Africa's super-rich: Rising demand for niche financial services

AdobeStock 178455694.jpgrevampSub-Saharan Africa is among the most rewarding but challenging markets to penetrate and nurture from an asset industry perspective, in regards to the ‘super-rich’

The region is not a single market, often mistaken by some financial services firms hoping to benefit from wealth creation and economic renaissance across much of the continent.
“The origin of the accumulated private wealth, the distribution of this wealth and the economic and political climates, vary from country to country,” stated the 2016 Africa Wealth Report.
Private “wealth” refers to the net assets of a person. It includes all their tangible assets (property, cash, equity, business interests) less any liabilities. The wealthy band group falls into five distinct categories: billionaires with net assets of US$1bn or higher; centa-millionaires holding netwealth of between US$100mn and US$1bn; affluent-millionaires or ultra high net-worth individuals (UHNWIs) owning net assets of US$30-100mn; mid-tier millionaires holding between US$5mn and US$30mn in net investable assets; and lower-tier millionaires are those with net worth of US$1mn to US$5mn (see table one).
In 2016, total wealth held on the African continent amounted to approximately US$2.2trn, according to UK-based consultancy New World Wealth (NWW). The top-five reported countries were South Africa (US$610bn); Nigeria (US$270bn); Kenya (US$95bn); Angola (US$75bn); and Ghana (US$55bn). Interestingly, worldwide private wealth estimate is staggering US$192 trn. There are between 145,000 and 165,000 high net-worth individuals(HNWIs) living in Africa with combined wealth holdings of US$800-860bn. In addition, 2,270 African UHNWIs boasted assets of US$260bn in 2016 (NWW data).

Location & trends
During 2006-2016, sub-Saharan Africa was the fastest growing region for asset management business, with HNWI numbers (in percentage terms) swelling by 230; 219; 167; 97; and 93 percent, respectively, in
Mauritius, Ethiopia, Rwanda,  Uganda and Kenya. According to New World Wealth, 20 countries whose ultra-wealthy populations have grown most rapidly in the past decade, 11 are in Africa.
South Africa dominates Africa wealth list – four cities (Johannesburg, Cape Town, Durban and Pretoria) are home to 32,200 millionaires and almost 3,000 super-rich individuals – with total net wealth reported at US$468bn.
Major sectors in leading centres are financial and professional services, real estate, healthcare, construction, telecom, manufacturing and basic materials. In 2016, Nigeria ranked second by millionaires (12,400) and
super-rich (800-plus). The country is home to Africa’s richest magnate (Aliko Dangote), whose business portfolios are estimated by US
magazine Forbes to be worth over US$12bn, making him the world’s 108th richest individual – exceeding both South Africa’s magnate Nicky Oppenheimer (US$7.1trn) and Africa’s richest woman Isabel dos Santos (Angola) whose personal wealth is estimated at US$3.4trn. Folorunsho Alakija, also made the Forbes list and is worth US$1.61bn. She is a business tycoon in the oil and fashion industries.


Niche banking
‘Wealth management’ or ‘private banking’ is defined as the provision of financial services to HNWIs and their families. It generally involves the management of trusts, inheritance, the allocation of client’s
investable funds and specialised advisory services (fiduciary/custodian). An estimated US$125-132bn of African HNWI wealth is deposited with reputable asset managers (see table two).
South Africa (mainly Johannesburg) is the hub for African private banking with US$72bn in Assetunder Management (AuM). Wealthy Africans demand the same sophisticated financial services with greater transparency in asset
allocations as HNWIs do elsewhere. The 2017 Attitudes Survey conducted for New World Wealth found that African rich places high priorities on five factors when it comes to managing their wealth
and their investment decisions: wealth preservation, capital growth, portfolio/asset diversification, investment protection from politicalinterference, and passing wealth to the next generations (i.e. succession
planning), followed by portfolio liquidity, privacy and steady income return. Popular asset classes for African HNWIs are stocks/shares, precious metals, cash (money market funds), real estates and
personal business.

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