There have been many misconceptions about Africa and its economic potential.
So much so that the continent’s general narrative has been one of poverty, war, and other mishaps.
Those who know better have created fortunes and have grown the global economy with fierce tenacity.
Henley & Partners, the world leader in investment migration, has captured the continent’s potential for growth and development in their latest Africa Wealth Report.
The document, which is a first, has taken into cognizance and by country trends in private wealth accumulation and its ability to create a ripple effect across Africa and beyond.
It also highlights the growth of private wealth on African soil.
We caught up with Dominic Volek, the group head of private clients at Henley & Partners.
He shared his insights and thoughts on wealth in Africa, investment migration, and more.
So, if you’re either looking for a second passport, residency, or the next frontier, this interview is for you!
Even if you aren’t, the issues addressed by Mr. Volek have global undertones.
This time, from an African perspective, of course.
Dominic Volek, Group Head of Private Clients at Henley & Partners
What was the motivation for the writing of the Henley and Partners recent Africa Wealth report?
There is a lack of public information on wealth and millionaire trends in Africa, and we wanted to fill that gap.
Expert commentators provide analysis of the data to highlight the prevailing trends driving the creation, flow, and preservation of capital across the continent.
Africa is home to some of the world’s fastest growing markets, so knowing where affluent individuals live, understanding their spending habits, and being aware of their preferences are all critically important to the providers of wealth management and luxury services in Africa and globally.
Please, can you tell us about Africa’s private wealth in terms of numbers and its growth over the next decade?
The total private wealth currently held on the African continent is currently USD 2.1 trillion and is expected to rise by 38% over the next 10 years, while Africa’s ‘Big 5’ private wealth markets together account for over 50% of the continent’s total private wealth.
There are currently 136,000 millionaires (HNWIs) living in Africa, along with 305 centi-millionaires and 21 billionaires (as at December 2021).
In US$ terms, total wealth held in Africa has fallen by 7% over the past decade.
Performance was constrained by poor returns in the three largest African markets, namely: South Africa, Egypt and Nigeria.
With so much capital in the hands of a few private individuals what are the factors that have led to the wide disparity between the rich and the poor?
This is a global phenomenon. Millionaires in Africa account for around 40% of the continent’s total private wealth, which is in line with global averages.
So, the wealth disparity in Africa is actually quite similar to the global average.
As Vusi Thembekwayo, Venture capitalist, global business speaker, author and CEO, MyGrowthFund Venture Partners, points out in his commentary in the report, “What is exciting about the prospects for wealth in future for the African continent is the diversification of the sources of creating wealth. The new economies that are built on technologies, driving inclusion and the now in-vogue environmental, social and corporate governance criteria are attracting new capital into the fold and creating more liquidity in the secondary capital markets. Over the next decade, the trend of accumulating wealth will continue, but the unanswered question is whether this growth will be more evenly spread and begin to reduce inequality”.
Which countries top the list of the biggest wealth markets in Africa and why?
The “Big 5” wealth markets in Africa are: South Africa, Egypt, Nigeria, Morocco and Kenya – together these five countries account for over 50% of Africa’s total wealth.
All of these countries have well-developed banking systems and relatively strong financial services sectors. Most are also strong in real estate, tech & telecoms, tourism and basic materials.
How have events such as the COVID-19 pandemic and the Russia-Ukraine conflict affected wealh generation across the board?
Apart from the human cost, the coronavirus outbreak has also had a severe economic impact on the continent.
The travel, hospitality and entertainment sectors been most heavily impacted.
This includes airlines, restaurants, hotels, casinos, safari lodges and theatres. HNWIs involved in these sectors have lost a large portion of their wealth over the past two years.
In terms of the Russia-Ukraine conflict: the current rise in global commodity prices should boost wealth growth in commodity rich African countries such as South Africa, Nigeria, Zambia, DRC and Angola.
Please, can you tell us about the perception of African and non-western passports according to the Henley Passport Index?
