Africa’s, including Nigeria’s, high net worth individuals (HNWI), made up of billionaires and multi-millionaires, are now embracing a new fancy in collectables, commodities and private equities as popular vehicles of storing their wealth, Businessamlive has gleaned from the Africa Wealth Report 2017, just released by AfrAsia Bank.
These new fancy areas add to the old, regular one they had always been known to store wealth, namely residential property, which normally constitutes between 25 percent and 30 percent of the average net assets of an average African or Nigerian HNWI, the report noted.
The report, which highlights the inclination of different wealth bands in Africa to invest in the various asset classes, indicates that in addition to owning second homes in other countries, billionaires prefer to store their assets in collectables, including arts, cars, watches and private equities.
The AfrAsia Bank Wealth Report noted that while lower-tier millionaires on the continent and, indeed Nigeria, have a high propensity to hold cash and residential real estate, billionaires tend to invest in collectables, commodities and other alternative assets, such as private equity, in recent times.
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Collectables, including art, wine and classic automobiles, according to the report, are an increasingly popular way for African HNWIs to store their wealth, adding that collectables accounted for 1.1 percent or US$8.8 billion of the assets of African HNWIs in 2016, compared to only 0.6 percent in 2006.
It equally stated that affluent millionaires (a middle band of the high net worths) on the continent are most likely to invest in fixed income products and equities as against lower-tier millionaires who prefer to hold cash and invest in real estate.
The report highlights that South Africa is home to the highest number of high net worth individuals (HNWIs) on the continent with over 40,200 and 1,200 multi-millionaires. Egypt (18,100 HNWIs: 950 multi-millionaires) ranks second on the list, with Nigeria (12,300 HNWIs: 620 multi-millionaires) coming third.
It estimates that African HNWIs held US$870 million worth of fine art at the end of 2016. Globally, fine art prices have risen by 3 percent over the past 10 years, whilst African fine art prices have risen by 22 percent, citing the New World-Wealth US$ collectables index.
South Africa is reported to be the largest fine art market in Africa with leading artists including Irma Stern, Thomas Baines, JH Pierneef, Alexis Preller, Pieter Wenning, Gerard Sekoto, Maggie Laubser, Hugo Naude, Portchie, Isabel le Roux and Dimitrov.
Nigeria, Egypt, Kenya and Morocco also have significant fine art markets.
Another notable collection for billionaires is fine wine. Prior to the review period, the global fine wine market recorded tremendous growth, with prices paid for certain vintages of Lafite Rothschild having increased more than tenfold in the 10 years from 1996 to 2006.
“Heavy buying by the Chinese in the Hong Kong market was the main driver of this growth. As a result of this boom, portfolio managers that specialized solely in fine wine investments began to crop up and offer unique wine- denominated investments,” the report noted.
During the review period, global fine wine prices continued to rise (although not at the same rate) – they rose by 72 percent during the 2006 to 2016 period. 2016 was a particularly good year, with prices rising by over 20 percent.
Over the review period, classic car prices rose by a strong 180 percent, making it the best performing investment class for HNWIs over this period.
However, it should be noted that the global classic car market is showing signs of slowing down. The most recent Pebble Beach Concours d’Elegance auction held in August 2016 recorded sales of US$340 million, down from US$396 million, the year before.
Other collectables in the fancy of billionaires include antiques, stamps and super-luxury watches (i.e. any luxury item that holds its value reasonably well over time). It should be noted that collectables do not include: yachts, private jets and new cars as these items are unlikely to hold their value.
Super-luxury watches is a particularly fast growing collectable segment in Africa. According to AfrAsia Bank estimates, U$$46 million was generated in African sales of these watches in 2016, up from U$$13 million in 2006.