The wealth of South African households declined in the first quarter of 2024, and the country’s per capita income will continue declining over the next three years, meaning South Africans are getting poorer.
The South African Reserve Bank (SARB) noted in its quarterly Bulletin for the first quarter of 2024 that real gross domestic expenditure (GDE) decreased by 0.9% in that quarter, following an increase of 1.4% in the fourth quarter of 2023.
“All the components of real gross domestic final demand contracted in the first quarter of 2024, together with a de-accumulation in real inventory holdings.
“Consequently, the level of real GDE in the first quarter of 2024 was 1.4% lower than a year earlier.
“Only real net exports contributed positively to growth in real GDP in the first quarter of 2024, as real imports contracted more than real exports,” it said.
The Reserve Bank added that real final consumption expenditure by households decreased by 0.3% in the first quarter of 2024.
The decrease was fairly broad-based among the expenditure components, as a decrease in households’ real disposable income suppressed consumption expenditures.
“The level of real final consumption expenditure by households was 0.4% lower in the first quarter of 2024 compared with the first quarter of 2023, reflecting weak consumer demand amid elevated inflation and high interest rates,” it said.
Household debt as a percentage of nominal disposable income rose from 62.2% in the fourth quarter of 2023 to 63.3% in the first quarter of 2024.
This increase was due to a larger rise in household debt compared to nominal disposable income.
Additionally, households’ cost of servicing debt in relation to disposable income increased from 9.0% to 9.2% during the same period.
In the first quarter of 2024, households’ net wealth also decreased due to a drop in the value of their assets and an increase in the value of their liabilities.
The decline in total assets was mainly caused by the lower market value of equities, driven by a decrease in the FTSE/JSE All-Share Index (Alsi).
However, the value of housing stock slightly increased. Despite this, nominal residential property prices continued to grow slowly in the first five months of 2024, remaining well below consumer price inflation.
This reflects the impact of a sluggish domestic economy and high interest rates, which have affected consumer affordability.
The SARB further noted that real gross fixed capital formation contracted for a third successive quarter in the first quarter of 2024 as capital outlays by the private sector decreased notably while fixed investment spending by the public sector increased.
The decrease was broad-based among the different asset categories, with the level of real gross fixed capital formation 2.8% lower in the first quarter of 2024 than a year earlier as business confidence remained low amid the prevailing weak economic growth outcomes.
The next three years
During a discussion at the Nedgroup Investments Cash Solutions roundtable in April, independent political analyst JP Landman painted a disheartening picture.
He indicated that the country’s per capita income is projected to continue its downward trajectory over the next three years.
This foreseen decline in income levels could potentially decrease South Africans’ overall standard of living.
Landman underscored the substantial challenges faced by the nation, pointing out that there has been a marked 6% reduction in per capita income over the last decade.
He attributed this decline to the compounding effects of the Covid-19 pandemic and the disruptive consequences of stage 6 load-shedding, both of which have severely damaged the economy.
In his analysis, Landman also factored in the estimated annual population growth rate of approximately 1.8%, which further compounds the challenges faced.
As a result, he cautioned that the country may not witness any significant economic relief over the next two to three years.
This multifaceted outlook suggests a prolonged period of economic strain and potential hardships for the South African population.
Below is a graph showing South Africa’s GDP per capita from 1960 to 2022.
Read: Salaries in South Africa set for big increases in 2024
