The distribution of wealth in Africa is extremely skewed but the prognosis for the future is that individual wealth is growing exponentially, finds Alnoor Amlani
This article was first published in the November 2018 International edition of Accounting and Business magazine.
With the African continent seen as the poorest, least developed part of the world, readers could be forgiven for not associating it readily with wealth creation. Africa accounts for just 1% of the world’s wealth, and just one in 100 of the world’s wealthy individuals hails from Africa. However, both corporate and individual wealth is on the rise.
The Africa Wealth Report 2018, published by AfrAsia Bank, examines the growth in wealth from 2007 to 2017 and offers projections to 2027. It reports that total private wealth held in Africa in 2017 amounted to US$2.3 trillion, of which US$920bn is in the hands of private high net-worth individuals (HNWIs), i.e. those with assets of US$1m or more.
To add context, in 2017 global private wealth amounted to US$215 trillion, of which US$75 trillion is held by individuals. Globally, there are 15.2 million HNWIs with US$1m or more in assets.
The rate of wealth growth in Africa is accelerating, albeit from a low base, rising 13% in the past decade and 3% in the past year alone. Mauritius leads the way, with 195% growth in the past decade, followed closely by Ethiopia at 190%, Rwanda at 74% and Kenya at 73%. Per capita wealth statistics also place Mauritius at the top of the list for Africa, with US$32,700 per person. Second and third on the list are South Africa and Namibia with US$12,900 and US$12,600 respectively. Botswana comes in fourth with US$7,900. The global average is US$28,400, and above US$200,000 for top-ranked countries such as Australia and Switzerland.
The distribution of wealth in Africa is extremely skewed – a situation that is unlikely to improve without advances in the pace of infrastructure and transportation development, as well as housing and education.
In The Hidden Wealth of Nations, Gabriel Zucman examines the ratio of wealth placed in tax havens in proportion to the GDP of source and finds that Kenyans and Zimbabweans hold very high ratios: 50% and more of their GDP value is held in this way. This is in sharp contrast to countries like the UK, Germany, France and other developed nations where the ratio is less than 20%. This is a huge proportion of wealth that is not invested locally, and a serious leak from an already impoverished developing world.
Africa’s cities are particular focus areas for wealth creation as rural-urban migration continues to grow. Presently Johannesburg tops the list, holding US$276bn of Africa’s wealth. Cape Town comes second with US$155bn.
The Global Cities Institute predicts that by 2050 Kinshasa will be the fourth largest after Mumbai, Delhi and Dhaka. By 2075 it places Kinshasa as the largest city in the world; by 2100 however it will have been pushed into second place by Lagos, with Dar es Salaam in third place.
If this sounds unlikely in 2018, remember that by the end of the century the people of Africa will account for one-third of the world’s overall population, offering much greater opportunities for national enterprises, multinational corporations and individuals operating on the continent.
Alnoor Amlani FCCA is director with the CFOO Centre in Nairobi, Kenya
"Africa’s cities are particular focus areas for wealth creation as rural-urban migration continues to grow"