In recent years, South Africa has been witnessing a concerning trend—a steady departure of high-net-worth individuals (HNWIs), leading to a wealth drain from the country. Data tracking the migration of millionaires reveals a concerning exodus, signaling underlying social, political, and economic issues that are prompting the affluent to seek opportunities beyond the nation’s borders.
Analysts at New World Wealth have shed light on this significant migration, emphasizing that the primary driver for these HNWIs is the quest for better financial prospects and conducive environments for wealth growth. With considerations ranging from favorable tax conditions to expanded economic opportunities, these individuals seek destinations that offer stability and growth potential for their investments.
The migration pattern highlighted by New World Wealth underscores that approximately 120,000 millionaires worldwide relocated to new countries in 2023. Notably, popular destinations attracting these wealthy migrants include the United Arab Emirates, Australia, the United States, Singapore, and Switzerland.
Defined as individuals with investable wealth surpassing USD 1 million, these millionaires are not only seeking better economic prospects but also contributing significantly to the countries they move to. The advantages of their migration extend beyond personal finance:
The departure of millionaires signifies more than just a loss of wealth; it reflects the economic and political landscape of a country. For South Africa, experiencing a net loss of these affluent individuals signals underlying challenges, including economic uncertainties, political instability, high crime rates, and concerns regarding education and healthcare.
Coreen van der Merwe, Director at Sovereign Trust, identifies the prevailing economic uncertainty, political instability, and safety concerns as primary catalysts for the departure of HNWIs. South Africa’s stagnant economic growth, high unemployment rates, corruption scandals, and policy unpredictability have dissuaded wealthy individuals from maintaining their assets within the country.
Moreover, growing government talks of increased taxation on the affluent have intensified their considerations. The proposals to raise taxes for funding national policies like the National Health Insurance (NHI) and calls for wealth taxes have added to the concerns of high-net-worth individuals regarding their financial stability and growth prospects within the country.
With the National Treasury announcing plans to raise an additional R15 billion in taxes by 2024, these proposed tax increments serve as a significant factor influencing the decisions of wealthy individuals contemplating their future in South Africa.
The impact of this migration trend goes beyond individual financial choices; it reflects the nation’s attractiveness as an investment hub and a safe haven for the affluent. While countries like Australia, Switzerland, Monaco, Singapore, the UAE, New Zealand, Malta, and Mauritius have reaped the benefits of attracting affluent migrants, South Africa’s challenge lies in addressing the factors driving its wealth drain.
Understanding and addressing the concerns of high-net-worth individuals, including economic stability, political transparency, safety, and taxation policies, are critical steps to prevent further capital flight and to position South Africa as an appealing destination for investment and economic growth.