On Thursday 18 July, Robert Moore, Jersey Finance’s Director – UK hosted a breakfast roundtable at the offices of Buzzacott’s attended by a small group of invited London-based intermediaries. Focussed on private client financial services in Africa, the event began with an update from Faizal Bhana, Director – Middle East, Africa and India, followed by an insightful roundtable discussion on trends and key themes in the region.
Africa’s wealth management landscape is evolving, with a growing number of high-net-worth individuals seeking opportunities for wealth preservation. In East Africa, the focus on next generation wealth management is becoming increasingly significant unveiling opportunities for wealth advisers in the UK and Jersey.
Kenya’s Progress and Challenges
Faizal’s update on East Africa began with a perspective on dramatic positive changes in Kenya’s economy. Prior to oppositions, Kenya was one of the few African economies that was showing positive change, with unemployment stabilising and the Kenya shilling currency gain against the dollar. The restructuring of their government’s Eurobond was a pivotal move, especially considering that in November 2023, Kenya was on the brink of a sovereign default.
President William Ruto’s state visit to the USA marked Kenya’s membership to the North Atlantic Treaty Organisation (Nato), indicating a growing positive relationship between the USA and Kenya.
Family Wealth and Business Dynamics in East Africa
Currently, there is a huge volume of activity and engagement in East Africa’s family business space, extending to the fourth generation. As sophistication grows and the scale and complexity of family affairs increase, Private Trust Companies (PTC) are emerging as a practical and attractive option offering a tailored approach to wealth management that aligns with families evolving needs.
From a family business perspective, families are establishing or relocating their holding structures to Jersey as one of few jurisdictions where the Kenya Revenue Authority (KRA) permits individual directors to act independently.
From an African perspective, the Pillar Two framework does not have a significant impact on family offices or business; it primarily affects corporate entities seeking to do business in multiple jurisdictions. Of vital importance to East African families and businesses is security and confidentiality, which is why Jersey’s political and economic stability is key to our offering in the region.
Insights into East Africa’s Fund Market
While East Africa is seeing substantial activity in the funds space, especially with sovereign wealth inflows from the Middle and Far East as well as investments from the UK the most significant engagement is within the family office sector.
The Jersey Private Fund, a regime which allows private institutions to co-invest, is a success story in the region. Kenya has witnessed an influx of Shari’a-compliant funds, and this type of investment will be a key focus for the rest of the year.
Succession Planning in East Africa
The region is experiencing a shift in wealth to the younger generation, who are actively engaging in conversations about their future roles, duties and what is expected of them.
There is ‘a change’ in conversations being held with HNW and UHNW families in East Africa, particularly with the next generation who are less interested in leading the family business or do not have sufficient skills to do so. One suggested reason for this decrease in interest and lack of skills was the fact that next generation in East African family businesses are being educated outside of the region. It is these circumstances which have enabled an increase in the use of PTCs by East African families and a shift towards head quartering businesses outside their home country.
With an increase in cost of living and market volatility, it is leaving the next generation with little opportunity to make an impact with their family wealth. Differences between generations are clear: the new or next generation are having to work harder to achieve the same level of financial success of their parents.
Strengthening Links: East Africa and the Middle East
Two key points were made when discussing the relationship between East Africa and the Middle East:
- Alongside China, the Middle East remains one of the largest lenders to the region –in the first half of 2024, the GCC lent more than US$53 billion to East African economies.
- The United Arab Emirates’ ambition as a region is to invest heavily which aligns with Africa’s strategic investment in infrastructure, food, mining and oil.