Only one individual in more than five years has managed to break into a tiny clique of 15 people in Kenya who have accumulated liquid investable wealth of more than $100 million (Sh13.5 billion) each.
It was only last year that the unnamed individual joined the exclusive ultra-wealthy individuals, bringing to 16 the number of centi-dollar millionaires in Kenya.
A further 7,200 are dollar millionaires, according to a report recently released by international wealth advisory firm Henley & Partners in collaboration with global wealth intelligence partner New World Wealth.
The survey shows that the small group had remained at 15 for nearly half a decade since the firms began tracking the wealth of the super-rich in 2013 in a country of more than 50 million individuals.
Cumulatively, the 16 centi-dollar millionaires alone hold wealth exceeding a staggering Sh216 billion, about 1.4 percent of the GDP, highlighting the huge inequality between the rich and the poor.
While the report did not reveal the identity of the 16 individuals, previous surveys show that the list is dominated by individuals from prominent political families and tycoons with vast interest in the major sectors of the economy including banking, construction, real estate and manufacturing.
In 2023, the number of dollar millionaires dropped sharply with some 1,300 Kenyans falling off the list from a high of 8,500 in 2021, underlining not only the difficulty of joining the super-rich but also staying there.
This is because as the wealth of these individuals is mainly tracked in Kenya shillings terms, it shrinks when converted to dollars due to the annual depreciation of the Kenyan shilling against the greenback.
According to charity organisation Oxfam International, the number of the super-rich in Kenya is one of the fastest growing in the world. It is predicted that the number of dollar millionaires will grow rapidly over the next 10 years, with 7,500 new millionaires set to be created.
“While this minority of super-rich Kenyans are accumulating wealth and income, the fruits of economic growth are failing to trickle down to the poorest. The rich are capturing the lion’s share of the benefits, while millions of people at the bottom are being left behind,” says Oxfam.
Wealth management
The gap between rich and poor in Kenya has been rising steadily in recent years, which makes it an arduous task for low-income earners to catch up with their well-to-do counterparts.
In 2021, for instance, this gap grew to 38.9 percent up from 35.8 percent in 2020, according to the Kenya National Bureau of Statistics (KNBS) Gini coefficient released last year.
The measure varies from zero percent where the two groups have perfect equality to 100 percent in the most unequal income distribution.
“Overall, the poorest quintile accounts for 7.4 percent of total consumption while the richest quintile accounts for 42.2 percent of consumption implying significant disparities in welfare,” said the study.
It is this increasing accumulation of wealth by the rich which is prompting banks to increasingly set up wealth management subsidiaries to cater to the investment needs of the super-rich.
This makes Kenya one of the countries with the highest income inequality in the world, according to the World Bank.
According to the global lender’s ranking, South Africa has the highest wealth disparity in the world at 63 percent, followed by Namibia (59.1 percent), Colombia (54.8 percent), Eswatini (54.6 percent) and Belize (53.3 percent).
While income inequality tracks the money that people earn, wealth inequality on the other hand includes not just income, but also the value of bank accounts, stocks and investments, homes, and personal possessions such as cars, jewelry, artwork, and other valuables.
Wealth tax
Oxfam has called for drastic reforms by the Kenyan government to reduce the concentration of wealth in the hands of a few individuals. It has recommended the review of fat incentives such as tax breaks and waivers as well as subsidies given to some big firms, which are shouldered by the poor majority in form of taxes.
“Taxes on property, ownership of land, income derived from ownership of land, personal income tax (dividends, interest and capital gains tax), inheritance and gift taxes should be targeted,” said Oxfam.
President William Ruto has in the past also joined the push for the introduction of a wealth tax on tycoons and high-income earners to make them contribute more to the country’s revenues.
“The economic principles of equitable taxation require that the tax burden reflects the ability to pay. This is best achieved by a hierarchy that taxes wealth, consumption, income and trade in that order of preference. Our tax regime currently falls far short of this,” said Dr Ruto in his inaugural speech to Parliament in September 2022.
In another report released in 2022, Oxfam estimated that Kenya would net $900 million (Sh121.5 billion) annually if it introduced a wealth tax of two percent on individuals with a net worth of $5 million (Sh675 million), three percent on those worth $50 million (Sh6.75 billion) and five percent on those who own assets exceeding $1 billion (Sh135 billion).
As part of reforms to squeeze more taxes from high-income earners, Dr Ruto raised the pay-as-you-earn (PAYE) charged on this group last year through the Finance Act, 2023.
The Act raised PAYE on those earning between Sh500,000 and Sh800,000 monthly to 32.5 percent from 30 percent.
Meanwhile, PAYE for those who earn more than Sh800,000 monthly was also raised to 35 percent up from 30 percent.
But analysts say that the rich are coming up with new ways to preserve their wealth. The risk the wealthy face is the volatility of the Kenyan shilling, which is forcing the super-rich to shift their investments towards foreign currency assets to preserve their wealth.
“We have seen a significant switch by investors from shilling assets to FX assets,” said Mr Sunil Sanger, the Managing Director at wealth advisory firm Orion Advisory Services.
Further, the shrinking number of dollar millionaires is not only a Kenyan phenomenon, as Africa as a whole has lost eight percent of its super-rich over the last decade alone, according to the report by Henley & Partners.
This has been attributed to the migration of the wealthy from the continent to other destination across the globe such as North America, Europe and the Middle East, which offer them better prospects especially vast opportunities to grow their wealth.
But the concentration of wealth among a few thousand people contrasts sharply with the rest of the Kenyan population in which five out of every 13 people live in poverty, underpinning the great wealth divide.
The incidence of poverty in Kenya is especially pronounced in rural areas, where two out of every five people live in poverty compared to two in six in urban areas, according to the Kenya Poverty Report which was released by KNBS in June last year.
Some 2,879,000 people were classified as living in extreme poverty, even as about 30 percent of the country’s population is unable to meet their food needs.
But it has become much harder for ordinary Kenyans to escape the web of poverty amid high unemployment, which has dashed the hopes of thousands of graduates to spend a fortune to get education.
At the same time, the cost of living is rising rapidly amid a taxation craze by the government which seeks to fund rising budgetary pressures especially public debt repayment and a growing wage bill.
