Kenya’s super-rich return offshore cash to escape economic turmoil in Europe-Report
Kenya’s super-rich returns home offshore cash to escape economic turmoil in Europe and the US, according to Knight Frank's 2023 "Wealth Report
Kenya’s super-rich returns home offshore cash to escape economic turmoil in Europe and the US according to Knight Frank’s 2023 “Wealth Report.
Rich Kenyans invested their money in luxury real estate and local government bonds as they returned billions of shillings home to escape the turbulence in Europe and the US economies.
According to Knight Frank’s 2023 “Wealth Report,” the majority of Kenya’s ultra-wealthy invest in residential and retail properties as well as government bonds.
They moved their cash from the US, the EU, and China whose economies are slowing down simultaneously, with the IMF expecting a third of the global economy to be hit by recession this year.
High-net-worth Kenyans have a history of stashing money overseas to avoid paying taxes or to diversify their risks by making investments in the more politically and economically stable Western countries.
However, this approach has been changed due to the continuing drag of the Ukrainian War, slow development in the west, inflationary pressures, and interest rate increases by major central banks.
“The attitudes survey revealed a sharp portfolio shift in Kenya and Africa towards domestic markets, during this time of global turmoil…with Kenyan HNWIs [high-networth individuals] also tending to hold a far larger proportion of their wealth in property and bonds than the global average for HNWIs,” said Knight Frank Kenya chief executive officer Mark Dunford.
Globally, ultra-high net worth individuals (UHNWIs) saw their fortunes slashed by 10 percent on average, with Europe being the worst hit at 17.3 percent due to the Russia-Ukraine war, said Knight Frank.
On the other hand, their African peers suffered the lowest losses at 5.0 percent, faring better than those in Asia (7.0 percent), the Middle East (7.3 percent), the Americas (10.1 percent), and Australasia (10.7 percent).
Knight Frank classifies as HNWIs persons with a net worth of $1 million (Sh127 million), while those whose net wealth is above $30 million (Sh3.8 billion) are classified as UHNWIs.
In this year’s report, Knight Frank did not give a breakdown of the number of Kenyans in each category in 2022. But a year ago it showed the country was home to 3,362 dollar millionaires and 88 ultra-rich individuals.
For the wealthy in Kenya, the flight from abroad was most pronounced in the property sector, where they reduced the share of their portfolio held outside the country from 19 percent at the beginning of last year to 11 percent by the end of December.
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In 2022, the rich had 40 percent of their wealth in commercial property—mainly retail and prime residential rental segments held either directly, through funds, or in Reits.
Government bonds in Kenya have provided investors with insurance against the capital erosion witnessed in other investment segments, in particular equities—which has seen a loss of billions of shillings in the paper in the wake of foreign investors selling key stocks at the Nairobi bourse.
With returns of between 12.5 percent and 14 percent, the bonds comfortably beat the average rate of inflation of 7.6 percent in 2022, thus protecting wealth from erosion in real terms.
In addition to the traditional investments, the wealthy have also been eyeing niche products such as jewelry, classical cars, and art as a store of value.
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