Transfer of wealth biggest headache for super-rich

The biggest headache for super-rich Africans is how to transfer wealth to the next generation, a new report says.

Knight Frank’s Global Wealth Report 2016 found that about 62 per cent of ultra-high net worth individuals (UHNWI) didn’t feel that their children would be encouraged to create their own wealth.

This has made some of them reluctant as far as transferring wealth is concerned. Close to half of the respondents expressed fear that their children would not know how to handle investments or that they would squander it.

There have been a number of long-running court cases in Kenya as children and relatives jostle for a share of the deceased family’s estate. A number of prominent rich Kenyans have died without a will, leaving behind a divided family. These include former Cabinet minister Njenga Karume, former Starehe MP late Gerishon Kirima, former spymaster James Kanyotu and former minister Mbiyu Koinange.

The report states that encouraging children to be part of the business from a younger age is ‘the obvious solution’ to this problem.

University of Nairobi lecturer XN Iraki said in our case it has mostly been cultural. “Growing up in an affluent family denies you a chance to experience wealth generation. It becomes normal to enjoy certain lifestyles most people only dream of. When given that wealth by your parents, you realise you have no clue how it’s generated and squandering it is easier,” said Dr Iraki.

His sentiments were supported by commercial lawyer Gad Ouma who works with the Robson and Harris. Besides ignorance, self-centeredness, sheer procrastination, fear that drafting a will cause rifts in the family, there is also superstition.

“In African cultures, making plans for what should happen after one’s death is in a way like inviting death. As such, most people shun the idea of drafting a will to avoid inviting death.”

Other issues that the rich will be grappling with include stock market volatility and direct legislation. Others include personal security and safety, personal and family health, compliance issues and the environment.

However, the report noted the number of millionaires in the country has been growing, with Nairobi having the highest followed by Mombasa. The two counties are also projected to dramatically increase the number of millionaires by 2025.

Despite the global economic meltdown, the number of high net worth individuals grew all across the globe. At least 200 Kenyans crossed the million-dollar net-worth mark in 2015, growing the country’s dollar-millionnaire population to 8,500, up from 8,300 in 2014. The report also projects Kenya’s million-dollar wealth band to grow by 80 per cent.