Economy
Kenya’s super-rich club shrinks on shilling slide
Thursday July 06 2023
The weaker Kenya shilling has raised the threshold for joining the country’s top one percent by net worth to Sh2.8 million. FILE PHOTO | POOL
The weaker Kenya shilling has raised the threshold for joining the country’s top one percent by net worth to Sh2.8 million from Sh2.16 million two years ago, locking out more people from the affluent class.
A wealth sizing model published by Knight Frank, as a follow-up to its Wealth Report 2023 released in March, puts the minimum net worth needed to join the top percentile in Kenya at $20,000, which is unchanged since the firm’s last similar analysis in 2021.
Read: Kenya’s super rich return offshore cash in rare move
Exchange rate movements in the intervening period have, however, diminished the shilling’s value against the dollar, as incomes for the bulk of the population have stagnated in a difficult economic environment.
The dollar, being the most widely used global currency, allows for cross-border comparison of wealth levels.
In July 2021, the shilling traded at an average of 107.95 units to the greenback, putting the one percent threshold in Kenya at Sh2.16 million.
At today’s exchange rate of 140.72 units, the value of $20,000 is Sh650,000 higher compared to 2021, at Sh2.81 million.
But this net worth threshold, which is already out of the reach of many Kenyans aside from prosperous professionals and entrepreneurs, demonstrates the country’s higher poverty levels and wealth inequality, relative to global standards to join the most affluent class.
It falls well below the $1 million wealth level needed to be considered a high net worth individual (HNWI).
Only a few economies around the world such as Monaco, Switzerland, the US, the UK and the UAE where the top one percent have a minimum wealth threshold of at least $1 million.
“The one percent rose to totemic status during the global financial crisis. However, the wealth needed to join their ranks varies sharply from country to country. While ‘the one percent’ might be thought of as the epitome of excess, the price of access to the club falls well short of our definition of an ultra-high net worth individual– somebody whose net wealth exceeds $30 million,” said Knight Frank.
On a comparative basis, one would need $109,000 (Sh15.4 million) to join the top one percent in South Africa, more than five times Kenya’s admission net worth.
Monaco, a favourite playground for the super-rich, has the highest admission price of one percent of $12.4 million (Sh1.7 billion).
Switzerland, known for providing banking services to the global elite, follows with a threshold of $6.6 million (Sh929 million). Australia is third with an entry level of $5.5 million (Sh774 million).
The study describes wealth as the net assets of a person that includes property, cash, equities, and business interests less any liabilities like loans.
In Kenya, a Sh2.8 million net worth is inadequate to afford a middle-class lifestyle in major cities like Nairobi, which is traditionally associated with home ownership and consumption of private education and transport, among other services.
For the majority of urban dwellers who rely on pay cheques, joining the ranks of the wealthy is difficult, with a majority trapped in low-paying jobs whose wages are usually gobbled up by living expenses and supporting dependants.
Official data show that 88 percent of Kenya’s 2.9 million salaried workers earn below Sh100,000 per month, with 10 percent taking home below Sh30,000 every month.
In terms of the super-rich, the Knight Frank report put the number of Kenyan millionaires with a net worth of between $1 million (Sh140.7 million) and $30 million (Sh4.2 billion) at 2,471 at the end of last year, with less than 50 individuals deemed to hold wealth above $30 million.
The firm has revised this number downwards from the estimates carried in previous editions of its Wealth Report, signalling either a change in methodology of calculating wealth, or access to new information on Kenyans’ holdings.
In March, Knight Frank released the 2023 Wealth Report without disclosing the millionaire count, saying that it was waiting for information regarding the specifics of the numbers from government sources involved in the process.
In the previous year, 2,437 individuals were classified as being high net worth, a downward revision from the estimate of 3,362 that had been indicated in the 2022 edition of the report.
Knight Frank tracks the wealthy through established financial sector units like banks, wealth advisers and asset managers, meaning that it does not capture super-rich people with no links to formal wealth managers.
Read: Weak shilling, global rate rises cost Kenya Sh27bn
Local financial institutions which participated in the 2023 survey include NCBA, Absa Kenya, Stanbic Bank Kenya, insurers ICEA Lion and CIC Insurance, Genghis Capital, Nabo Capital and Dry Associates.
