An employee of the Korea Exchange Bank works next to stacks of one
hundred dollar notes at the bank's headquarters in Seoul. The 2020
Knight Frank’s Wealth Report classified 2,900 Kenyans among the world’s
High Net-Worth Individuals (HNWIs) last year. FILE PHOTO | AFP
An estimated 499 Kenyans dropped from the rank of dollar
millionaires last year, highlighting how the impact of Kenya’s soft
economy has hurt persons who each had a net worth of more than Ksh100
million ($1 million).
The 2020 Knight Frank’s Wealth
Report classified 2,900 Kenyans among the world’s High Net-Worth
Individuals (HNWIs) last year, representing a 14.6 percent drop compared
to the 2017 count.
Six Kenyans also dropped from an
elite group of super-wealthy persons known as Ultra High Net-Worth
Individuals (UHNWI) with a net worth of more than Ksh3 billion ($30
million), cutting their number to 42.
The shifts
emerged in a year of relatively hard economic times in the country,
which has resulted in a drop in corporate profits that has seen
thousands of people lose their jobs and cut dividends from firms owned
by the wealthy.
Over the three years, Kenya has
elevated political uncertainties following a bruising presidential
election in 2017 that put on hold many investment decisions. This was
compounded by poor weather that held back farming—which accounts for a
third of the country’s gross domestic product (GDP)—last year.
“The
drop in number of dollar millionaires was a reaction to the slowdown of
the Kenyan economy,” said Andrew Shirley, one of the researchers behind
the Wealth Report.
The manufacturing, real estate and technology sectors have the
biggest contributors to the number of new dollar millionaires in recent
years.
The sectors bore the brunt of Kenya’s reduced
economic activity with real estate, which has over the past decade been a
favourite investment home for the wealthy, being hit hardest.
Business
people and workers who took mortgages on the strength of their pay
slips and expected earnings defaulted on their loans with the slowdown
in real estate hurting property developers who are finding it difficult
to sell units that were also built on debt.
But Kenya
had the sixth highest concentration of wealthy persons with a net worth
in excess of Ksh3 billion ($30 million) or UHNWI in Africa among the
countries captured by the Wealth Report.
South Africa
led the pack with 1,033 ultra-rich persons followed by Egypt (764)
Nigeria (724) Morocco (215) and Tanzania (114)—despite Kenya’s
neighbouring country having a smaller economy.
The
Knight Frank report does not name individuals but other wealth reports
have in the past singled out President Uhuru Kenyatta’s family, former
president Daniel arap Moi’s family and the late Cabinet minister
Nicholas Biwott among Kenya’s wealthiest.
Business tycoons who have appeared in past wealth reports include Vimal Shah, Chris Kirubi and Manu Chandaria.
Previous wealth reports on Kenya have shown strong linkages between politics and wealth accumulation.
Mr
Shirley said Kenya reported a faster rise in the number of under 35
year-olds HNWIs or investors with a net worth of at least Ksh100 million
($1 million) when compared to its peers in Africa.
He did not explain the source of the wealth for youth with analysts linking a bigger share of the rise to inheritance.
“In
Kenya, we had the highest number of Generation Z, people born after
1995, who are considered HNWIs and who are the clients of wealth
advisers in Kenya. It also showed a very large number of millennials who
are wealthy,” said Mr Shirley.
“So what we are seeing
in Kenya is an outperformance of young entrepreneurial wealth creation
and in terms of sectors they are coming from technology.”
The
report reckons that Kenya’s wealthy are increasingly becoming
conservative in their investments, preferring less risky and low returns
assets like bonds, gold and cash—where they pocket interest payments.
The
study describes wealth as the net assets of a person that includes
property, cash, equities, business interests less any liabilities and
their primary residences.
The tracking of the
millionaires through established units like private bankers as well as
wealth advisers and managers suggests that it does not capture
super-rich people with no links to formal wealth managers.
The
number of people with net worth of more than $1 million has grown more
than four times from 800 in 2014 to 2, 900 last year, according to the
Knight Frank report, while individuals with a net worth of more than Sh3
billion have nearly tripled from 16 to 42 over the period.
The report shows that Kenya lacks dollar billionaires.
“Our assumptions may be more conservative than previous data suppliers,” said Mr Shirley.
“A lack of robust data to feed into our complex econometric model on certain countries means we have to make assumptions.”
The
significant share of Kenya’s super-wealthy has attracted dealers in
luxury brands including car dealers, hotels and fashion products.
Some
of the global brands that have a presence in Nairobi include Germany’s
Volkswagen Group’s Porsche cars, German automaker Daimler AG and British
manufacturer of luxury cars and SUVs Bentley Motors Limited.
Private
sector activity in Kenya fell further in February as orders for new
goods dropped for the first time in more than two years, a survey showed
yesterday, as imports from China tumbled due to the coronavirus
outbreak
The Markit Stanbic Bank Kenya Purchasing
Managers’ Index (PMI) for manufacturing and services fell to 49.0 in
February from 49.7 in January. Readings above 50.0 indicate growth.
Companies
reported the first fall in new business orders since November 2017, the
survey found, attributing the decline to hard-up consumers in the
economy amid a wider cash crunch.
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