By Sylvester Mwaringa
High Net Worth Individuals (HNWIs) in Kenya realized some of the best returns in 2022 compared to their peers, retreating from foreign property and international citizenships, according to the 2023 Wealth Report released by Knight Frank.
An included Attitude Survey on Wealth Managers confirmed that next only to Australasia, Africa had the highest proportion of clients who increased their wealth in 2022, at 64 percent, compared with the global average of 40 percent, and just 24 percent in the Americas.
While their peers worldwide experienced a 10 percent slash in their fortune value, Africa’s affluent saw the lowest losses recording an overall drop of just 5 percent. Wealth owners in Europe suffered the heaviest blow, enduring a fall of 17.3 percent in their fortunes.
But how did this happen?
Permacrisis, an extended period of instability and insecurity, perfectly describes the global economic state of affairs in 2022. A cocktail of impacts on economies barely recovering from post-pandemic effects, soaring energy prices, volatile stock markets, surging inflation and interest rates rocked markets worldwide. The hardest hit were the wealthy in Europe as Russia’s invasion of Ukraine shook most investments.
Amid the global turmoil, majority of Kenyan HNWIs actively exited foreign markets and shifted their investment portfolios back home.
At the beginning of 2022, wealth managers reported that on average, a quarter of the property portfolios owned by their Kenyan clients were held overseas, compared to the 32 percent average of their global counterparts.
In the year since, Kenyan wealth owners have narrowed their holdings overseas down to 11 percent, as they shifted their investments back home and moved to fill a greater proportion of their investment portfolios in property and bonds, than their global counterparts.
“Nowhere in the world was immune from last year’s inflationary trends, or geopolitical risks,” observed Liam Bailey, Knight Frank’s Global Head of Research. “However, with the wealthy in Kenya and Africa less exposed to overseas property holdings and equity markets than HNWIs globally, their assets proved more resilient to the global disruption,” he remarked.
The attractive investment environment in Africa combined with key changes to investor visas, including the UK’s closure of its Tier 1 investor visa scheme in February 2022 – to reduce the number of Kenyan HNWIs planning to apply for foreign citizenship, oiled the wheels of domestic investment.
In terms of portfolio balance, property and bonds accounted for over half of Kenya’s HNWIs in 2022. While only 18 percent of their assets were held in stock market equities, just 5 percent was invested in venture capital and property equity. Most ramped up investments in rented residential and retail properties, while reducing their positions in industrial property and development land.
According to the Wealth Report, there was a notable shift in the preferred location for purchasing a second home. The survey, conducted on more than 500 private banks, verified that Kenya remained the most popular choice for the majority of Kenya’s wealthy. The UK, US followed closely, and Canada showed an increase in popularity making it to the top 5 of the majority of the respondents’ list.
Egypt and Tanzania emerged as new entrants for Kenya HNWIs top choices while European locations Sweden, Denmark, Monaco disappeared from the list.
Mark Dunford, CEO Knight Frank Kenya said, “In this general pivot away from international exposure towards investments in Kenya and Africa, Kenya’s HNWIs are also the most optimistic in the world, with 50 percent expecting their wealth to increase by more than 10 percent in 2023. This compares with just 21 percent of global HNWIs expecting rises of the same level.”