Over the past decade and a half, travel freedom has expanded significantly.
According to historical data from the Henley Passport Index, a ranking of all the world’s passports according to the number of destinations their holders can access without a prior visa, which is based on exclusive data from the International Air Transport Association, in 2006 an individual could, on average, visit 57 countries without a short-term visa.
Today that number has risen to 107.
But this overall increase masks an enormous divide between countries in the global north and those in the global south, especially in Africa.
For example, citizens of Japan, Sweden, and the USA can visit more than 180 countries without a visa. On the other hand, citizens of Angola and Cameroon.
The Seychelles, Mauritius and South Africa have the strongest passports on the continent.
According to exclusive research commissioned by Henley & Partners into the determinants of passport power, wealthier countries’ gains in travel freedom have come at the expense of poorer countries, which have experienced mounting barriers to entry in recent years.
Using 17 years’ worth of data from the Henley Passport Index, political scientists Ugur Altundal and Dr. Omer Zarpli compared visa-free scores with World Bank statistics on GDP and fragility, as well as with data collected by the Varieties of Democracy (V-Dem) project at the University of Gothenburg.
The study shows that while citizens of upper middle- and high-income countries have achieved visa-free access to most nations, citizens of lower middle- and low-income countries, as well as ones with higher fragility scores, enjoy far less travel freedom because they are deemed to be high-risk when it comes to security, asylum, and overstay.
Interestingly, however, they found that while the world’s democracies on average have higher visa-free scores, both democratic and authoritarian regimes have increased their visa-free scores since 2006, at somewhat similar rates.
How has this perception affected the investment migration industry from an African and non-western perspective?
Investment migration has been widely embraced by African investors and entrepreneurs as a mechanism to improve their global mobility and access opportunities to grow their businesses and provide great optionality to their families in terms of where they can live, study, invest and retire.
In addition to the traditional benefits of enhanced global mobility, residence and citizenship by investment programs offer a proven risk mitigation and growth diversification strategy in terms of wealth and legacy planning with the added lifestyle advantage of domicile optionality.
This is true for African investors but also HNWIs worldwide.
Please, can you tell us about inquiries from African countries regarding investment migration?
We saw a modest overall increase of 18% in enquiries from Africans seeking alternative residence and/or citizenship over the past 12 months.
But by early February 2022, we had already received over 11% of total 2021 enquiries, a trend we predict will continue this year as wealthy investors scramble to diversify their domiciles at the same time as their investment portfolios in a bid to secure greater global access and optionality as a hedge against unrelenting market and political volatility.
On the supply side, the Mauritius Residence by Investment Program is gaining traction as an excellent choice for both business owners and real estate investors, and there are reports of other African countries, such as Kenya, planning to launch investment migration programs.
How are residence and citizenship investment programs a core part of wealth management tools?
Savvy investors are embracing investment migration – the newest option in the safe-haven asset class – as it unlocks novel risk management and optimization options for the HNW portfolio.
The current market turbulence and increased political risks – not least also connected to the Coronavirus outbreak – is accelerating the momentum for wealthy individuals to include alternative residence and citizenship as a necessary component of their portfolios – one that can expand their footprints and market reach, offer them greater mobility and additional opportunities, and protect them from the dangers of volatile markets and political instability.
Over 100 countries have some form of investment migration legislation in place, and there are over 60 different programs active around the world.
In terms of the industry’s size, citizenship-by-investment contributes about USD 3 billion a year to the global economy, while the residence-by-investment sector contributes about USD 15 billion a year, putting the industry as a whole at around USD 18 billion.
Increasing demand indicates that the industry will soon reach USD 20 billion annually.
Why is private wealth research critical to regional economic growth?
Wealth research helps to provide a level of transparency that appeals to investors.
How does Henley & Partners assist clients with investment migration solutions?
Our specialist private client advisors guide hundreds of investors and entrepreneurs and their families each year, providing expert advice on the best residence and citizenship by investment solutions available to them worldwide.
