Is Africa the new face of ris­ing wealth and op­u­lence?

Big money and lav­ish life­styles mark newly-minted mil­lion­aires

Africa Renewal - - Contents - By John Nji­raini

Not many peo­ple in Africa, the ma­jor­ity of whom can hardly af­ford more than one meal a day, know of the ex­is­tence of the Mal­dives, an is­land in the In­dian Ocean. Yet, the is­land na­tion, a popular hol­i­day des­ti­na­tion for the rich and fa­mous, is the hotspot for African hol­i­day­mak­ers tak­ing a breather away from home

One such vis­i­tor is He­shan de Silva, a young mil­lion­aire from Kenya. “The Mal­dives is my favourite hol­i­day des­ti­na­tion. I go there ev­ery year,” he says. He is not the only African mil­lion­aire who va­ca­tions in the Mal­dives. To­day, the num­ber of trendy Africans va­ca­tion­ing on the breath­tak­ing and enor­mously ex­pen­sive beaches of the Mal­dives is on the rise. For years, only glo­be­trot­ters from Europe and the US flocked there.

Mr. de Silva, the founder of The de Silva Group, a pri­vate eq­uity firm, rep­re­sents the emerg­ing face of a fast-in­creas­ing cul­ture of op­u­lence seen in African cap­i­tals amidst sprawl­ing poverty. Like some of his com­pa­tri­ots, he feels the dis­con­cert­ing in­equal­ity con­trast, a gap that he tries to nar­row through so­cial en­ter­prise. Mr. de Silva sym­bol­izes the suc­cess­ful new African, with class, luxury and af­flu­ence. Apart from hol­i­day­ing in Mal­dives, he drives high- end cars and owns homes in Kenya, South Africa, the US and Sri Lanka.

Ev­i­dence that op­u­lence has found a new home in Africa can be seen across the con­ti­nent. Ac­cord­ing to New World Wealth, a con­sul­tancy based in the UK and South Africa, there are about 165,000 very wealthy in­di­vid­u­als in Africa with a com­bined net wealth hold­ings of more than $660 bil­lion. This equates to roughly 28% of to­tal in­di­vid­ual wealth held on the con­ti­nent. From 2000 to 2013, Africa’s very wealthy in­di­vid­u­als in­creased by more than 150% com­pared to the world­wide growth rate of 73%. In 2013, South Africa topped the list with 48,800 dollar mil­lion­aires, fol­lowed by Egypt with 23,000, Nige­ria with 15,900 and Kenya with 9,000.

The sig­nif­i­cant rise in the num­ber of dollar mil­lion­aires has not been among the usual African eco­nomic gi­ants alone.

Mil­lion­aires dou­bled

Sur­pris­ingly, Ethiopia, a coun­try that for long has been the face of Africa’s af­flic­tions ow­ing to the dev­as­tat­ing famine of 1984, is cre­at­ing more mil­lion­aires at a faster pace than other African coun­tries. Ranked among the top ten fastest grow­ing economies in the world, Ethiopia more than dou­bled its dollar mil­lion­aires from 1,300 in 2007 to 2,700 in 2014.

As the num­ber of dollar mil­lion­aires in Africa in­creases, global com­pa­nies in the luxury and fash­ion in­dus­try are en­ter­ing the new con­sumer mar­kets. In the re­cent past, sports car maker Porsche, French luxury goods con­glom­er­ates LVMH and Louis Vuit­ton, Ital­ian fash­ion and leather goods brand Gucci and Dan­ish jew­elry brand Pan­dora, among oth­ers, have set up shop in sev­eral African coun­tries.

For th­ese com­pa­nies, Africa falls un­der the cat­e­gory of dy­namic mar­kets that are of­fer­ing ex­cit­ing op­por­tu­ni­ties with higher re­turns on in­vest­ments than ma­ture mar­kets in Europe and North Amer­ica.

With a bil­lion-strong young pop­u­la­tion and an econ­omy ex­pected to dou­ble from $2 tril­lion to $4 tril­lion be­fore 2025, the con­ti­nent has emerged as the next fron­tier for growth and op­por­tu­nity. “Africa is no longer that con­ti­nent the world viewed with pity. To­day Africa is gen­er­at­ing wealth and the world now sees op­por­tu­ni­ties,” notes

Lyal White, the direc­tor of the Cen­tre for Dy­namic Mar­kets at the Gor­don In­sti­tute of Busi­ness Science at South Africa’s Uni­ver­sity of Pre­to­ria.

This ob­ser­va­tion is sup­ported by Michael Musau, the Chief Ex­ec­u­tive of Emerg­ing Africa Cap­i­tal, a wealth man­age­ment firm based in the Kenyan cap­i­tal, Nairobi. “Poverty is still deeply rooted in Africa but the con­ti­nent is chang­ing,” he says.

