The Africa Wealth Report is the benchmark of luxury sector research in Africa. Knowing where affluent individuals live, understanding their spending habits and being aware of their preferences is critically important to the providers of wealth management and luxury services in Africa and globally.
The Africa Wealth Report is published by Henley & Partners in partnership with South African wealth intelligence firm New World Wealth. The report provides a comprehensive review of the wealth sector in Africa, including trends among high-net-worth individuals (HNWIs), the luxury market, and the wealth management sector on the continent.
Africa is home to some of the world’s fastest growing markets, including the likes of Rwanda and Mauritius. There are also several well-established wealth hubs on the continent, including South Africa, Egypt and Morocco, that already host large numbers of HNWIs. HNWIs in Africa are extremely mobile and their movements provide a valuable insight into future economic trends in each country.
For instance, countries such as Mauritius that attract HNWIs through migration have a significant economic advantage over the rest.
The new world
of African wealth
Vusi Thembekwayo
Venture capitalist, global business speaker, author and CEO, MyGrowthFund Venture Partners
The pursuit of wealth is among the most universal of human endeavors. Regardless of their culture, their time of existence or the value system of their society, throughout civilizations and whichever deity they may have praised, humankind has pursued wealth.
In today’s world of rapid advancements in disruptive technologies, shortened life cycles of companies and globalized market volatility, designing a strategy to preserve your wealth is both a science and an art. Throw into this salad bowl of complexity the emerging asset classes of the world, the democratization of capital markets, the digitization of money and the generous supply of influencers who have no track record of successfully managing client wealth, and you have a festival of financial potholes to fall into at every turn.
So, the message is clear: investors beware. But although times are treacherous, they are also good. In many respects, we have been lulled into a false sense of security by the longer-than-average period of global peace that humanity has enjoyed and the global hegemon of the USA.
However, we are also living in a world where global inequality, slave-wage-fueled forced labor and the lack of diversity, equity and inclusion in the financial markets are real threats to the sustainability of the system of wealth creation and distribution.
The continent of Africa and Africans themselves have a rather curious relationship with wealth. Pop culture, musicians and celebrity status have sold a brand of wealth accumulation that is simply not attainable for the vast majority of Africans. What started out as an aspirational culture has fast become a status quo of attaining relevance for the ‘clout chasers’ found in the popular arts and culture.
Africa’s story is more one of polar domination, with the largest wealth management centers traditionally situated in the most extreme south, South Africa, and the most extreme north, Egypt and Morocco. The rise of frontier economies that are attracting new wealth by positioning themselves as preferred investment destinations is challenging this narrative. Mauritius and the Seychelles have recently been the most deliberate with this strategy.
While the number of millionaires on the continent over the past decade has not increased exponentially, the number of centi-millionaires and billionaires has shot up. This theme supports the idea that the continent needs to deal with the legacy industries whose ownership structures perpetuate inequality. Not only that but it also supports the notion that the continent needs to increase the exposure of and education regarding financial markets to ordinary households. The populations of most countries on the continent have asymmetric knowledge of finance, which constrains the growth of retail participation in financial markets.
The tide is swinging in the direction of smaller emerging economies. The delta in new wealth creation has been strongest in countries such as Mauritius and Rwanda. Key drivers of this trend are the recognition by these economies that they can attract substantial capital if they have the right regulatory framework. This regulatory regime includes preferential terms for capital gains tax and inheritance tax and an environment that allows for ease of doing business.
The disaggregation of the nation state and the rise of megacities whose economies are larger than the budgets of many mid-sized countries have also been themes that have driven the creation, preservation and flow of wealth across the continent. Civic authorities are positioning their cities as preferred destinations for wealth in order to stimulate inflows of capital, talent and prosperity.
All these factors also spur an increase in consumption and consumption-led growth, while the inflow of talent generally leads to an increase in productivity.
As an investor myself, the emergence of specialist investment offices staffed by highly skilled advisors, transactors and brokers has been a welcome trend in the marketplace. This network of firms provides one with access to alternative asset classes such as rare art, vintage cars, and limited- edition timepieces whose price escalation has proven a good hedge against the most insidious of wealth destruction tools: inflation.
What is exciting about the prospects for wealth in future for the African continent is the diversification of the sources of creating wealth. The new economies that are built on technologies, driving inclusion and the now in-vogue environmental, social and corporate governance criteria are attracting new capital into the fold and creating more liquidity in the secondary capital markets.