Henley & Partners’ successful government advisory practice assists sovereign states in developing and implementing residence and citizenship by investment programs to attract talent, entrepreneurs, and foreign direct investment to their shores.
Our exceptional track record is a testament to our extensive experience and expertise as the pioneer and leader of the investment migration industry.
How has the emergence of new technologies such as cryptocurrencies, blockchain technology, and so on affected the investment migration industry?
The rise of cryptocurrencies has seen a new class of millionaires emerge, and we find many investors seeking out the most tax-friendly jurisdictions to realize their newfound gains.
As our Best Investment Migration Real Estate Index revealed, many countries that host investment migration programs are crypto-friendly, and this is fueling interest and demand among crypto investors.
This is in addition to the increasing appreciation of the necessity for domicile diversification, highlighted during the pandemic, which has generated greater interest in alternative asset classes such as residence and citizenship by investment as well as cryptocurrencies.
What are the best compliance practices that have been implemented by Henley & Partners and its partner countries to prevent the use of corrupt monies and the proceeds of crime in investment migration?
Henley & Partners is fully aware of the potential inherent risks in handling client applications for residence and citizenship.
Although this risk is much smaller than in other areas where sovereign states grant immigration and citizenship statuses (a fact which is very important to point out in the context), we are aware of the sensitivity when it involves prominent or very wealthy people, or very rarely, controversial individuals among the tens of thousands of reputable entrepreneurs and investors from around the world that apply for these programs.
As such, we have invested significantly in creating a governance structure that is committed to the highest standards, with due diligence at its heart.
It must also be noted that it is ultimately the responsibility of the countries who offer investment migration programs to investigate and vet applicants.
As a private company, we are neither required by law to do so, nor do we have access to the same level of background information, contacts, or resources that government authorities have.
Even so, our stringent processes are well-documented and significantly more advanced that the majority of other investment migration firms, and they do regularly result in the rejection of potential clients.
A recent comprehensive study of Citizenship-by-Investment (CBI) and Residence-by-Investment (RBI) programs co-published by the Investment Migration Council and Thomson Reuters found that the majority of programs involve not one background check, but a series of comprehensive checks designed to determine the suitability of applicants for residence or citizenship.
The following four-tier, risk-based compliance system is typical of the industry, and was originally developed by Henley & Partners:
Tier 1: The use of Thomson Reuters World Check, INTERPOL’s Most Wanted list, the FBI Most Wanted Terrorist List, and the United Nations Al-Qaeda Sanctions List to scan the name of the applicant, his or her family members, and any businesses the applicant may be associated with.
Tier 2: The use of third-party due diligence service providers to conduct background due diligence on the principal applicant and associated family members.
Tier 3: Submission of the applicant’s names and other pertinent information to regional and international governmental partners.
Tier 4: A summary of the findings of the due diligence review and a recommendation to senior management.
How critical is investment migration for upward economic mobility for private wealth holders?
No matter how well or poorly a country is performing today, one thing has become very clear in our new Age of Uncertainty — governments and investors alike must focus on building resilience.
Preparing for the next shock is imperative, and one proven means of doing so is via investment migration, whereby investors can acquire and secure an alternative residence or second citizenship in a different jurisdiction in return for investing in a host country.
Last year was a record-breaking year for Henley & Partners, in which we assisted clients representing 79 different nationalities, including citizens of 15 African countries ranging from Algeria to South Africa, and from Liberia to Ethiopia.
As mentioned above, the appeal of investment migration for affluent families is truly universal due to its many benefits, ranging from domicile diversification to global mobility enhancement, to accessing world-class education and healthcare, to having a plan B in times of turmoil.
No matter where you were born, or where you currently reside, wealthy investors can futureproof themselves and their families for whatever might lie ahead through investment migration.
With a rise in anti-investment migration sentiment by several nations because of taxation and other issues, what are the best ways to maintain dual citizenship for private wealth holders?
