A Kenyan joins the list of ultra-rich in five years

Only one individual in more than five years has managed to join a small group of 15 people in Kenya who have accumulated liquid and investable wealth of more than $100 million (Sh13.5 billion) each.

It was only last year that the anonymous individual joined the ranks of the exclusive ultra-rich individuals, bringing the number of centidolar millionaires in Kenya to 16.

Another 7,200 are dollar millionaires, according to a report recently published by international wealth advisory firm Henley & Partners in collaboration with global wealth intelligence partner New World Wealth.

The survey shows the small group has remained at 15 for nearly half a decade since companies began tracking the wealth of the super-rich in 2013 in a country of more than 50 million people.

Collectively, the 16 centidol millionaires alone possess wealth exceeding a staggering 216 billion shillings, about 1.4 per cent of GDP, highlighting the huge inequality between the rich and the poor.

While the report did not reveal the identity of the 16 people, previous surveys show that the list is dominated by people from prominent political families and tycoons with strong interest in major sectors of the economy, including banking, construction, real estate and manufacturing.

In 2023, the number of dollar millionaires fell sharply, with some 1,300 Kenyans falling off the list from a peak of 8,500 in 2021, underscoring not only the difficulty of joining the super-rich but also of staying there.

This is because as the wealth of these people is mainly measured in Kenyan shillings, it is reduced when converted to dollars due to the annual depreciation of the Kenyan shilling against the dollar.

According to the charity Oxfam International, the number of super-rich in Kenya is one of the fastest growing in the world. It is predicted that the number of dollar millionaires will grow rapidly over the next 10 years, and that 7,500 new millionaires will be created.

“While this minority of super-rich Kenyans accumulate wealth and income, the fruits of economic growth do not reach the poorest. The rich are pocketing most of the benefits, while millions of people at the bottom are left behind,” says Oxfam.

Wealth Management

The gap between rich and poor in Kenya has steadily increased in recent years, making it an uphill task for low-income people to catch up with their well-off counterparts.

In 2021, for example, this gap increased to 38.9 percent, up from 35.8 percent in 2020, according to the Kenya National Bureau of Statistics (KNBS) Gini coefficient released last year.

The measure varies from zero percent, when the two groups are perfectly equal, to 100 percent, in the most unequal distribution of income.

“Overall, the poorest quintile represents 7.4 percent of total consumption, while the richest quintile represents 42.2 percent of consumption, implying significant disparities in well-being,” the study said.

It is this growing accumulation of wealth by the wealthy that is prompting banks to increasingly establish wealth management subsidiaries to serve the investment needs of the super-rich.

This makes Kenya one of the most income unequal countries in the world, according to the World Bank.

According to the global lender’s ranking, South Africa has the largest wealth disparity in the world at 63 percent, followed by Namibia (59.1 percent), Colombia (54.8 percent), Eswatini (54.6 percent) and Belize (53.3 percent).

While income inequality tracks the money people earn, wealth inequality, on the other hand, includes not only income but also the value of bank accounts, stocks and investments, homes, and personal possessions. such as cars, jewelry, works of art and other valuables.

health tax

Oxfam has called for drastic reforms by the Kenyan government to reduce the concentration of wealth in the hands of a few people. It has recommended the review of large incentives, such as tax exemptions and exemptions, as well as subsidies given to some large companies, which are borne by the poor majority in the form of taxes.

“They should focus on property taxes, land ownership, income derived from land ownership, personal income tax (dividends, interest and capital gains), inheritance and gift taxes,” Oxfam said. .

President William Ruto has also in the past joined the push to introduce a wealth tax for tycoons and high earners to make them contribute more to the country’s income.

“The economic principles of equitable taxation require that the tax burden reflects the ability to pay. The best way to achieve this is through a hierarchy that taxes wealth, consumption, income and trade in that order of preference. Our tax regime is currently far below this,” Dr Ruto said in his maiden speech to Parliament in September 2022.

In another report published in 2022, Oxfam estimated that Kenya would earn $900 million (Sh121.5 billion) annually if it introduced a two percent wealth tax on people with a net worth of $5 million (Sh675 million). shillings), three percent over those with a net worth of $5 million (675 million shillings). 50 million dollars (6.75 billion shillings) and five per cent for those who own assets over 1 billion dollars (135 billion shillings).

As part of reforms to squeeze more taxes from high earners, Dr Ruto increased pay as you earn (PAYE) charged to this group last year through the 2023 Finance Bill.

The law increased PAYE for those earning between Sh500,000 and Sh800,000 per month from 30 to 32.5 per cent.

Meanwhile, PAYE for those earning more than Sh800,000 monthly was also raised from 30 to 35 per cent.

But analysts say the rich are coming up with new ways to preserve their wealth. The risk facing the rich is the volatility of the Kenyan shilling, which is forcing the super-rich to shift their investments into foreign currency assets to preserve their wealth.

“We have seen a significant shift by investors from shilling assets to foreign currency assets,” said Sunil Sanger, managing director of wealth advisory firm Orion Advisory Services.

Furthermore, the dwindling number of dollar millionaires is not just a Kenyan phenomenon, as Africa as a whole has lost eight percent of its super-rich in the last decade alone, according to the Henley & Partners report.

This has been attributed to the migration of the continent’s wealthy to other destinations around the world, such as North America, Europe and the Middle East, which offer them better prospects, especially ample opportunities to grow their wealth.

But the concentration of wealth among a few thousand people stands in stark contrast to the rest of Kenya’s population, where five in 13 people live in poverty, underpinning the vast wealth divide.

The incidence of poverty in Kenya is especially pronounced in rural areas, where two in five people live in poverty compared to two in six in urban areas, according to the Kenya Poverty Report released by KNBS in June. from last year.

Some 2,879,000 people were classified as living in extreme poverty, even though around 30 percent of the country’s population cannot meet their food needs.

But it has become much more difficult for ordinary Kenyans to escape the web of poverty amid high unemployment, which has dashed the hopes of thousands of graduates to spend a fortune to get an education.

At the same time, the cost of living is rising rapidly amid a tax frenzy by the government seeking to finance growing budget pressures, especially repaying public debt and a growing wage bill.