THE growth of personal wealth in China, Africa’s biggest trading partner, has been stratospheric, highlighting its turbo-charged national growth in recent years, the slowing of which has set much of the world on edge.
In 2000, adults in China held just $4.7 trillion of the world’s private wealth, according to data from Credit Suisse Group AG’s global wealth report, released last week. But now adults in the Asian country hold $22.8 trillion in wealth, or 9.1% of the $250 trillion that is estimated to be in private hands globally.
Wealth is measured as either financial or non-financial assets, but the report highlighted that low-income countries tend to have very high shares of the latter class, reflecting the importance of land and agricultural assets.
For China, the $11,704 per adult held as non-financial wealth was described as relatively modest, and is almost equal to the amount held as financial assets, which counts classes such as cash and stocks. This is largely because urban land in the country is not privately owned.
But for nearly half, or 25 of the 54 African territories captured in the data, while the gross share held as non-financial assets is expectedly, as a proportion of total wealth there is less spread, many having roughly the same or comparable holdings between both asset classes. This trend also reflects the fact that higher shares of financial assets tend to indicate a higher level of financial development.
The exceptions where the spread is large tend to be where countries that run welfare states in their various forms, such as Algeria, Libya and South Africa, or where the markets are well developed, such as Mauritius and Seychelles.
Significantly, nearly all of these countries are in the top half of the continent’s per capita income table, with Seychelles, Libya, Mauritius, Cape Verde and Tunisia having the highest amount of adult wealth held as non-financial assets, while resource rich Gabon (which is at par with China), Angola, Namibia, South Africa and Equatorial Guinea round out the ten most financially-included countries:
The remainder of African countries, most of which are in the bottom half of many per capita income measures, have a disproportionately high share of private wealth held as non-financial assets, the main component of which tends to be real estate—essentially houses and land, even if the gross per capita amounts are low.
Malawi, Democratic Republic of Congo (DRC), Guinea Bissau, Burundi and Madagascar have the least amount of such assets, both as gross amounts and as a share of total wealth. They are joined by Ethiopia, Sierra Leone, Central African Republic, Uganda and Mozambique as having the least amount of non-cash wealth. The observed widespread trend is seen as characteristic of low income countries—of which Africa has the highest proportion.
Further highlighting the distance to be travelled by these countries, the same clutch of countries—Malawi, Madagascar, DRC, Guinea Bissau and Chad— have the least amount of personal debt, reflecting their poorly developed financial markets and which lock out millions of their citizens from securing much-needed capital.
For the financial services investor, these may be the countries to target, as they have the most room for growth.
The emphasis on adult wealth is made because typically personal assets and debts are owned by individuals in households and families.
“…even though some household assets, such as housing, provide communal benefits, it is unusual for households members to have an equal say in the management of assets, or to share equally in the proceeds if the asset is sold,” the report’s authors said.
In addition, the patterns of households vary deeply across countries, while in many others the number of households is unknown. Nowhere is this more apparent than in Africa, where tradition and culture mesh together in most interesting ways.