Household Balance Sheets in South Africa

Abstract

This paper evaluates the composition of household portfolios including assets, liabilities and net worth in the National Income Dynamics Study (NIDS) wave 5 (SALDRU, 2018). The inclusion of a top up sample of 1005 households made the sample more representative of the South African population – particularly the higher end of the wealth distribution, which was previously under-represented because of panel attrition between Waves 1-4. This resulted in an increase in the estimates of real total household assets and liabilities (after the removal of outliers), bringing the distribution closer to the macroeconomic household balance sheet estimates of assets and liabilities provided by the SA Reserve Bank (SARB), which implies that the top-up sample also improved the external validity of the wealth data. We find that household balance sheets are dominated by real estate and vehicular assets and debts, with notable exceptions in different covariate domains. In terms of inequality between waves 4 and 5 of NIDS, there has been a slight decrease in the Gini coefficient on net-worth despite the top-up sample, but an increase in the Gini coefficient on financial assets. The overall conclusion of the paper is that the NIDS Wave 5 wealth module is fit for purpose and researchers can conduct a wide range of analyses with the data, but researchers still need to conduct their own outlier detection checks before commencing analyses.