Ordinarily, people invest in health insurance or prioritize job security as protection against the unpredictable but in the context of Covid-19 and now, war in Europe, health risks, and personal precariousness have presented themselves on a different and much larger scale.
Holding more than one citizenship, with the range of personal access rights each guarantees, is the ultimate asset in a time of crisis and volatility.
The country you are born in dramatically impacts the quality and extent of opportunities you will have in your life as well as the challenges you might face along the way.
As Financial Times columnist Simon Kuper bluntly put it in a recent article, “watching Ukrainians fleeing west rubs in the simple truth: your passport is your fate.”
In recent decades, there has been an increasing acceptance of dual citizenship worldwide, a phenomenon that mitigates against birthplace inequality.
By 2016, more than 80% of European and American countries had recognized and allowed dual citizenship.
The most recent country to approve a law allowing its nationals to hold dual citizenship, which entered into force on 1 April 2022, is Slovakia. A few leading Asian states — notably India, China, and Japan — continue to oppose dual citizenship to varying degrees, but most of the developed world has acknowledged it as a legitimate status to have.
While most of the developed world has moved past historical taboos associated with dual citizenship, the status is less normalized in Asia than elsewhere.
This is exemplified by three leading states — India, China, and Japan — still officially not allowing their citizens to take on additional nationalities.
As legal scholar Prof. Peter J. Spiro points out, however, even these three countries do not always enforce their prohibitions on dual citizenship. Japan, which is ostensibly the most ideologically opposed to dual citizenship, allows room for birth dual citizens until the age of 22, at which point individuals must choose one nationality in favor of the other.
Furthermore, while dual citizenship is banned in China, this ban is rarely enforced for its own sake but instead is used primarily as a tool to crack down on individuals attempting to use dual citizenship to avoid financial controls. India’s ban on dual citizenship is constitutional but the country nevertheless maintains a special category — Overseas Citizens of India (OCI) — for those of Indian origin.
However, in what is believed to be a political move, in 2021 the Indian government introduced legislation to reduce the rights of OCIs.
The world has moved on.
Even those countries that are most adamantly against dual citizenship appear ready to make certain pragmatic compromises in their application of such bans.
In increasing numbers, policymakers acknowledge that rather than presenting an obstacle, dual citizenship opens up possibilities for sovereign states and their citizens.
In today’s increasingly mobile and interconnected world, dual citizenship — already largely accepted as a global norm — is certainly here to stay.
In terms of private wealth, what are the common misconceptions that many people have about Africa?
Probably the biggest misconception is that there is not significant private wealth in Africa.
Take South Africa for instance.
Despite a tough past decade with private wealth held in the country declining by 12% from USD 739 billion in 2011 to USD 651 billion in 2021, South Africa still ranks 28th in the world when it comes to private wealth, ahead of major economies such as Argentina, Malaysia, Thailand, and Turkey.
Africa’s two wealthiest cities are in South Africa — Johannesburg is the wealthiest, with total private wealth of USD 239 billion, while Cape Town in second place has total private wealth of USD 131 billion.
Cairo follows closely behind with USD 128 billion in privately held wealth, and Lagos is in 4th position with USD 97 billion in private wealth.
South Africa is also home to the largest luxury market in Africa by revenue, followed by Kenya and Morocco.
South Africa’s luxury sector which includes exclusive hotels and lodges, cars, clothing and accessories, watches, private jets, and yachts generates revenue of approximately USD 2 billion a year, making it the largest on the continent by a substantial margin.
Much of this revenue is generated from the sale of luxury foreign brands such as Porsche and Louis Vuitton.
How has the investment migration industry changed since the onset and retreat of the COVID-19 pandemic?
There is no doubt that Covid has been and continues to be a major game changer and accelerator when it comes to the investment migration industry.
Henley & Partners has seen an 80% increase in enquiries for residence and citizenship by investment programs over the past 2 years as wealthy investors scrambled to diversify their domiciles at the same time as their investment portfolios in a bid to secure greater global access and optionality as a hedge against unrelenting market and political volatility.
