Every year African nations lose a large chunk of their high-net-worth individuals to the warm embrace of emigration, a new report has shown.
This is according to a recent report by Henley & Partners that shed light on the significant emigration of high-net-worth individuals from African nations, highlighting a recurring trend that deprives these countries of vital wealth and potential growth.
- “African nations consistently lose large numbers of high-net-worth individuals annually due to emigration. This prevents them from reaching their full potential as much of their hard-earned wealth growth is eroded.”
While the migration of affluent individuals to a country can contribute to its economic prosperity, the reverse scenario, where wealth migrates away from a nation, leads to the erosion of an economic strength. Identifying key factors driving wealth migration and emigration, the report emphasizes the pivotal role of safety and security considerations in shaping such decisions.
According to the report, the safety levels within a country and the efficiency of local law enforcement agencies are paramount in fostering long-term wealth growth over extended periods, spanning more than five decades. However, the report notes that this crucial aspect is often lacking in many African nations, thereby discouraging the retention of high-net-worth individuals and impeding economic progress.
- “The safety levels in a country and the efficiency of local police are among the most critical factors in encouraging long-term wealth growth over a 50+ year period. Yet, this does not apply for most countries on the continent.”
The optics
There is also a concerning trend of African nations often ranking among the most dangerous countries globally, particularly in terms of key metrics such as murder rates, women’s safety, and child safety.
- “ African countries also perform poorly on the Global Peace Index. According to New World Wealth’s in-house Africa Safety Index for 2023, Mauritius ranks as the safest country in Africa, followed by Namibia, Botswana, and Morocco,” an excerpt from the report reveals.
In addition to safety considerations, the growth of key sectors also plays a significant role in wealth creation within African nations. Sectors that generate foreign exchange such as hi-tech, manufacturing, mining, and tourism are crucial drivers of economic prosperity.
However, many African countries face challenges in these areas, particularly in hi-tech and manufacturing, and instead, rely heavily on sectors like mining, agriculture, and tourism to bolster their foreign exchange reserves.
Mauritius stands out as an exception in this regard, as it has significant foreign exchange generation through offshore banking and real estate ventures. This diversification of revenue streams has enabled Mauritius to mitigate some of the challenges faced by other African nations reliant on traditional sectors for foreign exchange earnings.
What we know
The significance of competitive tax rates cannot be overstated in attracting wealthy individuals worldwide. Nations like the UAE, Monaco, and Singapore serve as prime examples of how favorable tax environments can incentivize wealth creation, boasting exceptionally low tax rates. In Africa, Mauritius and Namibia emerge as notable examples, as both countries have no capital gains tax or estate duty, and they offer residence by investment programs.
Furthermore, the presence of an efficient banking sector and robust stock market infrastructure plays a crucial role in encouraging individuals to invest and cultivate their wealth locally. South Africa exemplifies success in this regard, hosting one of the world’s top 20 stock exchanges, which provides ample opportunities for wealth accumulation and investment growth within the country.
“African nations must make their continent attractive to wealthy individuals and investors because that is the only way they can build wealth and achieve faster growth,* said Ukehie Obioma, a Lagos-based investment analyst.
