Markets & Finance

Kenya’s super rich now control two thirds of Sh6.2trn economy


Unequal distribution of the wealth has left millions of ordinary citizens looking for signs of Kenya's new lower middle-income status. PHOTO | FILE

Some 8,500 super wealthy individuals now control more than two thirds of Kenya’s Sh6.2 trillion economy, a newly released wealth report says revealing a widening gap between the rich and the poor.

The data, which was compiled over the eight years to December 2015, shows that the ranks of affluent individuals grew by 200 in the past two years, raising their combined net assets to Sh4.24 trillion — exposing the extent to which wealth distribution is skewed in favour of a tiny clique.

Official statistics show that about half of Kenya’s 43.1 million people live below the poverty line, barely surviving on less than Sh201 ($2) a day.

New World Wealth, an independent South Africa-based research firm that conducted the survey, also found that the average Kenyan has net assets worth Sh202,000 ($2,000), a long way off what the affluent minority control.

“High net worth individuals’ (HNWI) wealth rose by 75 per cent, from $24 billion in 2007 to $42 billion in 2015, making Kenya one of the top performing countries in Africa during this period,” the report says.

The research firm expects the number of dollar millionaires in Kenya to continue growing, hitting 15,300 in the next decade — a reality that will only be matched by Ivory Coast, Ethiopia, Mauritius and Tanzania.

The report, however, reckons that quality healthcare and education will remain accessible to only a small portion of the Kenyan population who have benefited directly from growth, putting the country on the path to a widening wealth gap.

Kenya was last year elevated to a lower middle-income economy to reflect its improving wealth status.

Unequal distribution of the wealth has, however, left millions of ordinary citizens looking for signs of that new status.

Uneven wealth distribution in Kenya has left the richest 20 per cent of the population earning an average of 11 times more than the poorest 20 per cent, according the United Nation’s Human Development Index.

“Development challenges (to Kenya) include poverty and inequality, and vulnerability of the economy to internal and external shocks,” the World Bank said in its April economic update.

Defied tough economic environment

The New World Wealth’s survey indicates that Kenya’s super wealthy defied last year’s subdued economic environment and posted a growth even as the number of their counterparts in South Africa and Nigeria dropped by double digits.

The rich’s collective portfolio performance was boosted by a growth in construction and financial services coupled by their limited exposure in the commodities market which has taken a hit globally.

The report shows Kenya’s dollar millionaires extract most (19 per cent) of their wealth from real estate and construction, which have experienced unprecedented boom in the past 10 years.

The report also says that the rich mostly depend on the financial services, fast-moving consumer goods and manufacturing to grow their portfolios.

“Residential property constitutes around 35 per cent of the net assets of an average Kenyan HNWI,” the report says, adding that this is a relatively high percentage compared to other African countries. 

Last year land stood out as the best performing asset class whose returns stood at an average of 15 per cent.

Kenya’s super rich are concentrated in Nairobi with nearly three-quarters of the 8,500 individuals residing in affluent estates like Runda, Lavington, Riverside, Kitisuru, Karen, Muthaiga, Kileleshwa, Langata, Spring Valley, Bahati Ridge, Thigiri Ridge and Westlands.

Another 800 individuals call Mombasa home, living in Nyali, Bamburi, Shanzu and Tudor estates, 200 others reside in similarly posh estates in Kisumu while Malindi, Kilifi and Nakuru are the choice counties for 300 more dollar millionaires (100 in each county).

The report also says that 52 per cent of Kenya’s super rich own second homes abroad in places like London, Paris, New York, Geneva where a 200 square-metre apartment goes for between $31,000 (Sh31 million) and $42,300 (Sh43 million).

An even higher number of individuals have second homes in Kenya, with Mombasa (Nyali, Bamburi and Shanzu, Malindi, Kilifi, Watamu, Diani, Lamu (Kizingoni) being the choice locations for such investments.

Kenya’s super wealthy, just like their global counterparts, have developed a taste for exclusive items (cars, whiskies, watches, helicopters and clothes among others) which serve as a social marker to distinguish them from others.

This phenomenon and the growing middleclass have attracted multinational luxury brand manufacturers to set up base in Kenya — especially Nairobi which is the epicentre of the wealth concentration.

Last year, local luxury car dealers booked record sales of 409 units, with Porsche, whose dealership opened in May 2014, emerging as the top-selling model, relegating Mercedes-Benz to second place.

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New World Wealth says it collated the information based on a sample of 500 local high net worth Kenyans as well as names from company and luxury goods databases that focus on prime property, yacht, art and private jet owners.

Rich Kenyans have always held their wealth in secret, forming companies and nominee accounts to hold their stock market investments and own land on their behalf.