As Africa opens its markets to the world, flaunts its opportunities and its innovations, the continent is becoming an increasingly attractive investment destination. This combination has seen a steady rise in personal wealth, but wealth management services haven’t always kept up.
The reality is that Africa’s high-net-worth (HNW) individuals are critically underserviced when it comes to securing their wealth, says Anthony Palmer, Group Commercial Director at Carrick Wealth.
“There are a lot of people who are earning well and accumulating a lot of wealth, but have never had a conversation with a professional about investments,” explains Palmer. He explains that, historically, Africa’s wealthy have seen international bankers jetting into a country to hold meetings with a handful of individuals. These ‘briefcase advisors’ are often not regulated to advise people in these specific jurisdictions, but have ‘credibility’ because they represent big European financial institutions.
Understanding the landscape
What these advisors are not doing, however, is considering the risks and complexities of African markets. Each country in Africa is unique in terms of possibilities and the potential threats to investors, be they economic, political and/or social.
How wealthy African clients should be advised has to be underpinned by a thorough understanding of these risks, believes Palmer. He stresses that the political, economic, legal, regulatory, taxation and foreign exchange frameworks must be assessed at a country-specific level.
Consider for a moment the case of Malawi and a number of other countries, which have a severe shortage of foreign currency reserves. Or Zambia and its debt issues. That countries such as Nigeria, Kenya and Mozambique are dealing with the threat of terrorism, while Ethiopia is in the midst of a humanitarian crisis as the government clamps down on civilians in the Tigray region. These are just a few examples of the myriad risks impacting different countries across the continent.
Plus there are regulatory issues to consider. For example, South Africa has very strict laws around retirement savings, whereas other African countries are far more relaxed in this regard, meaning their citizens are able to invest a higher percentage into international retirement funds which are not available to South Africans. This is hugely advantageous to Africans based outside of South Africa.
To better service this growing wealth community with boots-on-the-ground expertise and know-how, Carrick Wealth is committed to accelerated growth strategies across Africa. With offices in South Africa, Malawi, Mauritius and Zimbabwe, Carrick Wealth will be acquiring licences in five new jurisdictions in 2021 and has plans to ultimately expand into 17 additional African countries over the coming years.
Delivering on African needs
Although all 54 countries across the continent have specific challenges and requirements which must be factored into a sustainable and solid wealth management plan, Palmer notes the needs of HNW individuals in Africa are fundamentally no different to those anywhere else in the world. While the nuances vary from region to region, people still need to save for their children’s education, prepare for retirement, protect and preserve their assets and ensure they have a succession plan in place for their personal wealth and their businesses.
Based on Carrick Wealth’s experience, the typical services which are in demand among Africa’s wealthy include:
- Hard currency savings plans
- Offshore lump sum investment and diversified portfolio management
- Retirement planning
- Speciality fiduciary guidance, where legacy funds are secured in offshore trusts
- Foreign exchange expertise
- Offshore property investments
- Risk planning such as hard currency life insurance products.
African, and here to stay
Finally, Palmer stresses that the importance of African financial services firms providing services in Africa goes beyond merely understanding the continent’s multiple jurisdictions and their risks, it is also about ensuring long-term sustainability.
“A lot of international institutions are pulling out of Africa,” he explains. “Zimbabwe was a prime example, where many clients know first-hand what it feels like to receive an email saying ‘we are not allowed to serve you anymore, and you have a certain number of days to move your money elsewhere’.”
Africa-based firms that see the continent as home, rather than a destination at the end of a runway, will not do this. Rather, says Palmer: “We are invested in the continent, so we’ll strive to find workable solutions which are to the benefit of our clients.”