Harare - South Africa is the hub of private banking in Africa with holdings worth about $72bn, according to a recent report.
A Research and Markets report entitled The Africa 2016 Wealth Report identifies South Africa - mainly Johannesburg - as the continent's biggest centre for private banking. The country is the continent's second-largest economy after Nigeria, but has witnessed currency weakness in the past few months.
Its financial sector is anchored by strong banks such as Barclays Africa [JSE:BGA], Standard Bank [JSE:SBK] and Nedbank [JSE:NED] among others that have spread their tentacles further into African markets.
As these South African firms look for further growth in other African countries, they are propping up employment and economic activity away from home, said economists.
Robust banking system
But this has not deterred South Africa from becoming the biggest centre for private banking. "South Africa has a robust banking system that is well hedged by robust regulation and oversight by institutions such as the Reserve Bank," said economist Moses Moyo.
According to the report, about $125bn of African wealth is tied up with wealth management companies.
However, wealthy Africans outside South Africa "tend to keep their funds in traditional holding centres such as the UK, the Channel Islands and Switzerland".
Dubai has also become another popular destination, especially for the wealthy in North African countries. Estimates are that the African private banking market will grow by 7% per annum over the next 10 years.
"The most promising emerging African markets for private banking are Ghana and Kenya. Around US$28bn is tied up in venture capital companies and foundations that are linked to the wealthy," researchers at the company said.
Interestingly, many in Africa use these venture capital companies and foundations as vehicles to transfer money to the next generation.
The report identified people who live in Mauritius as the wealthiest individuals in Africa, with as much as $21 700 in wealth per person per year. It also highlighted that Zimbabweans are the continent's poorest, with $200 per person per year.
Zimbabwe, previously the bread basket of southern Africa, is battling a prolonged economic crisis that has led to job losses, company closures and declining consumer spending. The country has also suffered bank failures in the past few years.
According to the Zimbabwean government, about 4 million people in the country are facing food shortages precipitated by the El Nino dry weather phenomenon.