Financial considerations of Executive Expats living in Africa

There is something mystical about Africa which is very appealing to expats and keeps attracting them back. Perhaps it’s the lure of an untamed continent with no boundaries and endless opportunities.

If you haven’t lived and worked in Africa it probably makes no sense to relocate there.

After all who would want to live in a continent commonly afflicted by poor infrastructure, corruption, popular uprisings, civil wars and Islamists militants where violent street crime including muggings, abductions and car jackings reign?

Those of you who have lived and worked in countries such as Nigeria will be only too aware of the risks involved. Although expats in Africa are not specifically targeted; these are volatile places fraught with danger.

Executive expats in Africa are some of the best remunerated executives in the world

If you are an expat looking to work in Africa, there are plenty of exciting and well remunerated senior executive job opportunities in multinational companies.

As well as for senior executives, there are also a plethora of opportunities for university educated professionals with a long experience in industries of varying disciplines (such as engineers, geologists, architects) as well as senior executive roles in various sectors including shipping and logistics, natural resources, pharmaceuticals, consumer goods and renewable energy.

Executives in Africa are very well looked after by multinational companies. When it comes to executive expat pay, there are large regional variations across the continent dependant on industry sector and commensurate with the level of country risk and personal safety and security available. There are places where expatriates would rather not live due to security, lifestyle and health considerations. This is why recruiting expats in Nigeria is more difficult and therefore much more expensive than, for example, expats in Ghana.

An executive in Africa would expect to receive a six-figure guaranteed base salary plus a performance bonus and equity participation. They are also likely to be provided with private medical cover including emergency evacuation coverage. There is also use of a company vehicle, including fuel and driver, personal security, furnished family accommodation, with domestic staff and utilities as well as business class fares home every six months. Executive pay may also include pension benefits and schooling for the children.

Expats in highly demanding executive roles in Africa have excellent remuneration packages and all their expenses paid for by their employers but work pressures tend to allow them very little time for recreational activities. They are subservient to the corporations that fund their lavish lifestyles but who, on the other hand, provide them with a golden opportunity to build up considerable wealth over their working lives.

The challenge faced by Executives in Africa is sourcing a ‘trusted financial adviser’

But, of course, once in Africa, the big challenge for high earning executive expats is, who should they trust, to help them build, manage and protect their wealth with a future retirement in mind? How do they ensure a seamless transfer of wealth to heirs should they unexpectedly and suddenly pass away?

These are key concerns. But partnering with the right firm is not easy. There are just a handful of highly reputable wealth management practices to choose from, serving the British and English-speaking expat communities across the African continent. Whether you live in Nigeria or Ghana in West Africa; Kenya or Zimbabwe in East Africa; Angola or Cameron in Central Africa or Namibia and Botswana in the South – finding a trusted adviser remains a massive challenge for wealthy expats.

Senior executives are unconcerned about the location of the service provider. There is no need to have a local presence - convenient as it may be - to develop a trusting relationship. The reality is that tripping in to service their needs can be equally effective.

There is a strong sense of community within the expatriate fraternity, therefore, expats expect, their wealth management provider, to integrate and be well respected within expat communities – a form of validation.  

We find that expats in Africa want a trusted adviser who understands and looks after their needs on a continuous basis rather than delivering what is on offer. They seek deeper, more sustainable and valuable relationships. They seem to understand better than most that learning relationships facilitate the kind of unbiased expert advice that delivers the desired outcomes within the exact context they seek.

This is why they are happy to engage in a broader dialogue to receive more customised financial solutions through a single point of contact. But what these executives are really after is old-fashioned ethical advice which puts their long-term needs and interests ahead of short-term profit maximization.

The pressing issues for Executives in Africa

Despite the many attractive benefits of living and working in Africa there are plenty of challenges for expats too, including of course, providing financial security for their loved ones.

It is therefore vital to plan, maximise the opportunity of high earnings to build your wealth so when retirement comes; and you head home or relocate to another country with a benign tax environment; you are financially secure and may continue to enjoy your lavish lifestyle in retirement.

