Building Walls Against Economic Uncertainty

According to Forbes, Africa’s richest man Aliko Dangote lost US$7.8 billion of his fortune last year due to the slump in the naira and falling stock prices. CNBC Africa’s Wole Famurewa caught up with Martin Emodi,Managing Director: wealth management at UBS Africa on how best can Africa’s wealthy shield themselves against economic uncertainty.

FAMUREWA: The Global billionaires’ index indicates that the wealthiest people in the world got a lot richer by as much as 92billion dollars last year. Seeing that UBS conducted a recent study on billionaires can you just give us a sense of the trends across the world right now?
EMODI: The billionaire evolution has been the same affair over the last years, every year, the billionaires keep getting richer and richer and the question we ask ourselves is: will this trend continue? What’s our take on the trend? Our study found that billionaires wealth is evolving more and we expect it to slow down in the developed world, in the US and Europe. We are still very positive on the evolution of billionaires’ fortune in Asia and increasingly in Africa.

FAMUREWA: In your view, what to a large extent drives this wealth?
EMODI: It’s definitely Entrepreneurship. What we see in many of these individual cases is that these people behind these companies have strategic holdings in important businesses- In Nigeria for instance, in telecoms and other businesses, once you have a good hold on the market, you are in a very favourable position.

FAMUREWA: Are African Billionaires also getting richer? What does your study tell us?
EMODI: Absolutely! Africa is the place to be, the continent is up for grabs. African billionaires have really positioned themselves in some of the key companies like South Africa, Nigeria, East Africa and have established themselves in Industries where they can benefit from the large scale of Africa like telecoms and consumer retail.

FAMUREWA: Aliko Dangote is the richest man in Africa and one thing he is doing is making his business broad-based and spreading them into countries; is that the new trend for Billionaires? Are they going across the continent?
EMODI: It is actually the right trend. One thing billionaires are doing wrong is wealth concentration; they are putting too many eggs in one basket. Aliko is doing the right things, staying committed to Nigeria and he’s also starting to divest across Africa. It is a more balanced portfolio and it is exactly the right thing to do.

FAMUREWA: To what extent are the trends in the global economy impacting this wealth?
EMODI: In Nigeria, a lot of wealth is built around the oil and gas, with oil prices at low levels, that’s impacting. It is important to have many eggs in many baskets, that way; you will not be affected by a singular development like commodities arrears.

FAMUREWA: Billionaires are looking to protect themselves from uncertainty, what’s the smart thinking around that?
EMODI: The smart thinking is simple. As a billionaire, you should think of wealth diversification. Diversification across countries, across currencies, across regions, because Africa is booming and I think many of the investors and billionaires in Africa and other countries can learn that there is still room for improvement in risk management and having globally diversified portfolios across the globe.

FAMUREWA: How do you see the changing technology in Entrepreneurship evolving?
EMODI: In East Africa, the M-Pesa is a good example, the technology has helped Africa jump over a whole generation, people don’t have bank accounts anymore, they use their mobile phones and there is over a billion worth of transactions done on M-PESA. Technology is helping unlock and fuel entrepreneurship in Africa and it is an important driver.

FAMUREWA: As seen in East Africa, are we seeing that evolution in other parts of the Continent?
EMODI: Africa has a high affinity to technology, looking at the mobile phone penetration across the most important countries in Africa. It is very high and sometimes higher than the developed world. So, there is an affinity to technology and I meet interesting entrepreneurs in my line of work and I can tell you there are interesting things happening across Africa on the technological side – Disruptive technologies which will swap back from Africa into the United States or Europe. Actually, some of the African Development is ahead of the developed world, so I am very optimistic in that area for Africa.

FAMUREWA: Looking at the Leaders, what trends are we seeing? Are the Leaders also getting richer as seen in the 80s and 90s?
EMODI: Africa today doesn’t have what we used to have in the past, when the wealthiest person in the Country was either the President or the finance minister, which is being replaced all over the Continent by really bonafide Entrepreneurs. There is still the need for improvement, Nigeria for example is on the right track and it is going to be a bumpy road for Africa we expect, but the future is very rosy.

FAMUREWA: Can you highlight more from that report, in terms of the trends you have seen.
EMODI: The key trend we have seen is an endless evolution of billionaires. Across the globe, there is increasing social pressure, social gap is increasing in the western world and this is putting pressure on the very wealthy. I think most billionaires now are focusing on their legacy, on how to leave a positive legacy behind, family succession. As seen that the first generation makes the wealth, the second generation keeps the wealth and the third generation destroys it, Wealthy entrepreneurs did not create the wealth for the next generation to destroy it, so they are looking at strategies to involving them, educating them and passing on the legacy in a way it is sustainable in the future.

FAMUREWA: I think a big part of legacy is Philanthropy; to what extent are Africa’s’ richest focusing on Philanthropy?
EMODI: Philanthropy is very important in Africa and from a previous study done across Africa by the UBS, a key finding was Africa is not waiting for support from the outside, Africa is helping itself. The key takeaway is that many of the big philanthropists and every wealthy person in Africa is involved somehow in philanthropy and they are looking to connect to other philanthropists to get to another level.

FAMUREWA: In the 19th century, the main focus of philanthropy was education, so where is philanthropy going now?
EMODI: I think a lot of focus today is about philanthropy, because simply giving money is not helping and in many ways, it is detrimental because you are now making people reliant on the people making the money. Educate people so they can help themselves. Philanthropy is to create sustainable success and not a one-off to make people reliable on people giving them money.

FAMUREWA: How many more billionaires can we expect in Africa? Are we likely to see Africa lead the way?
EMODI: I think the opportunities in Africa are larger because it is coming from a lower base with a large population. People can benefit from the evolving middle class in Africa which in a study I read is currently somewhere between 500 million and a billion. Not only the billionaires will benefit from this, I see a broad –based middle class in Africa who is going to become wealthy at the same time and that’s a good thing till the whole continent over time