What is the future of private banking in Africa?

By Stuart Thomas

Africa’s growth story may have been hampered by COVID-19, but there are still people creating wealth. There are, at present, some 136 000 dollar millionaires across the continent and 6 700 multimillionaires, with net worths of at least US$ 10-million. Those numbers are expected to keep growing too. In fact, the number of high net-worth individuals (HNWIs) in South Africa alone is expected to grow 40% over the next decade. The growth rate is set to be even higher in Uganda (60%) and Mauritius (80%). 

That means private banking on the continent will only become more important. But as the number of people needing private banking services grows, these services will also have to adjust to their changing wants and needs. Among other things, that means helping clients with tangible investments in Developed Markets such as the UK, Discretionary Portfolio Management, and balancing traditional and digital banking services. 

According to Amol Prabhu, Country CEO: South Africa and Market Head: Africa at Barclays, families within these brackets (especially those with established wealth) are also looking for access to global networks, the ability to invest in entrepreneurs on the continent, and ways to ensure that their children can be educated overseas.

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‘Not just private banking’ 

Prabhu notes that providing access to those global networks often means going above and beyond traditional private banking expertise. 

“We’ve got a South African family who are in the recycling business,” he says by way of example. “The entire family – parents, all three children and their spouses – bank with us. They’re continuing their business in South Africa but also looking to establish the same business in the UK. We are now also helping them with their Corporate and Investment Banking needs as their business expands.”

“It’s the ability to provide clients with coverage that’s not just multi-location but also multi-business and multi-generational that’s important,” he adds. “These types of clients have got complex, global needs, so that’s where real value can be added.” 

According to Prabhu, another specific thing that African clients look for help with is quality UK real estate. 

“That can be people wanting to have a second home in London and spend more time there or wanting London properties as part of their investment portfolio,” he says. “And generally because people are spending more time in these houses, they want bigger properties too.” 

This, he says, is overlaid with the fact that many clients expect that their children will live, work, or study in the UK at some point in their lives, as many of them have done.

“They’re thinking, my son’s three years old but after matric he’s going to university in the UK, so I might as well buy a place for 15 years’ time,” he says.

The rush for direct assets 

Another massive trend, Prabhu points out, is the growing demand for direct assets. 

“What that means is that entrepreneurial families like to invest in other entrepreneurs,” he says. “It can be high-growth technology companies: fintech, medtech, agritech or ones focused on climate change and other issues. 

“These companies are typically looking for funding anywhere from US$1 million to US$200 million and we open it up to our ultra-high net-worth and global families within the Private Bank to give them the opportunity to invest.”

Crucially, these companies are all private, meaning that these investments are not open to the general, public market. By facilitating these investments, Barclays Private Bank not only helps their clients make more meaningful investments on the continent but also help grow the continent’s entrepreneurial ecosystem. 

Classic portfolio management 

While those trends will undoubtedly shape private banking in Africa for some time to come, Prabhu points out that there’s still significant value in classic asset and portfolio management. The key, however, is to have managers and methodologies that can thrive even during periods of global political and economic uncertainty. 

“If you’re sitting in Cape Town or Johannesburg and you’ve got a portfolio in the UK, you are literally thousands of miles away from your hard-earned money,” he says. “You have got to have real trust in the institution, the portfolio team and their underlying methodology that your money is being managed properly.” 

Talent development is crucial     

In order to ensure that all those needs are fulfilled, however, the right level of talent is essential. 

“A high-quality talent bench is vital,” says Prabhu. “And to service African private banking clients effectively, they should either be from Africa, have lived on the continent, or have a decade plus of African private banking experience. Having that deep experience and a high-quality service mentality is critically important to show and deliver value.” 

Ultimately, he points out, you are helping people who are typically very good at what they do but may have very little banking and investment knowledge and / or time to look into these things. 

“At the end of the day, our role is to help and guide clients to make the right kinds of decisions in the financial context,” he says. “And having the right talent and skills on-hand as well as a quality institution behind you is crucial to that as there are Private Bankers who get it wrong and the client suffers.”

As the number of high net worth and ultra-high net worth individuals in Africa continues to grow, having the right partners with those skills and knowledge will only become more important. 

Stuart Thomas is Lead Content Strategist at one of Africa’s top integrated marketing agencies. He has more than a decade of experience in media and PR, having worked across technology, business, and employee engagement verticals. When not honing content and strategy for clients, he enjoys running, reading, and spending time with his pets.