The following areas are some of key financial planning issues which require your attention as an executive expat in Africa:

Establishing your risk profile

Living abroad brings about inherent increased risks, but with regards to making financial decisions, it is vital that any independent advisor establishes your risk profile to help establish a suitable financial and investment strategy on your behalf. This helps ensure that the advice offered is tailored to meet your risk propensity and presents you with financial strategies and products that offer suitable return on investments, without exposing you to increased levels of risk which is not aligned to your risk tolerance.

Protecting yourself and your family

Quite often you will live in a hostile environment where danger potentially lurks around every corner. Securing personal insurance cover for life, critical illness and income protection to ensure your loved ones are financially protected whilst you live abroad would be advisable. You need sufficient cover in place to ensure your dependants are able to maintain their current standard of living should you suffer illness or injury which prevents you from working or should you pass away.

Making adequate retirement planning provisions

You may have to take care of your own retirement planning provisions. This is an important area of financial planning advice because without proper retirement planning you may end up back in your home country in later life with insufficient financial resources to maintain the kind of living standards that you envisaged.

Making regular savings and lump sum investments

You are working in Africa with the aim of building up a considerable amount of wealth as fast as you possibly can. This requires the discipline of putting money aside for a future date rather than spending it now. Your trusted adviser needs to pursue dynamic asset allocation strategies which yield consistent and demonstrable long term returns that are commensurate with your risk tolerance and personal circumstances.

Tax optimised wealth management advice

As with any investor, you need to ensure your pensions, savings and investments are as tax efficient as possible. You should align your investments with the tax rules of the country where you are tax resident and where your family might be considered tax resident.  For your complete peace of mind, you should hold your financial assets in a safe and secure environment within a highly regulated financial centre.

Establishing your tax residency

Generally speaking, you will be tax resident in the country where you are working. This means that you need to ensure you have exited your previous country of residence to avoid any future tax liabilities.

You also need to be aware of any tax consequences resulting from having your spouse and dependants living in another country. You also need to understand the implications of OECD initiatives such ‘Common Reporting Standards’ in which personal financial information is being freely exchanged between countries as well as ‘DAC6’ a new EU disclosure regime aimed at addressing aggressive cross border tax planning.

Inheritance, succession tax and estate planning

This is an important area of financial planning advice for UK nationals as it is extremely difficult to shed your UK domicile to avoid a potential liability to UK Inheritance Tax. Even if you have lived abroad for many years, you may still, unwittingly, expose your estate to UK Inheritance Tax, as this is determined by your domicile rather than your tax residency.

You must take appropriate steps to ensure your estate is passed on to your beneficiaries as tax efficiently as possible.

Cash flow analysis

Very few people consider the important issue of how much capital (including pensions and investments) is required to sustain your current lifestyle in retirement.

There is a possibility you stumble into retirement without having given sufficient thought to your future income requirements. The use of a cash flow analysis tool allows you to run cashflow based scenarios using a set of variables - investment pot, income requirements, expected investment return, anticipated inflation rate, tax rates and life expectancy - to determine at what age your money may run out.

This allows you to plan ahead and build wealth with a target capital sum, retirement age and income requirement in mind. Failing to plan in this area is planning to fail.

Relocation Advice

You may also need to consider where you intend to establish your tax residency post retirement. A country with a low tax environment (ideally with a warm climate) provides you with the opportunity to enjoy a better lifestyle during your sunset years.

Ensure you create the best wealth management strategy as an executive expat in Africa

Social developments such as greater client mobility, inter-generational wealth transfers and the global drive for tax transparency have increased the need for tax advice within a financial advisory proposition.

The issues of residency, domicile and location of wealth creation may cause cross border conflict for expats in Africa.

The demand is shifting away from commoditised transactional offerings to a fully integrated and effective cross border tax planning service.

At Experts for Expats, when you request an introduction, we will connect you with a globally respected independent wealth manager who provides executive expats in Africa with exemplary wealth management advice, equipping you with the advice you need to meet your financial goals.