Robust economy fuels Africa's millionaire club

27 August 2013
Nigeria is expected to create more USD millionaires over the next eight years than any other African country, according to UK-based New World Wealth. Africa's second largest economy will create 10,200 millionaires by the end of 2020, adding to its current crop of 15,900.

For now, South Africa sits on top of the millionaire list as it is already home to 48,800 millionaires, according to the report.

The South African economy has had its problems over the past few years, but it remains a magnet for entrepreneurs and will continue to remain a formidable financial, mining and industrial hub within the continent.

Egypt, currently devastated by political turmoil, is also home to 23,000 millionaires - the second largest in the continent after South Africa.

However, rapid wealth creation in Africa is likely to occur elsewhere. Kenya, for example, is expected to create 4,500 new millionaires by 2020 to reach 12,900, as the country's economy picks up pace. The East African state's GDP growth is already clocking around 7-8% on average and new investments and its aspirations to become a financial hub will only fuel the economy further.

Kenya's millionaire-creating ability will even exceed that of Angola, the third largest economy in the Sub-Saharan region. Angola is expected to be home to 10,800 millionaires by 2020, compared to its current number of 6,400.

Ethiopia, one of the fastest-growing economies in the continent, is expected to create 2,000 new millionaires by 2020, to add to its current crop of 2,700. The report dispels the notion of Ethiopia as drought-stricken country and also highlights the new centres of growth in Africa.

Ivory Coast, another seemingly impoverished state, is also expected to create a significant number of millionaires over the next eight years, taking the toll to 3,700 by 2020 from 2,100 millionaires currently.

"The broad picture emerging from the data is that Africa's economies have been expanding robustly and that poverty is coming down," said Shanta Devarajan, the World Bank's chief economist for Africa, who also recently conducted a new report on the country.

"At the same time, the aggregate numbers hide a great deal of diversity in economic growth and performance, even among Africa's faster growers," Devarajan said.

The World Bank study notes that African growth will be driven by increased investment and higher consumer spending. Foreign direct investment is expected to reach record levels of USD 54 billion by 2015.

While the extractive and agriculture sector will receive the majority of the investments, those in the minerals sector in Ghana, Guinea, Liberia, Nigeria and Sierra Leone will also help spread the wealth.

"Domestic private investment in the near term is expected to be supported by the interest rate cuts in the region in 2012," said the World Bank.

"Furthermore, in an environment of easy monetary policy in high-income countries, those with a stable macroeconomic environment and prudent fiscal policies could access international capital markets to finance their public infrastructure programs. So far, some 20 countries in the region have obtained international sovereign credit ratings. Angola, Kenya, Rwanda and Tanzania have all expressed interest in raising international bonds in the near term."

These developments will trickle into the wider economies and help generate wealth and entrepreneurship in the country.

A McKinsey Global Institute report estimated that, by 2020, Africa's GDP will collectively reach USD 2.6 trillion, with a consumer spending power of USD 1.4 trillion and discretionary income in more than 128 million households.

Last year, Africa led the world in terms of wealth creation with a 9.9% increase in high-net-worth individuals in the continent, according to Cap Gemini's benchmark report on millionaires.


Key African cities will be the engines of wealth creation. Cities such as Accra in Ghana, Nairobi in Kenya and Dar es Salaam in Tanzania, are expected see rapid increases.

Lagos in Nigeria will see 15,800 new millionaires by 2030, while Casablanca in Morocco and Luanda in Angola will also generate 3,800 new millionaires each.

For now, Johannesburg is the richest city in Africa, as it is home to 23,400 millionaires. Cairo, currently stricken by political turmoil, has the second largest concentration of millionaires with 12,300 million, with Lagos a distant third at 9,800 people with wealth exceeding six figures.

Johannesburg, Cairo and Lagos also have the three largest concentrations of multi-millionaires - or high-net-worth individuals. Not surprisingly, some of Africa's richest people reside in these locations. The latest Forbes list of African billionaires show the majority of the wealthiest people live in either South Africa, Nigeria or Egypt.

The Africa growth story has many facets and the rise of wealth shows that economic reforms and investments are spreading across the continent. Yet, while wealth is rising, governments will do well to ensure that all Africans are included in this growth story.

"Africa's human development and poverty reduction over the past 15 years has made progress, but it is uneven," the World Bank said. "Moreover, converting resource wealth into human welfare has proven particularly challenging, despite fast growth in these countries. Given the spate of recent mineral discoveries and Africa's high levels of initial inequality, concerted efforts will be needed to enhance Africa's growth elasticity of poverty."

© 2013


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