Ranks of African millionaires swell

As the number of wealthy Africans grows, so has the variety of the sources of their income, diversifying away from the traditional oil and minerals to banking, telecommunications, property and other emerging fields.

Africa’s richest man, Aliko Dangote, left, has a net worth of about US$18 billion, according to Forbes. Tom Saater / Bloomberg

CAPE TOWN // The sinking tide of commodity prices has lowered incomes for the rich and poor, but for a growing class of African millionaires, the effect may be less painful than for others.

By the end of last year there were about 170,000 people with more than a million dollars in their bank accounts across the continent, according to the London-based property consultancy Knight Franks' Wealth Report 2016. In 2005, there were just over 90,000 in this club.

And as the number of rich Africans has grown, so has the variety of the sources of their income, diversifying away from oil and minerals that supported them in the past.

"The situation is changing and the wealthy are becoming rich from banking, telecommunications, property and other fields," Andrew Shirley, the editor of the report, tells The National from London.

“With a growing middle class that wants things to buy, shopping centres are now an investment vehicle that are creating wealth in their own right. It’s certainly not only about commodities any longer.”

Even though the 54 countries that make up Africa have collectively suffered as commodity demand has fallen, the continent remains an important consideration for investors. According to Knight Frank, more than US$200 billion was collectively held by ultra-high-net-worth individuals across the continent.

Another feature of this wealth is that more of it is being spent locally, rather than being expatriated to developed countries, as frequently happened in the past.

Africa's richest man, the Nigerian Aliko Dangote has a net worth of about $18bn, according to Forbes. Although he began in commodities, Mr Dangote has long since expanded to become one of the largest industrial investors on the continent.

Recently he put up $20 million for a tomato processing factory in Nigeria, where he is also bidding for a stake in a joint venture with the French car maker Peugeot for local manufacturing. He also owns cement plants – a crucial product for construction that usually has to be imported at great cost. Dangote cement is now operating in Nigeria, Benin, Ghana, Congo, Tanzania, Senegal, South Africa and Zambia.

This type of domestic investment attracts attention; at least two Chinese firms are now setting up cement plants in Zambia to serve the country’s huge mining industry, following Dangote’s launch of a $500m plant in the southern African state.

Not all of Africa benefits equally, of course, and Mr Shirley notes that given the diversity of economic activity and local conditions, some countries do better than others. “In north Africa the optimism over the Arab Spring has not translated in optimism over the economy,” he says.

“We are also seeing countries such as Angola and Nigeria, which are heavily dependent on the oil price, doing less well than Kenya, which has a much more diversified economy.”

Kenya, in fact, is going great guns. Ultra high net worth individuals have increased 122 per cent since 2005, rising 2 per cent in 2015 alone, says Knight Frank. A burgeoning tech economy and proximity to Gulf countries such as the UAE have underpinned trade and investment.

“A huge amount of technology innovation is going on in Kenya and that is creating millionaires,” Mr Shirley says.

Some of the wealth has come from outside Africa. In 2001 South Africa’s Koos Bekker placed $32m investment in a then-obscure Chinese web company called Tencent. Mr Bekker did so on behalf of Naspers, a modest media and publishing house that he served as CEO.

Today this stake is worth about $66bn according to Bloomberg, making Cape Town’s Naspers one of the most valuable media companies in the world. The investment has also allowed Naspers in the succeeding years to spread multimedia and other ventures in more than 130 countries.

Mr Bekker is, unsurprisingly, now a revered business figure in South Africa and himself on the Forbes list with $2.3bn in the bank.

Africa’s rich, much like their international counterparts, also like to spend money on personal rewards.

“Luxury SUVs are very popular with Africa’s super-rich, especially Porsche, Lexus and Range Rover,” says Andrew Amoils, the chief executive of New World Wealth, a Johannesburg investment advisory firm. Getting around the continent can be especially challenging given the poor state of roads in many regions, which is why the rich look for vehicles that convey prestige but are practical as well.

As a result, manufacturers themselves have taken note and top-end marques such as Bentley have started to release tougher off-road models more suited to rougher roads.

But, for when driving is not practical, flying becomes the travel method of choice among the super-rich. “Private jets are also very popular, especially in South Africa, Nigeria and Kenya,” Mr Amoils says.

The African wealthy are also spending on education to help to ensure their children continue their legacy. A study by The New York Times shows that Nigerians make up less than 1 per cent of the black population in the United States, but in 2013 nearly one-quarter of the black students at Harvard Business School were of Nigerian ancestry. Moreover, a fourth of Nigerian-Americans have a graduate or professional degree, as compared with only about 11 per cent of whites, the study showed.

Property, of course, has always been a cornerstone of wealth investment, and while destinations such as London, New York and Dubai continue to draw the world’s rich, some African cities at least are also benefiting. “Property is also very popular for the very rich, especially beachfront villas and homes in residential estates,” Mr Amoils says.

In Cape Town, top properties are now hitting the $35m mark, as millionaires from Africa and elsewhere buy up sea-view villas.

Cape Town’s star is rising so fast it may soon edge out Egypt as the African city with the second-most millionaires, says Knight Frank, while Johannesburg in South Africa remains number one by some distance.

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