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Africa Wealth report shows SA is losing its lustre

High-net-worth individuals looking to hedge their investment bets look to Mauritius instead.

NOMPU SIZIBA: AfrAsia Bank has released its Africa Wealth report for 2019. The report looks at the preservation of wealth on the continent, the behaviour of high-net-worth individuals and the trend seen in their investment and spending behaviour. Migration is also a hot topic, with the wealthy being extremely mobile and moving to places where they view that the grass is greener.

Well, to give us some insights into the report, I’m joined on the line by Ravi Teji, the head of Business Development Africa at AfrAsia Bank. Thanks very much for joining us, Ravi, on the show. According to your report, the total wealth in Africa rose by 14% between the years 2008 and 2018. What were the key drivers of that growth in wealth?

RAVI TEJI: Thank you, Nompu. There have been many key drivers in the last decade. The infrastructure growth in Africa has attracted more investments, and the new emerging African countries have become more business-friendly.

NOMPU SIZIBA: The AfrAsia report refers to the big five wealth markets, which include South Africa, Egypt, Nigeria, Morocco and Kenya. What were the main observations around high-net-worth individuals in these markets?

RAVI TEJI: Most of what these countries have got to offer is the planning and growing financial services sector, ease of doing business, well-developed banking systems and stock exchanges and a strong FDI influence of course, in the top five that you’ve mentioned.

NOMPU SIZIBA: So, where do wealthy folk invest their money these days, and what do they spend their disposable cash or credit on?

RAVI TEJI: Where they invest – it’s been in the handling of change. In the last few years when foreign equities or equities in scenic groups in 30 to 32% and alternatives, such as the arts, antiques, liquid investments growing by nearly 1%.

And in terms of a decrease, we’ve seen a decrease in cash and bonds, business interests have been stagnant, not much growth in that end.

NOMPU SIZIBA: So, what are some of the big cities gaining prominence or have already gained it in terms of attracting wealthy individuals to come and live and work?

RAVI TEJI: Most of the cities I would speak about would be Johannesburg in South Africa and Cape Town, Cairo in Egypt, Lagos in Nigeria, and Nairobi in Kenya.

NOMPU SIZIBA: For years South Africa has enjoyed a high concentration of extremely wealthy people living here. But South Africa appears to be losing its allure for the very wealthy, as Mauritius appears to be attracting more and more high-net-worth individuals to go and live there. Why is that?

RAVI TEJI: Yes, you are absolutely right. It’s not just affecting South Africa. It’s affecting all the Brics countries. And all these high-net-worth millionaires are looking for ways to hedge their bets overseas.

Safety concerns and essentially concerns that South Africa is one of the most industrialised economies in Africa and is suffering power outages which have a huge impact on the economy. So, with issues like that, investors have started looking elsewhere. And the talk of land distribution without compensation. So, what investors or high-net-worths are looking to do is raise their bets overseas.

NOMPU SIZIBA: Yes. Obviously we do keep on hearing a lot about emigration, and it’s not just high-net-worth individuals, but also middle-class individuals. If they get an opportunity they are also apparently emigrating. What do you understand to be the key reasons for this? Of course, you’ve talked about uncertainty around policy and so on, but what other reasons are leading people to leave the country because, let’s face it, the world is quite an unpredictable place all over – even in developed markets?

RAVI TEJI: Correct. The reasons why people apply for or countries offer second citizenships is to ensure freedom of global mobility and access, and security and wealth protection for their families. So, the middle-class professional starting at a younger age, looking at such opportunities available in other countries, prepares to move.

NOMPU SIZIBA: I want to highlight one country. You indicate that in 2018 Angola experienced a total wealth decline of 15%. What happened there, and how did the high-net-worth individuals there responded to that?

RAVI TEJI: In Angola the local economy has struggled since the oil prices have dropped. So, it’s always been the biggest commodity to offer, and the Angolan currency depreciated against the US dollar. So, these are the main key drivers which every country kind of looks at, or investors look at. Being dependent on one commodity and one product that brings income to the country has the impact that people start thinking and diversifying.

RAVI TEJI: Your growth forecast for wealth that will be held on the African continent is up 35% to around $3 trillion over the next 10 years – up to 2028. What do you believe will be the key drivers of this significant increase in wealth? From your previous answer I suppose it’s diversification within the economies.

RAVI TEJI: Absolutely. It’s diversifying, it’s hedging, looking at other economies that are more business-friendly, a well-developed banking system. For example, Mauritius has a growing financial sector, hence it’s become number one. Ease of doing business, a well-developed banking system. We are seeing a lot of African countries are working towards that or, failing that, have almost slumped and are coming back to see what more sanitary period to the market.

NOMPU SIZIBA: Yes. Assuming that we can get over some of the hiccups that we are experiencing on the African continent, how significant will the African Continental Free-Trade Agreement be for this growth?

RAVI TEJI: Absolutely. That’s a very clear area and as Africa we need to work on our borders, we need to be open to the business with each other and we need to promote each other’s markets to bring more growth. And I think it’s a great initiative and I hope it comes in place as soon as possible.

NOMPU SIZIBA: Thanks to Ravi, for your time today.

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