About 873 Kenyans that fell off from the dollar millionaire club on the onset of Covid-19 have failed to reclaim their status, pointing to the extended impact of the pandemic.
The 2021 Knight Frank’s Wealth Report classified 3,362 Kenyans among the world’s high net-worth individuals (HNWIs)—those with a net worth of more than $1 million (Sh113 million) — by end of last year.
The latest number represents a 1.2 per cent rise from 3,323 in the previous year, meaning that only 39 out of the 912 Kenyans who exited the dollar millionaire club in 2020 have made a comeback.
Knight Frank projections show that it may take these rich Kenyans up to 2026 to reclaim their dollar-millionaire status when HNWIs are expected to hit 4,274.
At 1.2 percent, Kenya had the slowest pace of churning out fresh dollar millionaires when compared with six other African economies included in the report.
South Africa’s dollar millionaires grew by 14 percent or 3,809 to hit 31,852 to retain its spot as the economy with the highest number of people in that league.
Uganda’s dollar millionaires grew nine per cent to 1,704 while Tanzania recorded two percent growth to 2,599.
Last year also saw two Kenyans fall off from an elite group of super-wealthy persons—those with a net worth of more than $30 million (Sh3.4 billion) and classified as ultra-high-net-worth individuals (UHNWI)—to close at 88.
This means the sharp fall in share prices across capital markets including the Nairobi Securities Exchange (NSE) and the reduced valuation of private companies and real estate earnings is still impacting the wealth.
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Commercial property investments accounted for 49 percent of the wealth held by Kenya’s wealthiest individuals meaning that the continued low occupancies in residential and commercial spaces has hurt their returns.
Extended remote working by some businesses and co-sharing of office spaces by companies as a way to lower operational costs has translated to reduced income from commercial property investments.
In an environment of slow pace of recovery, about a quarter of Kenya’s wealthy are planning to apply second passport or new nationality, partly in search of better returns.
Knight Frank noted that for the rich seeking new passports, the motivation includes cutting taxes, enhancing their safety or getting a better quality of life.
“This rising trend of ‘nationality planning’ from our own wealthy is highly focused as a route to best-in-class investments, education and healthcare, with property investments making up a significant component of that investment,” said Ben Woodhams, managing director for Knight Frank Kenya.
According to the report, 31 percent of Kenyans with a net worth above Sh113 million are seeking a second nationality to escape high tax in Kenya.
Further, 59 percent say they are seeking a second nationality so as to invest, meaning that the rich now want to reside close to where their fortunes are.
The trend also suggests that the pandemic has triggered more Kenyans to start thinking of diversifying investments beyond the country.
In particular, Kenyans are eying countries such as the US, UK, Australia and the United Arabs Emirates for property investments.
More Kenyans were joining the dollar millionaire club but this run was halted in 2020 when Covid-19 struck, triggering economic disruptions.
The height of Covid-19 disruptions in 2020 was punctuated by a drop in share prices, and plunging corporate profits in multiple sectors including real estate, manufacturing and banking.
Many rich Kenyans have spread their wealth across sectors and also invest part of it across borders, meaning that sustained economic disruptions in international markets has slowed their recovery.
The NSE for instance last year recovered added Sh237.62 billion to reverse the Sh203.28 billion lost in 2020.
However, with nearly 80 percent of NSE wealth in just five stocks—Safaricom, Equity, East African Breweries, KCB and Cooperative Bank—it means the recovery left out many investors.
Kenya has the fourth-highest concentration of wealthy persons with a net worth in excess of Sh3.4 billion in Africa among the countries captured by the Wealth Report.
South Africa led the pack with 561 followed by Nigeria (467) and Egypt (253). Tanzania, Uganda and Zambia had 42,27 and five respectively.
Globally, more than 51,000 people joined the ranks of the “ultra-wealthy” last year as their fortunes soared on the back of rising global stock markets and increased property prices during the pandemic.
The number of ultra-high net worth rose by a record 9.3 percent last year to hit 610,569.
All continents save for Africa (0.8 percent drop) experienced growth in their UHNWI population.
“The savings amassed during 2020 have enabled significant investment upside over the past 12 months,” said the report.