More Kenyans get super rich in a tough economy

Kenya defied last year’s slowdown in economic growth and diminishing corporate performance to stand among the world’s top 10 countries that increased the ranks of the super-rich at the fastest pace.

Wealth-X, the firm that publishes the annual World Utra-Wealth Report, says the number of Kenya’s ultra-rich — defined as people worth $30 million (Sh3 billion) or more — grew by 11.7 per cent last year, ahead of India, Hong Kong and the United States.

No actual figure of the ultra-rich is given for Kenya, which has in the past five years ranked among the countries that are creating the super-rich at the highest rate.

The African continent is, however, reported to have had 2,490 utra-high-net-worth individuals with cumulative wealth of $305 billion (about Sh30 trillion) that grew at the rate of 5.9 per cent.

The report says the ranks of India’s super-rich grew at the rate of 10.7 per cent, Hong Kong (9.3 per cent) and the United States (8.1 per cent).

“Among the top 10 UHNW countries, China and Hong Kong have achieved the strongest gains in their ultra-wealthy populations over the past five years, with the US also recording impressive growth,” says the World Ultra Wealth Report 2018, adding that double-digit increases have also been posted by Vietnam, Kenya and India.

“In contrast, those of Japan, Canada, Italy and the UK have largely stagnated.”

Kenya’s higher rate of minting multi-billionaires is particularly puzzling given the hard economic times the country has experienced in the past three years and the resulting fall in corporate profits that has seen thousands of people lose their jobs.

Wealth-X’s findings are, however, in line with other reports that have ranked Kenya among the hotspots for accumulation of wealth in Africa.

Realtor Knight Frank has, for instance, published a report showing that Kenya created 180 new dollar millionaires in 2017, increasing the number of persons with net-worths of more than Sh500 million to 1,290.

Knight Frank said that out of the 1,290 dollar millionaires, less than 10 had a net-worth of over Sh50 billion, while 90 were worth Sh5 billion and above.

Kenya and other African countries are expected to mint more multibillionaires over the next five years, a development that may widen the gap between the rich and the poor.

“Our forecasts show a healthy increase in the number of UHNW individuals and their combined wealth in the period to 2022, with solid gains in each of the three global regions — the Americas, Asia-Pacific, and Europe, the Middle East and Africa (EMEA),” the report says.

Investment analyst Aly-Khan Satchu said Kenya’s economic performance in recent years only points to the fact that its list of the newly super-rich is likely to be dominated by politicians and the few investors in fast-growing fields such as ICT.

“Certainly news that Kenya is among the top 10 worldwide in ultra high net worth wealth creation with double-digit compound annual growth rate between 2012 and 2017 is an eye-catcher particularly at a time when ‘You can’t eat GDP’ is the refrain you hear from Kisumu to Mombasa,” said Mr Khan.

“What these reports tell me is, first that there has been a massive skew of wealth accumulation in favour of those at the top of the pyramid, a reverse Robin Hood as it were,” he said, adding that politically exposed persons, investors in ICT and PEs, fintech as well as growth in monopolistic businesses explain the outcome.

Kunal Ajmera, the chief operating officer at Grant Thornton, a consultancy, said that compared to the wealth generated by the new startups in technology and other emerging sectors in the western world, most of the wealth generated in Kenya still relates to the “old money” and comes from traditional sectors like manufacturing, real estate, and finance.

“Real estate in particular stands out as a sector that has given handsome returns to anyone who had large cache of land in cities like Nairobi,” he said.

“We have also seen increased appetite by the private equity and multinational firms in Kenya looking to buy well-established businesses in agriculture, hospitality, medical and manufacturing sectors and grow their footprints in Africa,” Mr Ajmera said, even as he acknowledged that the report is a painful reminder of the widening gap between the rich and the poor.

“A clear trend emerging from this report is also the sad reality of increasing gap between those who have it all and those who have nothing. Income inequality in Kenya is surely worsening as is evident in our Gini co-efficient, which currently stands at 48.5 per cent ( a Gini index of zero means perfect equality) and has been worsening in last 15 years or so.”

A recent World Bank report said that poverty rates in Kenya remain relatively high compared to other lower middle-income countries.

This is despite the proportion of Kenyans living on less than the international poverty line of $1.90 or (Sh191.88) per day) declining from 43.6 per cent in 2005/06 to 35.6 per cent in 2015/16.

Kenya’s economy expanded by an estimated 6.3 per cent in the first six months of 2018, offering hope for more jobs.