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Sunday, March 1, 2015 - 13:20
Debts and stocks

The value of South African households’ wealth declined by an estimated R88.5 billion in the third quarter of 2014. According to the Momentum/UNISA South African Household Net Wealth Index, the value of households’ net wealth declined by 4.4% on a nominal seasonally adjusted and annualised basis compared to the second quarter. However, at an estimated R7 844 billion the value of household net wealth was still 10.5% higher than a year before.

The decline in household net wealth was caused by an increase in their liabilities/debt, as well as a reduction in the value of household assets. An estimated 33.1% of the decrease in household net wealth can be attributed to the increase in households’ liabilities and the remaining 66.9% to the reduction in the value of household assets.
Momentum/Unisa estimates that in the third quarter household liabilities increased by R30 billion to R1 765 billion. In contrast, the value of household assets declined by R58.5 billion to R9 609 billion in the third quarter.
The decline in the value of household assets was primarily caused by a reduction in the value of household financial assets – especially assets invested in companies listed on the JSE. The JSE All Share Index declined from 50 945 points at the end of the second quarter of to 49 315 at the end of third quarter. This represents an annualised quarterly decline of 12.2%.
Lower international economic growth, international uncertainties regarding interest rate changes in the United States and declining commodity prices affected international stock exchanges negatively during the third quarter, and this spilled over to the JSE. In addition, labour strikes in the manufacturing sector also contributed to lower domestic share prices. This meant that when workers went on strike for higher wages, they lost money in terms of their wealth.

Copyright © Insurance Times and Investments® Vol:28.3 1st March, 2015
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