Business

Africa’s family office sector might be growing but it’s not staying home

Aliko Dangote is a man of few words and plenty of money. With a net worth of $12.1 billion, the mild-mannered Nigerian is Africa’s richest person. His company, Dangote Group, has 18 subsidiaries specialising in a range of sectors such as cement manufacturing, sugar refining, petrochemicals, and infrastructure. But he’s not keeping all of his money in Africa. 

Many of the continent’s super-rich choose to hedge away from African currency and political risk by creating foreign-domiciled family offices to manage their investments

In 2020, Dangote announced that his family would be opening a US family office, complementing his UK family office, which is believed to be Dangote Global Services. Based in London, Dangote Global Services has both Aliko and his younger brother Sani as directors, according to regulatory filings. The name of the US-based family office isn’t known. 

The diversification rationale, he said, was to “preserve some of the family’s wealth” and avoid “issues of devaluation” that plague the Nigerian currency, the naira. Dangote is no oddity among African billionaires. 

Other African billionaires have their investment offices outside of Africa, or at least subsidiaries abroad, are:  

  • Mary Oppenheimer Daughters (the family office of Mary Slack, née Oppenheimer, of South Africa), which has a UK subsidiary
  • Oppenheimer Generations (the family office of Nicky Oppenheimer of South Africa, which has a London office and recently opened a Singapore office
  • Kathaka (the family office of Caroline Rupert, the daughter of Johann Rupert) is based in London family of South Africa) 
  • TY Danjuma Family Office (the family office of the Danjuma family of Nigeria) is headquartered in the UK. 

There are exceptions, of course, most noticeably, Heirs Holdings, the family investment group set up by Nigerian multi-millionaire Tony Elumelu, which is based in Lagos, Nigeria, without subsidiaries abroad. 

“Most of my clients in South Africa are second, third, or fourth-generation families,” says Andrea Benkenstein, senior manager at PwC South Africa’s Family Business Centre of Excellence. “In the rest of Africa, it’s even lower. In many countries, a lot of family wealth has been generated in the last 40-50 years.” 

According to research by Knight Frank, just under 4,400 individuals will join the league of ultra-high-net-worth individuals in Africa between now and 2026, a growth rate of 33%, the fastest in the world after Asia. This growth will be driven largely by entrepreneurs. In recent years, several tech entrepreneurs have joined the league of African wealthy. And in years to come, they will form an important part of the continent’s family office ecosystem. 

African fintech firms raised $906 million in the third quarter of 2021 alone, according to Digest Africa, a database of early-stage investments on the continent. That represents more than 60% of all venture capital money that flowed into the continent during the second quarter, and more than all other sectors combined in the first half of the year. 

Within a relatively short space of time some tech founders have become rich by exiting their businesses entirely, selling a stake to investors or going down the M&A route.

Iyinoluwa Aboyeji is one such person. The Nigerian tech entrepreneur co-founded Andela, a company that identifies, trains, and provides software developer talent to global firms, and Flutterwave, a company that helps businesses build customisable payments applications through its APIs. Both businesses are now valued at over $1 billion. 

Aboyeji exited both businesses and today heads up Future Africa, an investment fund that invests early-stage capital into promising tech startups. The fund’s investors comprise successful African tech founders like Aboyeji and other investors too. “Ultimately, our desire is to partner with companies that are leveraging the miracle of technology and innovation to build out of Africa, global businesses that deliver a more equitable future,” the fund’s website says. Future Africa aims to sell stakes in portfolio companies after the firms have achieved a $100 million+ valuation. 

But the excitement that surrounds investing in Africa isn’t just reserved for tech founders. Firms such as 1K1V provide a way in for global family offices seeking a piece of the action. The private equity manager invests in sub-Saharan Africa with an exclusive limited partner (LP) base of leading global family offices, led by the Coors family of US brewing fame. To date, the firm has invested in businesses – mainly family firms – in agriculture, consumer products, health foods, edtech, and mobile payments. 

 The opportunity to drive significant returns is huge but the institutional rails that exist in other regions are often lacking on the continent, which is why many African billionaires prefer to move their money offshore. 

And as recent surveys by Asoko Insight and PwC reveal, African family-owned businesses are an important component of the continent’s economy. As these businesses grow in value, it’s likely that many of the families will create foreign-domiciled family offices to preserve their wealth because the currency and political risks will not disappear in the short, or even, medium-term.

 

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