South Africa is bleeding millionaires
Thousands of high net worth individuals (HNWIs) are flooding out of South Africa, with 1,500 millionaires exiting the country in the last year alone, says specialist tax firm Sovereign Trust, with many heading to environments that are more supportive for business.
“South Africa is bleeding millionaires – and there doesn’t seem to be any stopping the trend. The numbers suggest one in every five millionaires has sought greener pastures over the past decade, with around 1,500 HNWIs heading for the exit in 2022 alone,” it said.
According to Sovereign Trust director, Coreen van der Merwe, the group has recorded a sharp uptick in interest in destinations such as Singapore, Canada, Australia and Malta, which all offer various options for relocation, highly diversified economies and supportive environments in which to do business.
Other popular emigration destinations include the United Kingdom, the United States, France, Israel, Monaco, New Zealand, Portugal, Switzerland and the United Arab Emirates.
“HNWIs are actively focused on the flexibility that a foreign or second citizenship brings. The main reason they apply for a second residence or citizenship is to ensure freedom of global mobility and access, as well as security and wealth protection for their families in the long term,” she said.
Aside from giving wealthy individuals a secure ‘plan B’, Van der Merwe said that moving abroad is also appealing to HWNIs because it gives them the ability to travel internationally without visa restrictions; providing better healthcare, education and career prospects; offering a comfortable, convenient and tax efficient location to retire; greater tax efficiency; wealth management; and estate planning.
Why the millionaires are leaving
Historically, South Africa’s exodus of wealthy individuals has been driven by a combination of social, political and financial concerns.
One of the primary drivers behind the departure of HNWIs from South Africa is the pervasive economic uncertainty and political instability in the country. South Africa has faced challenges such as sluggish economic growth, high unemployment rates, corruption scandals, and policy unpredictability.
For HNWIs seeking stable investment environments and favourable economic conditions, these uncertainties have become deterrents, leading them to consider more secure options elsewhere.
There are also key concerns over personal security and safety, including rising rates of crime and violence, as well as worries about education and healthcare – which are foundational considerations for high net-worth families.
According to Van der Merwe, the growing focus from the government on taxing the wealthy is also now a major factor.
The tax burden on high net worth individuals has long been a contentious issue in South Africa. With concerns about potential future tax hikes, many wealthy individuals are opting to move to jurisdictions with more favourable tax policies for the affluent.
“The potential impact of looming wealth tax considerations on HNWIs has been a clear driver behind the trend of relocation to other jurisdictions,” Van der Merwe said.
“It’s also no coincidence that most of these destinations are business-friendly environments. Destinations like Singapore and the UAE are booming hubs for innovation, with world-class infrastructure and financial systems.”
Not only the rich
What’s more worrying for the country is that it’s not only HNWIs who are leaving, Van de Merwe said.
SA Revenue Service (SARS) figures show that more than 40,500 taxpayers ceased to be tax residents of South Africa between the 2017 and 2021 tax years.
The data shows a growing trend of taxpayers from lower-income brackets changing their tax residency, which means they are ending their tax residency younger.
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