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By Dr. Owen Young, Managing Director, Regional Head of Affluent & Wealth Management, Europe, Middle East and Africa (EMEA), Standard Chartered
The single simple and obvious truth about generational wealth is that someone must generate wealth in the first place. Africa can boast some sterling examples: in Nigeria, Aliko Dangote, Michael Ibru, Jim Ovia and Tony Elumelu; in South Africa, Patrice Motsepe, Nicky Oppenheimer, Johann Rupert and Raymond Ackerman; in Egypt, Naguib Sawiris and Mohamed Mansour; and in Zimbabwe, Strive Masiyiwa.
Creating generational wealth is a crucial step towards the economic growth of any country. People with jobs are taking this step by investing in good educations for their children, owning homes that can be passed on to future generations and more. If that human capital does not go to waste, it can become the generator of generational wealth, ensuring a bright future for Africa. Therefore, the continent’s biggest challenge remains unemployment: Without a job, it is impossible to accumulate wealth.
Providing quality education, financial literacy, supporting homeownership and encouraging entrepreneurship within the family are essential. Accessing financial planning and investment advice and encouraging intergenerational communication, which are the building blocks for preserving generational wealth, are equally important.
Generational wealth
To create generational wealth, nations must overcome several hurdles, including historical injustices that have impacted wealth distribution. Addressing these issues is critical for sustainable economic progress. Recognising that the unequal distribution of resources and limited access to education, healthcare and economic opportunities exacerbate this divide is essential.
Generating wealth requires a holistic approach (wealth is not about the money but the legacy) that first includes infrastructure investment by the government and the private sector in energy, communication and transport. With increasing urbanisation come massive demands for housing and services, which depend on robust infrastructure.
The second requirement is fostering the adaptability and resilience of African entrepreneurs, who are vital to the continent’s economic growth. Of course, their survival depends on access to capital and cooperative legal and regulatory environments.
Families must seek legal advice to navigate the various tax implications and legal requirements to transfer generational wealth efficiently, protecting their assets from unnecessary losses when transferred to the next generation. Trusts, wills and estate planning are fundamental components that help minimise estate taxes and ensure wealth is distributed according to the benefactor’s wishes. Financial advisers must be familiar with these legal structures and adapt to include these assets in a way that is both secure and legally compliant.
Legal frameworks are essential for the efficient transfer of generational wealth. Generational-wealth transfer processes require strong legal structures and innovative insurance products specifically designed for this purpose. Financial institutions must understand these structures and adopt an adaptive approach incorporating modern asset types and technological advancements within such legal frameworks.
Using digital assets in estate plans is becoming increasingly important. Blockchain technology, for example, offers new ways to manage and record the transfer of assets securely and transparently. Financial advisers must stay abreast of the adaptations to the legal frameworks governing technological advancements to ensure their clients’ digital assets are protected and included in generational-wealth transfers.
Insurance products, especially life insurance, provide tax-efficient methods of transferring wealth to beneficiaries. Universal and whole-life policies can also serve as vehicles for accumulating cash value that can be borrowed against or passed on to heirs, contributing further to the family’s financial legacy.
Educating heirs on legal requirements, wealth management, investment strategies and wealth-stewardship responsibilities is essential. This will better prepare families to handle the assets they will inherit.
Creating wealth also necessitates formal and informal education to ensure that human capital can be employed, enabling individuals to concentrate on accumulating financial resources, planning for personal financial growth and prosperity, and making well-informed financial choices. As a result, education plays a vital role in developing wealth and enhancing economic growth.
Africa is experiencing significant demographic changes that have far-reaching implications. The region’s population is growing rapidly: Within the next 15 years, half of the world’s population under 18 will be born and raised in Africa. South Africa has seen a significant increase in its working-age population (15 to 64). More alarming is the high youth unemployment—job seekers between 15 and 24 years old—at almost 60 percent in the fourth quarter of 2023. The high overall level of unemployment in South Africa—over 32 percent—must be addressed to achieve economic growth and prosperity.
There has been a notable change in gender dynamics in recent times. Nowadays, most governments and corporations have realised that empowering women’s economic independence can contribute to overall prosperity. Therefore, it is crucial to address the gender gaps in employment rates, though this requires financial (and often legislative) support.
Capital and credit
Limited access to capital and investment is a significant challenge for generating wealth. However, several financial institutions understand this issue and are working towards creating inclusive financial services to bridge this gap. The aim is to provide access to credit for small businesses and individuals, including women and youth, in rural and underserved areas. In this way, economic growth is distributed to all societal segments, benefiting everyone.
Agriculture—a primary source of generational wealth—continues to be a vital sector in Africa. In addition to granting agricultural loans, private entities, including financial institutions, should invest in updating agriculture, agricultural value chains and agribusinesses. These actions would enhance productivity, guarantee food security and improve the incomes of rural communities. Additionally, governments must tackle income inequality by implementing progressive taxation and social policies.
Numerous financial-services companies and banks support small and medium-sized enterprises (SMEs) by providing customised credit solutions. These solutions may include working-capital loans, trade finance and asset financing. By offering timely credit, they empower SMEs to manage cash flow, invest in growth and seize opportunities.
Financial institutions (including Standard Chartered) have undertaken several initiatives to improve financial literacy as part of their broader commitments to economic empowerment. These efforts include significant investments in enhancing digital capabilities and indirectly supporting broader access to financial services and literacy by simplifying and streamlining banking processes.
Digital platforms enable clients, especially tech-savvy ones, to manage their investment requirements conveniently. The SC Shilingi Funds, for example, is Kenya’s first 100-percent digital-only platform providing money-market funds. The SC Shilingi Funds platform is a simple and seamless journey that allows Standard Chartered clients to access low-ticket money-market funds in Kenya through the bank’s existing mobile app. Launched with a focus on young, low- to middle-income Kenyans who are digitally savvy and looking for investment solutions, this platform has made it easier for people to access simple financial products and make informed financial decisions that can lead to a better standard of living and a brighter economic future for the country.
It is important to grasp that generational wealth is continuous, with significant prosperity already achieved; one should not view Africa as typically poor. According to the “Africa Wealth Report 2023” published by Henley & Partners, an investable wealth of approximately $2.4 trillion is held on the African continent. Creating generational wealth requires a comprehensive approach that combines prudent financial planning, investment diversification and a long-term vision that will tap into this financial resource.
A multifaceted approach that involves government policies, private-sector initiatives, education and community empowerment can address Africa’s challenges. Promoting economic inclusion and equal opportunities will pave the way for creating generational wealth.
ABOUT THE AUTHOR
Dr. Owen Young is based in the UAE where he is the Regional Head, Affluent & Wealth Management for Europe, Middle East & Africa (EMEA). Prior to that, he was the Global Head of Bancassurance, Trust & Wealth Planning for Standard Chartered’s Private Bank and Wealth Management units based in Singapore. In that role, he was responsible for the enterprise-wide bancassurance strategy, product management and governance across all segments and regions/countries and led the Trust & Wealth Planning business within the Private Bank. Owen’s previous roles at Standard Chartered included Managing Director for Group Strategy. He joined the bank from Boston Consulting Group in Singapore.