Over the next decade, the trend of accumulating wealth will continue, but the unanswered question is whether this growth will be more evenly spread and begin to reduce inequality.
The push and pull factors driving wealth migration in Africa
Dominic Volek
Group Head of Private Clients Henley & Partners
With private wealth on the continent set to rise by 38% over the next decade, investors are embracing investment migration as a means of enhancing their global mobility and mitigating regional risk.
The 2020s have heralded an era of extreme instability across the globe. Since the decade began, two Cs have consistently driven interest in residence and citizenship by investment: Covid and climate change. In Africa, a third C — conflict — has also been a push factor for some time. Yet in 2022, conflict took center-stage as a global driver. The shockwaves that followed Russia’s invasion of Ukraine have reverberated across the world, creating even greater levels of uncertainty and volatility for individuals, families, businesses, investors and governments alike.
While the coronavirus appears to be in retreat, it remains an unpredictable adversary. On the other hand, the Intergovernmental Panel on Climate Change is very clear in its severe warnings on impending climate breakdown, recently confirming that the world will warm by 3.2° C this century. Our own research in the Henley Global Mobility Report 2022 Q2 revealed that many sub Saharan countries are doubly disadvantaged, being among the most vulnerable to climate change as well as having poor global mobility, with their passports ranking consistently low on the Henley Passport Index. Regional conflict, meanwhile, is ever present. Political instability has seen the continent plagued by multiple coups in the past year alone.
These events and circumstances impact the lives of people in multiple ways, including their mobility and economic activity. In Africa, we see this impact reflected in the decline in total wealth on the continent over the past decade, as this report reveals. But there is optimism for the future, as New World Wealth predicts that the total private wealth held in Africa will rise by 38% over the next 10 years, to reach US$3 trillion by 2031.
One thing is very clear in our new Age of Uncertainty — governments and investors alike must focus on building resilience. Preparing for the next shock is imperative, and one proven means of doing so is via investment migration, whereby investors can acquire and secure an alternative residence or second citizenship in a different jurisdiction in return for investing in a host country. Last year was a record-breaking year all around for Henley & Partners, in which we assisted clients representing 79 different nationalities, including citizens of 15 African countries ranging from Algeria to South Africa, and from Liberia to Ethiopia.
The investment migration industry has been growing steadily for over 25 years. This positive trend has continued in 2022. Henley & Partners has seen a significant spike in interest in residence and citizenship by investment programs globally, with a healthy 55% increase in enquiries in Q1 2022 compared to Q4 2021. Africa is no exception and continues its trajectory as a growth market for investment migration. We saw an overall increase of 18% in enquiries from Africans seeking alternative residence and/ or citizenship last year, and by the end of Q1 2022, we had already received over 29% of total 2021 enquiries. We predict that this trend will continue throughout the year as wealthy investors continue to concentrate on diversifying their domiciles at the same time as their investment portfolios to secure greater global access and optionality as a hedge against unrelenting market and political volatility.
From a global perspective, South Africa, Nigeria and Egypt were among the top 15 nationalities in terms of the enquiries Henley & Partners received last year. South Africa was in 5th place globally, with growth of 38% in 2021, Nigeria in 7th place with growth of 15% and Egypt in 14th place with growth of 25%.
Looking at the exclusive New World Wealth country wealth rankings in this report, it is no coincidence that the top four of the ‘Big 5’ wealth markets in Africa were also the top four investment migration markets in terms of the applications Henley & Partners received last year. The African countries that occupied the top three places were South Africa, then Nigeria, followed by Egypt. Algeria and Morocco were joint-4th, and Ghana took 5th place in terms of the number of applications we received for investment migration programs.
Today, residence and citizenship by investment programs are widely accepted wealth management and legacy planning tools. The range of programs is steadily increasing as governments tap into their capital- and talent-boosting potential. Nineteen of the G20 nations offer some form of mechanism to encourage inward investment in exchange for residence rights. The 20th G20 member is the EU, and 60% of EU member states offer investment migration options.
The appeal of investment migration for affluent families is truly universal due to its many benefits, ranging from domicile diversification to global mobility enhancement, to accessing world-class education and healthcare, to having a plan B in times of turmoil. No matter where you were born, or where you currently reside, wealthy investors can future proof themselves and their families for whatever might lie ahead through investment migration.
