In the global wealth landscape, the disparity between the rich and the average citizen is starkly apparent. According to a 2023 report by Credit Suisse, the top 1% of the world’s population holds nearly 45% of global wealth. This statistic reveals a fundamental truth: the wealthy accumulate money differently and also employ distinct strategies to manage and grow their fortunes......READ THE FULL STORY>>.....READ THE FULL STORY>>
In Africa, a continent with burgeoning economic potential, these practices are equally relevant.
Here are five key strategies the wealthy employ that set them apart.
1. Invest in Appreciating Assets
While the average person might save money in a bank account, wealthy people focus on investing in assets that appreciate over time, such as real estate, stocks, and private equity.
Aliko Dangote, Africa’s richest man, has significantly invested in various sectors, including cement, sugar, and oil, all of which have seen substantial appreciation over time.
Pro Tip: Start by educating yourself on different types of investment opportunities. Consider consulting a financial advisor to create a diversified portfolio tailored to your risk tolerance and financial goals. Look into both local and international markets to diversify your assets further.
2. Leverage Debt Wisely
Contrary to the common belief that all debt is bad, the wealthy use debt strategically to acquire assets that generate income or appreciate in value.
This includes mortgages on investment properties or loans to expand businesses. For example, Strive Masiyiwa, a Zimbabwean billionaire and the founder of Econet Wireless, leveraged debt to expand his telecom business across Africa.
“Using debt responsibly to finance business growth can be a powerful tool. It’s about leveraging opportunities to build more value,” Masiyiwa said.
Pro Tip: Learn the difference between good debt (debt used to generate income or increase net worth) and bad debt (debt used for consumption). Use good debt to your advantage by investing in opportunities that offer a return higher than the interest rate on the debt.
3. Invest in Education and Self-Improvement
Wealthy individuals consistently invest in their own education and personal development. This can range from formal education like MBAs to workshops, seminars, and online courses that improve their skill sets and expand their networks.
Patrice Motsepe, founder of African Rainbow Minerals, credits much of his success to continuous learning and adapting to new business environments.
“Continuous learning and improvement are essential to stay ahead in any business environment. The world is constantly changing, and you must adapt to remain relevant.” — Patrice Motsepe.
Pro Tip: Set aside a portion of your budget for continuous learning. This could be attending industry conferences, enrolling in courses relevant to your career, or even hiring a coach to help you achieve your personal and professional goals. Utilize online platforms offering high-quality education tailored to your needs.
4. Build Multiple Income Streams
The wealthy rarely rely on a single source of income. They create multiple streams, such as passive income from investments, rental properties, royalties from intellectual property, and side businesses.
Sudanese-British billionaire and telecom magnate, Mo Ibrahim, has diversified his investments into areas like infrastructure and renewable energy, ensuring multiple streams of income.
“Diversifying income sources is not just about wealth creation; it’s about financial security and resilience.” — Mo Ibrahim.
Pro Tip: Identify your strengths and interests to create additional income streams. This might involve investing in rental properties, starting a side business, or creating digital products that generate royalties. Explore opportunities in emerging markets within the continent to capitalise on growth trends.
5. Philanthropy
Many wealthy individuals are deeply involved in philanthropy. They understand the social and financial benefits of giving back, including tax deductions and the personal satisfaction of contributing to societal good.
Tony Elumelu, a Nigerian entrepreneur, is known for his extensive philanthropic work through the Tony Elumelu Foundation, which focuses on empowering African entrepreneurs.
“Philanthropy is not just about giving money; it’s about solving problems and creating a legacy that benefits future generations.” — Tony Elumelu.
Pro Tip: Start by identifying causes you are passionate about and begin contributing, whether through donations or volunteering. Consider setting up a donor-advised fund (DAF) for structured and tax-efficient charitable giving. Engaging in local community projects can also create a significant impact.
