Five hundred Kenyans fell off the exclusive list of dollar millionaires in 2023 as a weak shilling cut the valuation of their liquid investable wealth in dollar terms, a new report shows.
The super-rich were also affected by instability in the property market and a bear run at the stock exchange, according to Africa Wealth Report 2024.
The report, which was released on Tuesday, shows the number of dollar millionaires – individuals with liquid investable wealth of more than $1 million (Sh131.5 million) – in Kenya dropped from 7,700 in 2022 to 7,200 in 2023.
The report was released by international wealth advisory firm Henley & Partners in collaboration with global wealth intelligence partner, New World Wealth.
It tracks millionaires with liquid wealth, that is, cash, cash deposits in banks, or assets that can easily be converted into cash such as stocks, money market funds, and Treasury bills and bonds.
For Kenya, it marks the second successive decline in the number of dollar millionaires with 800 having fallen off the list last year, further shrinking the basket of the super-wealthy.
The number of dollar millionaires in Kenya peaked at 8,500 in 2021 when the economy emerged strongly from the Covid-19 pandemic to grow by 7.6 percent, which was the highest growth rate in 11 years.
With an estimated population of 50 million, it means that only 0.01 percent of individuals belong to this exclusive club in Kenya, where about 7.4 million people are estimated to be living in extreme poverty.
However, one Kenyan joined the more exclusive club of centi-millionaires – individuals with a net worth of more than $100 million (Sh13.15 billion) – increasing from 15 in 2022 to 16 in 2023. In total, there are 135,200 high-net-worth individuals (HNWIs) with a liquid investable wealth of $1 million or more living in Africa, along with 342 centi-millionaires worth $100 million or more, and 21-dollar billionaires, said the report.
However, the depreciation of the Kenyan shilling – as well as other African currencies – against the US dollar led to a decline in the wealth of HNWIs in dollar terms.
The local currency depreciated rapidly last year, with a unit that was exchanging at Sh123.38 at the start of the year closing at Sh157.29 against the US dollar. Wealth management experts say that in addition to the weakening of the local currency in 2023, the tough economic environment for businesses made it harder for new dollar millionaires to emerge.
“I would attribute the drop (in dollar millionaires) largely to the weakening of the shilling. But the tough economic environment is also deterring the rise of new millionaires,” said Sunil Sanger, the managing director at wealth advisory firm Orion Advisory Services.
Further, the volatility risk of the local currency is also forcing the super-rich to shift their investments towards foreign currency assets to preserve their wealth.
“We have seen a significant switch by investors from shilling assets to FX assets,” said Mr Sanger.
At the same time, high-interest rates in the US led to a flight of investors from the local bourse, leading to a drop in the value of stocks at multiple counters. As a result, wealthy individuals who have invested in stocks took a hit from the underperformance of stocks traded at the Nairobi Securities Exchange (NSE) last year.
According to market data, the NSE closed the year with a valuation of Sh1.439 trillion compared to Sh1.986 trillion when the year began.
This means that investors lost Sh547 billion in paper wealth during the period, dealing a blow to the wealth status of the investors.
“Currency depreciation and underperforming stock markets have chipped away at Africa’s wealth compared to global benchmarks,” said Group Head of Private Clients at Henley & Partners, Dominic Volek.
This erosion of wealth was recorded not only in Kenya but also in leading homes of the wealthy in Africa, including South Africa, Egypt, Nigeria, and Morocco.
Henley & Partners says that this can be largely attributed to the typical composition of African wealth portfolios.
“African investors tend to allocate their assets equally across equities, property, and cash. With African stock markets underperforming against global peers, local property markets facing headwinds, and currencies depreciating against the dollar, African investors have seen their wealth eroded on multiple fronts,” said Mr Volek.
Amid the economic turmoil, some wealthy individuals are leaving Kenya and other African countries in search of greener pastures, especially in countries that offer citizenship-by-investment programmes.
The report shows that about 18,700 high-net-worth individuals left Africa between 2013 to 2023 for top investment spots in North America, Europe, the Middle East, and Asia that offer vast opportunities to grow their wealth.
However, the report has tipped Kenya, Mauritius, Namibia, Morocco, Zambia, Uganda, and Rwanda to record a growth of more than 80 percent in the number of dollar millionaires in the next decade.