Interest in investment migration as a pathway to secure alternative residency and citizenship grew significantly due to increased concerns for mobility and access to healthcare.
For instance, we have very good feedback from clients who had acquired residency rights through the Golden Residence Visas in Portugal, Greece, and Spain.
They were still able to travel to Europe even when embassies their own countries were not issuing tourist visas.
Further to this, our clients added that having mobility during the pandemic gave them greater peace of mind as they had access to world class healthcare in different jurisdictions.
We all remember how US and other foreign nationals were airlifted by their governments out of China at the outbreak of the pandemic, and only Australia temporary banned the return of their own nationals as part of their Covid-19 restrictions.
Having multiple citizenships also opens up the possibility of traveling to a wider range of destinations more easily. Even in the context of a pandemic, which led to unprecedented travel restrictions, having a second citizenship proved extremely valuable because individuals are usually permitted to return to the countries of which they are citizens.
This allowed dual citizens flexibility, even during travel bans.
In the post-pandemic landscape, international companies, entrepreneurs, and investors face new choices about where to locate their headquarters, executives, employees, and production, as well as themselves and their families.
All the key metrics of the past are in flux.
Corporate tax arbitrage is coming under fire, and a proposed new global flat tax will change the pecking order of advantageous jurisdictions.
And then of course there’s remote work, the now undeniable impact of climate change, fluctuating property markets, and healthcare security to name but a few key considerations.
The advancement of technology has given us greater choice when it comes to where we live, work, study, and invest, and enables us to be “present” in multiple locations at the same time.
There is a growing demand and desire for a global omnipresence.
Residence-by-investment programs can satisfy this demand, providing a channel for building a portfolio of multiple complementary residence and citizenship options to enable us to take advantage of opportunities as well as hedge against the volatility and risks that the new world order might bring.
How do you think the investment migration industry will change over the next decade?
We believe there will be a significant worldwide expansion of investment migration program options as it presents a “win-win” for both investors and sovereign states alike.
Countries have realized the importance of granting residence and citizenship to attract much-needed foreign direct investment, debt-free capital, talented entrepreneurs, and experienced investors.
And investors understand the benefits of investment migration as a mechanism to improve their global mobility and access opportunities to grow their businesses and provide great optionality to their families in terms of where they can live, study, invest and retire.
Combined with over a decade of growth in engagement from the buy and sell side, it’s fair to state that investment migration is now very much a mainstream (U)HNWI advisory service.
The value to both investors and their families, and sovereign states and their citizens, is very clear.
The volume has also now reached a critical mass where it is reasonable to suggest that investment migration is now a standard consideration for international HNWI who are looking to hedge volatility, create short term value as well as long term yield through enhanced global mobility.
As client advisors, we are now seen, treated, and understood as other professional advisors to HNWIs such as lawyers, bankers, wealth and investment management professionals.
Further accelerated by the need to alleviate the financial distress across the world following the Covid-19 pandemic, more and more countries are offering investment migration programs or introducing new options in order to attract highly sought-after talent and capital to support their economies and strengthen their ‘sovereign equity’ (which is a term coined by Henley & Partners to describe how investment migration has the ability to endow nations with sustainable investments in a relatively short time frame without them having to increase debt and thereby burden future generations — while gaining highly qualified and experienced entrepreneurs and investors as new residents or even citizens).
Particularly, people with talent and means are less and less restricted by geography and will increasingly relocate to countries with better business, work, and education opportunities, more robust health systems, better fiscal environments, and more sustainable infrastructure.
They desire locations that are more stable socially and economically and that are less affected by armed conflicts and climate change.
After witnessing and experiencing the devastating effects of the pandemic and now the war in Ukraine, residence and citizenship diversification has become a must for global entrepreneurs and investors.
