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Finance, retail sectors churn out new millionaires

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Knight Frank’s Wealth Report Editor Andrew Shirley (left) with Knight Frank Kenya managing director Ben Woodhams at the launch of the latest wealth report in Nairobi yesterday. PHOTO | DIANA NGILA | NMG

Kenya’s retail and finance sectors braved a turbulent political season and tough economic times arising from prolonged drought to produce the highest number of new dollar millionaires, a newly released wealth report says.

The Knight Frank’s Wealth Report, which was unveiled yesterday, shows that the number of persons with a net-worth of more than Sh503 million in the retail and finance sectors grew by 18 per cent each.

That growth has pushed the number of the ultra-high net-worth individuals (UHNWIs) in Kenya to 1,290 — a 16.2 per cent growth from the 1,110 recorded in 2016.

Out of the 1,290 dollar millionaires, 90 are worth Sh5 billion while about 10 individuals are estimated to have a net-worth of more than Sh50 billion.

READ: Kenya mints 180 new dollar millionaires despite economic slowdown

Non-profit or social organisations, industrial conglomerates and manufacturing industry were the source of wealth for nine, eight and six per cent of the ultra-rich Kenyans, respectively. 

Kenya’s formal retail sector has a penetration rate of between 20 per cent and 30 per cent and is estimated to be worth over $7 billion (about Sh709 billion).

“The retail sector involves any aspect of selling things from running a shopping mall, supermarkets, and shop to online retail businesses,” said The Wealth Report Editor, Andrew Shirley. 

The country’s e-commerce retail sector, which has rapidly grown in the past five years, is dominated by brands such as Jumia, Kilimall, OLX and Pigiame.

Retail chains are also getting into the online space to reach out to a wider audience. Last year, for instance, Tuskys Supermarkets inked a deal with online shopping mall Jumia that allows virtual shoppers to select from a wider range of products in over 50 stories countrywide.

To underline the potential of online retail business in Kenya, a Kenyan based e-commerce start-up, Sky.Garden, raised Sh122 million from Dutch and Norwegian firms last month to grow its business.

The growth of e-commerce retail is partly fuelled by the wider penetration of affordable smartphones.

Kenya’s financial services sector has in recent years been feted as one of the most dynamic and resilient in Africa — a reputation that is mainly linked to its use of mobile money and the resulting financial inclusion. The sector has attracted micro-financiers such as Branch, Maisha and Tala.

Forty three per cent of Kenyan respondents in The Wealth Report’s Attitude Survey, involving 500 of the world’s leading private bankers and wealth advisers, said their client’s wealth increased in the 12 months to December, another 43 per cent said it decreased while 14 per cent said that it remained unchanged.

The report says the number of wealthy Kenyans worth at least Sh500 million is expected to grow by 74 per cent over the next five years to 2,070 in 2022.

Knight Frank’s 2018 wealth report shows that Nairobi’s population of the super-rich grew at the fastest rate in 2017, beating its peers in the region.

During the year, 40 Tanzanians entered the club of dollar millionaires worth over Sh500 million, taking the country’s total to 250.

A majority of wealth advisers in the country (81 per cent) say they expect their clients’ net worth to increase in 2018 compared to five per cent who expect it to decline.

The increase in wealth is largely attributed to improved political and economic conditions in the country, as well as the performance of property investments and HNWIs.

“This expectation of increased wealth underlines the confidence that Kenyan high net worth Individuals have in the future economic performance,” said Ben Woodhams, the Knight Frank Kenya managing director.

The study also revealed that Kenya’s super-rich had difficulties passing wealth to the next generation, with the country having the lowest percentage of respondents (40 per cent) with a succession plan.

Kenya had the lowest percentage of succession preparedness worldwide against a high in the US, and a global average of 53 per cent and Africa’s 47 per cent.

“Fear that their children will fritter their inheritance away, the worry that passing on too much too soon will dampen their offspring's entrepreneurship spirit, or simply concerns about how to treat siblings fairly — all weigh on their minds,” said Mr Shirley.

“This highlights the scale of the issue and helps to explain why private banks and wealth advisers are putting so much effort into helping their clients with succession planning.”

READ: Africa rich list: No Kenyans this time but Dangote still king