Why Kenya’s rapidly growing middle class is far away from attaining riches

The recent publication of the list of Kenya’s richest has forced many ordinary people to ask what really makes one enter the club of the super wealthy.

Some have even had to revisit the term ‘‘middle class’’ that is commonly used to refer to the group that follows those at the top in the pecking order of wealth — asking how far they are from the top club.

A quick calculation, however, leads one to the realisation that the term ‘‘middle class’’ has nothing to do with being halfway to riches. Far from it.

Going by what the top five per cent control alone in comparison to what the ‘‘middle-class’’ has, the super-rich are as far from the middle class as the earth is from Pluto.

But money is not the biggest differentiator. Neither is the nature of investments they make. The biggest differences are more subtle and mostly lie in the day to day habits and attitudes of the super-rich.

For one, they not only control vast wealth but also invest in strategic connections with those in power, something the middle class does not care much for.

The elite class world over invest a lot of time and effort building relationships and connections to create a strong lobbying position.

They know how to plug into the government of the day to ensure their hard earned wealth is not threatened by new legislation or whimsical political decisions of the day.

They understand and follow keenly changes in the political leadership and legislation and take time to trace the likely impact on their wealth and understand that participation in certain circles is key to managing certain risks.

The middle class for the most, perhaps for lack of clout to earn them a seat at certain tables, have no such relationships leaving them vulnerable.
The wealth of the middle class is therefore more exposed to political and other risks than that of the super-rich.

Another important distinction is in the fact that the super-rich’s purchasing decisions almost always have an underlying gain besides satisfaction of the need to consume.

What the middle class don’t see is the underlying connections being made when the rich and powerful purposefully decide to eat in one restaurant and not another or when they choose to fly in one airline and not another, or choose to drive one brand of a car and not another.

They may have a stake in the dealership they are buying a car from and therefore get motivated to grow it, or they may be seeking a relationship with the owner of the hotel they choose to stay in perhaps to supply them in the future.

They may be looking to buy a stake in an airline and therefore want to experience them first hand. Everything they do is for something. No purchase is thoughtless.

The middle class, on the other hand, buy mostly to fulfil consumption needs and nothing more. Who owns what plays a small role in their decision making.

From the moment they wake up, the super-rich attach a money value to their time. They never engage in an activity that does not have a return and that includes leisure time and sleep.

They organise a leisure activity around meeting potential investors who match their capabilities. It is never just a round of golf, for instance.

Leisure for the super-rich carries something of a quantity attached to it. This is unlike the rest of the population who will share a long drink with friends at the end of which not a single investment idea will have been discussed.

The super-rich also have a very different concept of payback period and return on investment. They think long term and are not quick to calculate profit.

Wealth is long in coming

They look at return as a consolidated value and look at future value addition to what they have already started. The case is different for the middle class investor.

They will most likely whip out their calculator and quickly work out ‘‘time to a new Range Rover’’ which they will most likely conclude is just too long and off they go to look for a get rich quick investment, which we all know really does not exist.

The super-rich understand that real wealth is long in coming and that patience is the name of the game. Most importantly, the super-rich are constantly working.

They do not take pride in announcing that they switch off their mobile devices at night or during weekends. They only switch them off if they absolutely have to. They draw a faint line between weekdays and weekends and an even thinner line between night and day.

On the contrary, the majority of the middle class celebrate the end of a work week like it was an annual festival.

The super-rich see their working cycle as a much longer period, often only taking vacations after weeks at a time and preferably at the end of a successful project. They feel the need to justify their vacation and Friday night bingeing just won’t cut it for them.

The habits of the super-rich are beyond the trappings of conspicuous consumption. They never want to own what they cannot account for in terms of usage.

For that reason, they may choose not to own the latest electronic gadgets if they cannot actually utilise the capacity installed in them.

Rarely do their homes have a hoard of stuff they do not need in the first place. The super-rich are confident in their worth and do not need stuff to prove it. This leads them to choose healthier life styles and they on average spend less on mundane things.

They do not buy on credit what does not generate a return better than the interest and most do not own credit cards. They are frugal and even though they may own expensive homes and toys but as a percentage of their net worth, they are worth a dime.

It is these that will keep the super-rich getting richer and the middle-class trying to get there all their lives.

Ms Mugo is finance professional based in Mombasa.