Investment migration programs — alongside digital nomad visas and, at the other end of the scale, asylum seeker and refugee permits — are available levers for individuals to acquire and states to extend residence or citizenship rights. It is good to see that residence and citizenship by investment, a concept we pioneered, is becoming a mainstream concept with which now even large states operate to attract talent and investment and to offer individuals all over the world the opportunity to increase their mobility and life options.
How does Henley & Partners help clients to mitigate the risks associated with investment migration?
Henley & Partners is a unique firm in many ways.
We are first and foremost an advisory firm that creates value for high-net-worth individuals and their families as well as for entire countries.
Our sole focus is residence and citizenship by investment, and our best practice processes have been perfected over the last 25 years.
We use our creativity, intelligence, and global knowledge to achieve outstanding solutions for our clients.
Our highly qualified professionals work together as one team in over 35 offices worldwide.
Henley & Partners has invested significant time and capital in developing an operational model designed to provide a bespoke service, tailored to each individual client.
We offer an integrated service that enables us to assist our clients from A to Z in their journeys to become residents or citizens of one or more additional countries.
Henley & Partners’ outstanding advisory services are underpinned by industry-leading compliance protocols, secure IT infrastructure, and diligent commitment to data security.
With several countries doing everything possible to limit the influence of investment-grade passports, what other investment migration models do you think will emerge as time passes?
More and more investment migration program options are likely to emerge as time passes.
The rapid development of the means of communication and the evolution of social media have exposed a discordance between the distribution of people around the globe and the location of resources we all rely on.
At the same time, technology and the improvement of transport systems have dramatically increased people’s mobility and ease of traveling (current Covid restrictions aside).
Communities are making the most of these advancements as an increasing number of reasons drive their need to migrate.
In his latest book MOVE: The Forces Uprooting Us, FutureMap founder and member of Henley & Partners’ Board of Advisors, Dr. Parag Khanna, identifies this momentum as an important trend in the years to come. To him, “The decades ahead will witness constant circulation as we attempt to rectify the grave mismatch among resources, borders, industries, and people.”
The demographic reality is self-evident and can no longer be denied: developed economies must encourage inward migration if they aim to improve, or at the very least maintain, their social model as well as the size and quality of their workforces.
Fortuitously, these nations’ needs (namely, human resources and talent) are congruent with various developing societies’ supply reservoirs.
There are countries that have long been behind the curve in terms of economic development and education, that are now overflowing with youth and talent.
Recognizing the essentiality of keeping up with the pace, these countries have exerted extraordinary efforts over the years in making policy changes and developing programs specifically to improve their higher education systems.
Their populations now comprise highly skilled, educated, and efficient young professionals who are members of the most mobile generation in history.
Many of these capable individuals tend to travel, complete an international baccalaureate, study abroad, and interact with the global youth.
From their hybridized values a new model of thought is emerging that transcends geographical segmentation.
In other words, the highly mobile 21st-century youth is promulgating a new culture aligned with the principles of the modern economy — taking the best from East and West, North and South, they bypass intellectual barriers.
Resourceful countries need to futureproof their economies by attracting and welcoming the upcoming generation and avoid stagnating and lagging behind owing to complacency.
It is pivotal that advanced nations consider revising their current somewhat exclusive approach to the rest of the world, and reform and adapt to overcome the competition and not miss the opportunity to capitalize on this potential.
In the scramble for young talent, but also for investors, the countries that are first to review and streamline their outdated migration policies will have the edge.
The enterprise of realigning the needs and resources of the global community is in the best interest of people worldwide.
If successful, it could help prevent the inevitable migration trend from becoming a lasting global migration crisis. Such a project, however, requires adequate migration policies.
Following the latest economic crisis and in the midst of the Covid-19 pandemic, several countries have created or augmented a growing range of residence and citizenship by investment programs.
Many aim to attract wealth, experienced talent, entrepreneurs, and foreign direct investment, but more and more are also designed to appeal to young individuals with unique expertise and skills.
Heightened and better managed global migration is the appropriate route for humanity to take in these troubled times.