship Report (WCR), which found that Africa’s dominant nations – including South Africa – are not meeting the needs of their most affluent citizens.
The report, compiled by advisory group CS Global Partners, looks at the five motivators that the wealthy consider important for their lives to thrive. These are:
- Safety and Security – The ability to enjoy greater social safety and security for oneself and family and a safety net against being trapped in dangerous territory.
- Economic Opportunity – The ability to access major business hubs and increased access to better employment prospects and wider business opportunities.
- Quality of Life – Being able to access territories with higher social and institutional stability, higher standards of education and healthcare.
- Global Mobility – The ability for greater freedom to travel for business and leisure and the insurance policy to enable travel for medical or safety emergencies.
- Financial Freedom – Being able to diversify assets across different geographies, being able to protect assets from government overreach or corruption, and being able to facilitate wealth structures in a more tax-efficient manner.
“Being bound to a single country and its government can limit your freedom. With current global uncertainty, travel restrictions, and crises, investors are concerned about future market volatility and the security of their wealth, assets, and lifestyle within their home countries.
“This uncertainty further fuels the desire among wealthy individuals to incorporate second citizenship as part of their portfolio,” said Micha Emmett, chief executive of CS Global Partners.
Even though mobility means increased freedom and accessibility for global citizens, the WCR found that safety and security rank highest – an area that African markets struggle with the most.
The report noted that South Africa is facing a number of socio-political issues that include high unemployment and very low levels of business confidence.
“It is often assumed that HNWIs can buy security for themselves and their families, but no single individual can be exempt from significant political upheaval or serious social turmoil. That is why being able to avoid enduring a situation of conflict where one is constricted is of immeasurable value,” said Emmett.
Treasury data published in 2021 shows that for the first time since the current tax brackets were established six years ago, the country will see a drop in the number of top earners in the 2021/2022 fiscal year.
Revenue from the three highest brackets will fall by 8%, or around R22.6 billion according to previously unreported treasury forecasts.
- The number of taxpayers earning R1.5 million or more will shrink 9.6% for the 2021-22 fiscal year.
- The R1 million to R1.5 million bracket is expected to contract 13%.
- The R750,000 to R1 million rand bracket is expected to contract 1.1%.
Personal income tax accounts for 38% of total tax revenue, far eclipsing corporate tax receipts, and those in the top three brackets represent a third of the total personal income tax base.
Treasury said that it cannot attribute the drop directly to emigration as it does not track data on how many people have left the country. However, immigration consultants, real estate companies and bankers told Reuters they are seeing clear signs of wealthy people leaving.
The latest research from New World Wealth and AfrAsia Bank shows that South Africa lost 3,400 dollar millionaires in the last year, with the country now home to only 35,000 high net worth individuals (HNWIs).
HNWIs are defined as dollar millionaires or people with a net worth of $1 million (R14.6 million) or more.
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