Africa’s mil­lion­aires are amass­ing mas­sive wealth from lu­cra­tive sec­tors like tele­coms, fi­nan­cial ser­vices, re­tail, man­u­fac­tur­ing, im­ports and ex­ports, agri­cul­ture and com­modi­ties. At the same time, the con­ti­nent seems to be los­ing the in­come equal­ity battle. In fact, the New World Wealth re­search shows the gap is widen­ing as the num­ber of mil­lion­aires is grow­ing at a faster rate than the mid­dle class.

In­equal­ity in Africa is a mal­ady that is widen­ing at alarm­ing lev­els and con­tin­ues to paint the ‘Africa Ris­ing’ nar­ra­tive with shades of black. Africa is the sec­ond most in­equitable re­gion in the world, host­ing six out of the 10 most un­equal coun­tries world­wide. “In­equal­ity makes us ask the ques­tion, ‘Is Africa ris­ing or is the world floun­der­ing?’” says Mr. White.

The grow­ing num­ber of mil­lion­aires seek­ing av­enues to in­vest their wealth is a tes­ta­ment that a fast-grow­ing elite has high dis­pos­able in­come be­ing spent not only on luxury goods and af­flu­ent life­styles, but also on busi­ness in­vest­ments. “There is a sig­nif­i­cant in­crease in the num­ber of [mil­lion­aires] in Africa and most are look­ing for ar­eas to in­vest,” ex­plains Mr. Musau, adding that Africa’s mil­lion­aires are in­vest­ing heav­ily in var­i­ous sec­tors through pri­vate eq­ui­ties, hedge funds and cap­i­tal mar­kets.

De­spite the public dis­plays of wealth, the pres­ence of 58 mil­lion un­der­nour­ished and stunted African chil­dren be­low the age of five, high lev­els of child and ma­ter­nal mor­tal­ity and limited ac­cess to clean wa­ter and san­i­ta­tion, health and ed­u­ca­tion fa­cil­i­ties has forced the rich to give back some of their wealth by cre­at­ing jobs and en­gag­ing in phil­an­thropic ini­tia­tives.

“It is con­sciously dis­turb­ing to be rich while sur­rounded by poverty and do noth­ing,” says Mr. de Silva, adding that his com­pany has a so­cial arm that fo­cuses on of­fer­ing start-up en­ter­prises in­ter­est-free loans.

Riches ver­sus phi­lan­thropy

On the larger scale, Africa’s bil­lion­aires have bor­rowed a cue from some of the world’s rich­est peo­ple like Bill Gates and set up foun­da­tions through which they chan­nel mil­lions of dol­lars in phi­lan­thropy. Aliko Dan­gote, the Nige­rian founder of Africa’s big­gest industrial con­glom­er­ate, Dan­gote Group, re­cently an­nounced he would do­nate $1.2 bil­lion to the Dan­gote Foun­da­tion to scale up sup­port in ed­u­ca­tion, health and youth em­pow­er­ment. Pa­trice Mot­sepe, a South African min­ing mag­nate with a net worth of about $2.5 bil­lion, has com­mit­ted to give at least half of the funds gen­er­ated from his fam­ily’s as­sets to im­prove the lives of poor and marginalised South Africans.

De­spite the con­trast­ing re­al­i­ties in Africa, the global luxury and fash­ion in­dus­try can­not ig­nore the con­ti­nent in its pur­suit for prof­its and growth. Ac­cord­ing to Bain & Com­pany, the world’s lead­ing ad­vi­sor to the global luxury goods in­dus­try, the in­dus­try has en­tered a ter­ri­tory that can well be de­scribed as the “new nor­mal” be­cause lead­ing mar­kets in Europe, Rus­sia, Amer­i­cas, Ja­pan, China and Asia Pa­cific are floun­der­ing and growth can only be guar­an­teed by new mar­kets.

Mar­ket in­tel­li­gence firm Euromon­i­tor In­ter­na­tional adds that although Africa is a long way be­hind both emerg­ing Asia and Latin Amer­ica in terms of the size of its mid­dle class, the com­bi­na­tion of rapidly grow­ing economies and youth­ful pop­u­la­tions au­gur well for the next ten years and be­yond for the luxury in­dus­try. It also reck­ons that re­cent spate of oil and gas dis­cov­er­ies in some African coun­tries could fuel get­rich-quick op­por­tu­ni­ties for a new gen­er­a­tion of mil­lion­aires, which trans­lates into a grow­ing mar­ket for the luxury in­dus­try. Er­ratic oil prices, like the re­cent plunge, how­ever, pose real threats par­tic­u­larly for coun­tries that are highly de­pen­dent on a sin­gle re­source such as Nige­ria, An­gola and South Su­dan.

Africa’s luxury mar­ket, val­ued at $4 bil­lion, is still a frac­tion com­pared to the $280 bil­lion global value. Nonethe­less, the con­ti­nent will be the sec­ond driver of growth over the next decade af­ter the Mid­dle East.

Alamy/Zute Light­foot

An­golan elite en­joy the im­port of ex­pen­sive cars as a boy looks on while wait­ing to fill his con­tainer with fuel.

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