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Luxury Goods Vs Mass Market

According to the 2017 Credit Suisse Global Wealth Report, there has been significant rises in wealth throughout the world, driven not only by robust equity markets, but also by substantial increases in non-financial wealth. Overall, aggregrate global wealth rose by USD16.7trn to USD280trn, up 6.4%. In fact, wealth growth outpaced population growth, so that global wealth per adult grew by 4.9%, raising global mean wealth to USD 56,540 per adult, a new record high.

Comparing wealth gains across countries, the United States of America (USA) was in the first place as it registered an increase of USD8.5trn, which is 5 times the rise recorded by China (USD1.7trn) which was in second place. Four Eurozone countries (Germany, France, Italy and Spain) also appear in the top ten. Together they accounted for USD3.1trn, or almost 20% of the total gain worldwide. However, inequality has been a major concern and it is now estimated that the richest 1.0% of the world’s population now owns 50% of its total wealth and nine of the world’s richest men have more combined wealth than the poorest 4.0 billion people.

2017 World Wealth Levels

Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2017

The 2017 AfrAsia Bank Africa Wealth Report indicates that in Africa, Mauritians are the wealthiest individuals with an average wealth of USD25,700 per person, whilst people in living in Zimbabwe are the poorest with USD200 per person. It should be noted that all the figures are below the Credit Suisse global mean wealth of USD 56,540 per adult. We highlight that around 2000, Zimbabwe was one of the wealthiest countries in Sub Saharan Africa (SSA) on a wealth per capita basis, ranked ahead of the likes of Nigeria, Kenya, Angola, Zambia and Ghana. However, now it is ranked well behind these countries. Contributing factors to Zimbabwe’s poor performance since 2000 include (i) the erosion of ownership rights in the country, (ii) economic and political crisis and (iii) around 20% of Zimbabweans fled the country since 2000, taking their remaining wealth with them. This has also led to a massive brain drain.

With an estimated population size of 15.0 million people and one of the lowest wealth per capita levels, we opine the market for luxury goods from companies such as LVMH, Estée Lauder Companies Inc. and Compagnie Financière Richemont SA is very small (the demand for luxury cars, luxury hospitality and personal luxury goods remains limited). We see more opportunities for mass-market focused businesses. The winners, in our view will be food, airtime, data, beer, cigarettes and low-cost financial services (banking and insurance).

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