Estimates of Household Sector Wealth for South Africa, 1970-2003

Abstract

Market values of components of household sector wealth are important explanatory variables for aggregate consumer expenditure and household debt in macro-econometric models. We construct the first coherent set of the main elements of household-sector balance sheet estimates at market value for South Africa. Our quarterly estimates derive from published data on financial flows, and other capital market data, often at book value. Our methods rely, where relevant, on accumulating flow of funds data using appropriate benchmarks, and, where necessary, converting book to market values using appropriate asset price indices. Relating asset to income ratios for various asset classes to asset price movements and other features of the economic environment, throws light on the changing composition of household sector wealth. Most striking are the relative rise in the value of pension wealth and the trend decline of directly held securities, the decline and recent recovery of housing wealth, and the rise in household debt and concomitant decline of liquid assets from the early 1980s to the late 1990s. Copyright � 2006 The Authors; Journal compilation � International Association for Research in Income and Wealth 2006.

10 Estimating the Balance Sheet of the Personal Sector in an Emerging Market Country: South Africa, 1975–2005

“…The paper extends the earlier work of Aron and Muellbauer (2006a), particularly in a broader treatment of tangible assets and foreign assets (though still incomplete), and some refinements in the measurement of housing wealth and liquid wealth. The historical data for liquid assets and the pension liabilities of long-term insurers from 1970 to the early 1990s were constructed using the methodology in Aron and Muellbauer (2006a), as were private pensions up to 1998.…”

“…The sources for the data used in constructing estimates of fixed and financial assets, and liabilities, are summarized in Table 1. Other deposits For the whole period, compiled from flow of funds data from the National Financial Account, using methodology in Aron and Muellbauer (2006a Other non-bank loans Mainly credit granted by micro lenders, and obtained from quarterly records of the Micro Finance Regulatory Council (MFRC). The unpublished data for these adjustments were only available from 1997Q1 in the case of long-term insurers and private pension funds, and for official pension funds from 1999Q1.…”

“…The quality of these data sources 14 is sound and in keeping with the methodology used in the UK. Prior to the third quarter of 1991, in the absence of other data, the methodology in Aron and Muellbauer (2006a) was employed to cumulate the relevant flow of funds categories 15 using a second benchmark for 1969Q4 and matching the 1991Q3 benchmark. The benchmark calculation draws on US and UK experience (ibid.…”

“…It was decided to group this category with directly held illiquid financial assets. The series is derived by cumulating the relevant flow of funds category (item 14) with respect to a benchmark for 1969, as in Aron and Muellbauer (2006a).…”

“…The historical data for liquid assets and the pension liabilities of long-term insurers from 1970 to the early 1990s were constructed using the methodology in Aron and Muellbauer (2006a), as were private pensions up to 1998. The methods rely, where relevant, on accumulating flow of funds data using appropriate benchmarks, and, where necessary, converting book to market values using appropriate asset price indices.…”