Opportunities & obstacles for African family offices
Africa marches to her own rhythm. Besides her unrivalled natural beauty, the continent is blessed with numerous natural resources and knowledge power. Despite these riches, even the wealthiest African cities are home to the greatest numbers of people living in poverty worldwide. The emergence of a healthy Family Office ecosystem remains lacklustre.

By Francois Botha
Published on Simple October 1, 2020

It is said that Africa marches to the rhythm of her own drum. She doesn’t necessarily follow typical global trends and when she does, it happens over time and at her own pace. As the world’s second largest continent out of seven after Asia, she covers 20% of the Earth’s total land area and is home to 16% of its population. She is blessed with numerous natural resources ranging from precious gems and metals to raw oil and petroleum reserves as well as unrivaled agricultural land, yet she remains an interesting and ambiguous dichotomy of extreme financial wealth and poverty with a somewhat sedentary middle emerging market. Despite these riches, she accounts for a pitiful 1% of total worldwide wealth.

Almost all of her 54 countries remain wracked by inequality fueled , it would seem, by ongoing territorial and tribal warring, chronic illness, poor sustainable food security measures, the inability to overcome a history of common wealth invasion, lackluster financial governance and management as well as insurmountable global financial deficits. With the ongoing messaging of the emergence of the African Renaissance, which was coined as long ago as 1946, she remains a land filled with potential yet wracked by poverty.

It is said that Africa marches to the rhythm of her own drum. She doesn’t necessarily follow typical global trends and when she does, it happens over time and at her own pace. As the world’s second largest continent out of seven after Asia, she covers 20% of the Earth’s total land area and is home to 16% of its population. She is blessed with numerous natural resources ranging from precious gems and metals to raw oil and petroleum reserves as well as unrivaled agricultural land, yet she remains an interesting and ambiguous dichotomy of extreme financial wealth and poverty with a somewhat sedentary middle emerging market. Despite these riches, she accounts for a pitiful 1% of total worldwide wealth.

Almost all of her 54 countries remain wracked by inequality fueled , it would seem, by ongoing territorial and tribal warring, chronic illness, poor sustainable food security measures, the inability to overcome a history of common wealth invasion, lackluster financial governance and management as well as insurmountable global financial deficits. With the ongoing messaging of the emergence of the African Renaissance, which was coined as long ago as 1946, she remains a land filled with potential yet wracked by poverty.

Albert Einstein said it best, “Every problem is an opportunity to invent a new possibility.” With that in mind, could this be a hallmark of opportunity for the emergence of the Family Office in Africa?

The Importance of Africa Time

The question remains, is Africa a land of opportunity for Family Offices? The short answer is Yes, opportunities exist and have the potential not only to thrive but bring with them extreme and rapid economic growth.

However, the Family Office ecosystem in Africa remains largely undeveloped and is expected to emerge over time. Africa time. And, nobody is willing to hedge their bets as to when, although tentative estimations are closer to 2030 than not. Wealth distribution statistics are a great starting point when analyzing the fascinating investing conundrum Africa presents. This would appear to be the largest hurdle to its development.

Wealth Distribution Statistics

According to the latest statistics presented by the Africa Wealth Report in October 2019, 42% of the continent’s $2.2 trillion wealth is held by individuals. To break it down further, 140,000 HNWIs with net assets comprising $1 million or more call Africa home. There are approximately 6,900 multi-millionaires living on the continent, each with net assets of $10 million or more. She is home to around 310 centi-millionaires each with net assets of $100 million or more.

While Africa is home to 23 billionaires with net assets of $1 billion or more, there are 2,095 globally. This is in comparison to the average of $1,900 per capita for individuals living in Africa. Even the richest African cities are home to great numbers of people living in poverty.

Wealth distribution remains the largest hurdle to the emergence of Family Offices as well as several other extraneous circumstances.

For some perspective, it would be interesting to note that Africa’s landmass alone could comfortably house some of the largest financial superpowers of the world including the whole of China Part 1 and China Part 2, Japan, The UK, Ireland, The USA, Spain, Portugal, Belgium, The Netherlands, France, Germany, Eastern Europe, Switzerland with enough room for Italy (for tourism purposes of course) and bountiful breathing room for borders between the aforementioned countries.

Clarifying Misconception

The combined wealth by Africa has risen by some 14% during the last ten years yet remains remarkably similar to statistical studies conducted in 2017. According to the Council on Foreign Regulations, growth has been stymied by relatively weak economic performances in South Africa, Nigeria, and Egypt, the continents current financial powerhouses. But with such a low starting base, any growth of any sort is notable.

Private Wealth Holding Companies are expected to take traction as growth emerges over time. Economic growth is expected to be higher than other emerging markets such as that of the BRICs (Brazil, Russia, India and China) as well as Indonesia.

The assumption is because Africa is a landmass, she is one investment region. And therein lies the correction. Africa like Asia has numerous investment regions. Nine to be exact.

Six of The Best

Interestingly, the six wealthiest cities are

  1. Johannesburg
  2. Cape Town
  3. Cairo
  4. Lagos
  5. Durban
  6. Nairobi.

These are defined as total individual private wealth including equities, real estate and businesses less liabilities.

