The first words recorded in the provisions of the South African constitution in 1996 talk about human dignity, equality and the advancement of human rights and freedoms.
From a financial point of view, this means that we South Africans have the right to financial freedom. It doesn’t matter whether you live in South Africa or have moved abroad, you have the economic freedom to move your money as, when and where you please. There are obviously rules and regulations that you must comply with, of which compliance to exchange control is probably the most complex. But once you have successfully completed the compliance process, you have the opportunity to benefit from international market performance and stability.
By moving some of your money offshore, you spread your risk.
Even if you choose to stay in the country, you can still invest money offshore. In fact, it makes sense to do this – by spreading your risk across countries and currencies, you add an extra layer of protection to your overall investment portfolio. The accessibility to financial markets and investment funds offshore has opened up a multitude of opportunities that were previously reserved only for expert investors. Today, however, anyone can make use of international investment opportunities.
The benefits of investing some of your money outside South Africa.
- Protection against rand depreciation
This means your rands can potentially have better buying power in the future when you exchange your rands for a foreign currency. For example, in 2004, one Australian dollar would have cost you R4.41, which means you could get $22,676 for a R100,000 investment. Today, one dollar will cost you R9.41*, which means R100,000 today is worth only $10,626. If you invested R100, 000 in Australia 10 years ago, this investment would now be worth roughly R213, 300 (excluding investment returns and inflation) – it has doubled in value because the rand is now worth less against the dollar. In other words, you could boost your investment value purely based on the devaluation of the rand against the Australian dollar.
- Quality education for your children
If you are a parent, having an offshore investment makes it easier to give your children the opportunity to obtain a tertiary education overseas. This is because it’s easier and more affordable to pay for tuition in the currency of the country where your child receives an education. From a future career prospects point of view and in light of the global demand for skilled professionals, an international tertiary qualification from a reputable education institution can give your children a competitive edge.
- You get to stay in South Africa, while enjoying the benefits of international markets
You may have considered physically moving offshore, but found that you could not satisfy the destination country’s visa requirements. Or perhaps you want to stay in South Africa and be close to your family and friends, but you want better financial prospects. Fact is, you still have the opportunity to emigrate your wealth by simply investing offshore. You can also move to a better location within South Africa while you still have the benefits of diversified offshore investments.
- If you did emigrate, you get tax benefits when you bring your money back
If you have been living and working abroad, you have most likely made your money offshore. If you decide to come back to South Africa, you can take advantage of various local tax opportunities. For example, if you get a pension from overseas, you don’t pay tax on that income in South Africa.
- You are free from South Africa’s exchange control regulations
South Africa is one of a few countries in the world where the government still regulates the flow of capital to and from the country, and we don’t know when or if this will change. If you invest money in a country without exchange control, you have the freedom to move your money as you please.
Whatever your sentiment about South Africa, investing offshore is a smart choice.
The South African political and economic landscape offers both challenges and opportunities. It doesn’t matter whether you believe South Africa is the best place to live or whether you are considering greener pastures abroad, spreading your wealth across countries offers you the benefits of lower risk and higher growth through diversification.
If you would like to find out more about offshore investment opportunities, please send us your contact details and we’ll give you a call.
*Exchange rate as at 9 December 2014.