Wealthy Kenyans returned billions of shillings to the country to escape economic turmoil in Europe and the US, shifting their cash to local government bonds and luxury real estate. A majority of Kenya’s super-rich put their money in government bonds and properties targeting residential and retail clients, according to the 2023 “Wealth Report” compiled by luxury property firm Knight Frank.
They moved their cash from the US, the EU, and China whose economies are slowing down simultaneously, with the IMF expecting a third of the global economy to be hit by recession this year.
High-net-worth Kenyans have traditionally stashed wealth abroad to either escape the taxman’s scrutiny or to spread their risks by investing in the more politically and economically stable Western democracies. But this practice has been upended by sluggish growth in the west following the continuing drag from the war in Ukraine as well as inflationary pressures and interest rate hikes by major central banks.
For the wealthy in Kenya, the flight from abroad was most pronounced in the property sector, where they reduced the share of their portfolio held outside the country from 19 percent at the beginning of last year to 11 percent by the end of December.
In 2022, the rich had 40 percent of their wealth in commercial property—mainly retail and prime residential rental segments held either directly, through funds, or in REITs. They have also continued to hold onto land for development purposes, riding on the sustained appreciation of land prices in the country.
Bonds accounted for 26 percent of their holdings, relegating equities to just 18 percent of their portfolios. Government bonds in Kenya have provided investors with insurance against the capital erosion witnessed in other investment segments, in particular equities—which has seen loss of billions of shillings in paper in the wake of foreign investors selling key stocks at the Nairobi bourse.
With returns of between 12.5 percent and 14 percent, the bonds comfortably beat the average rate of inflation of 7.6 percent in 2022, thus protecting wealth from erosion in real terms.
This focus on local investments also prompted fewer HNWIs seeking second passports through investment visas in pursuit of quality living and investments. Kenyans have since 2010 been allowed to hold dual citizenship with the promulgation of the new Constitution.
Those seeking a second passport or new nationality normally do it to access better investment opportunities, healthcare, and quality education overseas.
In addition to the traditional investments, the wealthy have also been eyeing niche products such as jewelry, classical cars, and art as a store of value. Half of them have invested in classic cars, while 45 percent have put part of their money in jewelry.
Art (40 percent), watches, furniture (35 percent), and rare whisky (30 percent) are the other alternative investment options that the wealthy have been exploring in the country.
Some of the younger members of the high-net-worth club have also been investing in digital assets such as non-fungible tokens (NFTs) and digital currencies, but the amounts being pushed into this segment remain relatively low. Knight Frank tracks the wealthy through established financial sector units like banks, wealth advisors, and asset managers, meaning that it does not capture super-rich people with no links to formal wealth managers.
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.