South Africa now supersedes Nigeria as the continent’s wealthiest country. International, non-African produced companies and brands are known to capitalize on the knowledge power of South Africa as a springboard into Africa’s potential for growth. It worked for the likes of Nicky Oppenheimer, Johann Rupert, Patrice Motsepe, Koos Bekker and Michiel le Roux. It is believed that South Africa also holds the most number of Family Offices.

Nigeria’ wealth is, for the most part attributed to its oil reserves and its role as being the the financial economic hub of Eastern Africa.

The highly centralized economy of Northern Africa’s Egypt, home to Cairo on the banks of the Nile remains consistent in its growth thanks in part to its natural resources such as crude oil, cotton, textiles, metal, chemicals and agriculture as well as steady export streams. The predominant export markets include the United Arab Emirates, Italy, United States, United Kingdom, Turkey, Germany and India.

The Hurdles Explained

Given this burgeoning potential, one would expect to have seen the proliferation of the Family Office or at least the Multi-Family Offices. Yet the opposite holds true. Traction remains slow as Africa’s wealthy remain reticent to embrace the bountiful benefits presented by Family Office’s ability to preserve sustainable multi-generational wealth.

Nike Anani, a Nigerian-based family enterprise specialist, says that the hurdles to the emergence of Family Offices isn’t for lack of wanting or trying but rather due to more on-the-ground issues such as: liquidity and portfolio challenges with many investments tied-up in real estate; volatile, unpredictable and unstable business environments; a far larger nuclear family unit and mercurial definition of the concept or family; a disconnection from the global investment community and little in-depth understanding of Africa’s investment opportunities and challenges; many of Africa’s UHNWIs are first-generation resulting in succession and next-generation challenges; lackluster reputation management and representation of Africa on the global stage. Anani paints a bleak yet realistic picture of the grassroots challenges.

The Opportunities: Mauritius Residence and Citizenship by Investment

Two little water locked African islands namely the Seychelles and Mauritius are proving to be the exception to this rule. Mauritius, located just off the coast of the south east African coastal country of Mozambique is showing particular promise and could very well provide a blueprint for the emergence of Family Offices in Africa.

According to Henley and Partners, founders of the concept of residence and citizenship by investment which also produces the annual Passport Index, Mauritius has the power of its passport to thank for being one of the fastest-growing wealth markets anywhere.

It is exceptionally investment-friendly with agreeable comparable tax returns and remains a destination hotspot for further high-investment immigration potential. This can also largely be attributed to the power of holding Mauritian citizenship. Mauritian Passport holders have visa-free or visa on arrival access to 148 countries and territories, ranking the Mauritian passport 32nd overall globally and second in Africa after Seychelles in terms of travel freedom. The country’s economy is anticipated to catapult by 130% in the next ten years.

Mauritius seems to be basing its success on that of Malta through its own Permanent Residence Scheme. It asks carefully vetted foreign nationals to invest more than $500,000 into the Permanent Resident Investment Fund for a period of 10 years. Thereafter, investors are eligible for permanent residence, along with their spouse and children under 18 years of age. For children over 18, an additional deposit of $100,000 is required. It also requires foreign nationals to spend a certain amount of time in Mauritius and invest in certain community outreach programs which uplifts the entire country and its infrastructure. We can expect this country to lead the way regarding the emergence of Family Offices, who have the capacity to transform Africa to the powerhouse that she rightfully is.

“Family Offices in Africa have the potential to change the face of the continent. Africa abounds with opportunities and as this continent continues to take a more visible position on the world stage, the role of African Family Offices will become more prevalent.”
Anesu Bridget Mhlanga, CEO of an African-based Family Office

As the world moves through the linear economy and as Africa starts to embrace the cyclical economy, the fourth industrial revolution has also been repurposed. The new Purpose Driven Economy is what will spur on the healthy development of the Family ecosystem in Africa. And this starts with honesty and intentional generational investment that addresses what was previously referred to as the ‘softer issues’.

The sentiment is mirrored by Gareth Ackerman, CEO of Pick n’ Pay, one the top five retailers in Arica, who infers that Family Offices will proliferate in Africa once Purpose replaces Profit. Founded in 1967, the company provides employment to more than 150,000 people in seven African countries and continues to thrive.

“Our Family Office is relatively advanced by global standards, and interestingly, I am finding that many international offices are benchmarking themselves on what we do. We have successfully focused our Family Office on optimizing governance, paying special attention to soft factors as well as managing inter-generational challenges.”
Gareth Ackerman, CEO of Pick n’ Pay

Food for thought Mr Ackerman because therein lies a potential opportunity. Using tried-and-tested Family Office models not only to help build a thriving Family Office ecosystem in Africa but also to provide a structure on which to build success for the small and medium sized enterprises which abound in Africa too, for generations to come. Top down and bottom up with a longterm view.

About the Authors

Francois Botha

Simple Founder. Strategy Advisor

Francois believes that the next generation of family leaders need new, simple tools and trusted experts with a fresh outlook.

Connect with Francois Botha View Francois Botha Profile

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