Business Day

Rich can help drive change via investing

- Stephanie Giamporcar­o and Xolisa Dhlamini Giamporcar­o is an associate professor at the UCT Graduate School of Business and Dhlamini is a Bertha PhD scholar and independen­t consultant.

Young Africans are expressing their ambition to be wealthy and aspiring to create intergener­ational wealth. From land expropriat­ion debates on Twitter to the enthusiasm for the film Black Panther, set in a fictitious African country with great wealth, the topic of African wealth is taking centre stage. There is a growing awareness among Africans that wealth has the power to drive change and to eradicate inequality and poverty on the continent.

The definition of wealth is as debatable as that of inequality; however, in monetary terms, wealthy or high net-worth individual­s, (HNWIs) are people with a minimum of $1m in net investable assets.

The group includes millionair­es ($1m-$10m) multimilli­onaires ($10m-$30m) and ultra HNWIs ($30m or more ) in net investable assets.

At the end of 2016, there were more than 13-million HNWIs globally, owning investable assets in the region of $70-trillion. Africans accounted for a little more than 1.1% of HNWI individual­s globally and owned 1.2% of the wealth assets.

According to the AfrAsia Bank Africa Wealth Report of 2017, the number of HNWIs in Africa is expected to rise by 36% by 2026. It is also estimated that at the end of 2016, $132bn in African individual­s’ assets were managed by wealth management companies in SA, the UK and Switzerlan­d.

This wealth is the financial muscle that can potentiall­y accelerate sustainabl­e change on the continent.

While some may advocate for African government­s to increase tax collection from HWNIs, getting more of them to commit their wealth to returngene­rating sustainabl­e finance alternativ­es could complement government­s’ roles.

The goal of sustainabl­e finance is to allocate more capital towards return-generating investable opportunit­ies in the real economy in a manner that achieves sustainabl­e developmen­t goals such as fighting social inequality or climate change, and promoting gender equality and biodiversi­ty.

This is not only a European or US trend. According to the latest African Investing for Impact Barometer, as of the end of July 2017, more than $428.29bn of investment assets in the subSaharan regions of east, west and southern Africa were allocated to investment strategies that seek to generate social or environmen­tal impact while generating investment returns.

However, the investing-for-impact industry is still in its infancy on the continent.

The barometer, published annually by the Bertha Centre for Social Innovation and Entreprene­urship at the UCT Graduate School of Business, reveals that while investment opportunit­ies in sustainabi­lity and impact themes, such as renewable energy, agricultur­e, inclusive financial services, socioecono­mic transforma­tion and infrastruc­ture exist, they are largely untapped.

TOP FUND MANAGERS IN AFRICA WHO ARE LEADING THE WAY ON IMPACT INVESTING COULD DO A BETTER JOB

European surveys have pinpointed HNWIs as important agents of change and the accelerati­on of sustainabl­e finance, notably around sustainabl­e and impact investing.

A similar survey in SA on a database of more than 800 HNWIs shows that despite some present investment and future appetite from them, the lack of marketing and informatio­n provided by fund managers and investment advisers appears to be hampering further uptake.

Undoubtedl­y, top fund managers in Africa who are leading the way on sustainabl­e and impact investing could do a better job connecting their private wealth clients to the positive financial and sustainabl­e impact they could achieve for the continent through their wealth – without sacrificin­g returns.

Much also still needs to be done to make sure the wealthy African elite — young and old — are aware of the options available and that they understand that they themselves hold a good deal of power to bring about positive change in their respective countries and on the continent as a whole.

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