The last few months have seen the Rand tumble down a slippery slope and economists have warned that this currency collapse is likely to plummet South African into a recession and possible credit-rating downgrade to junk status.
Why is the Rand weakening?
There are several factors influencing the Rand’s instability. These include:
- President Jacob Zuma’s questionable cabinet reshuffle which has led to investor unrest
- Market turmoil in China – one of South Africa’s biggest trade partners
- The USA’s rising interest rates
- South Africa’s upcoming 2016 municipal elections which will only hamper investment further
- Worsening South African debt levels at both governmental, corporate and individual level
- Limited options for SARB and policymakers to ease inflation and boost spending
- Drought and resultant rising food prices driving inflation
- Unreliable energy and resource provision
The next ‘Groot Trek’ for South African emigrants
South Africans worldwide are following investor cues and moving their money offshore in order to safeguard their funds as they wait to see what the future holds for their home-grown currency. For although there may be opportunity for future investment, the overwhelming sentiment is one of jumping ship before it sinks.
Although some are prepared to wait in the hope of stability, others have cut their losses and reinvested their money offshore with hopes for recovering losses and earning higher returns. And this move may be the saving grace for South Africans living abroad.
With South African property prices set to deflate in 2016 in-line with the currency decline, it becomes even more pertinent to consider selling South African assets and reinvesting offshore.
Step 1: move your money
Of course, selling your fixed assets is not necessarily an instant solution, but some of your other funds may be easier to transfer. For example, your South African based retirement annuities, pension funds, unit trusts and other investments can be surrendered and the proceeds moved into hard currency. South African emigrants can also use their annual discretionary and foreign investment allowances for offshore transfers of South African income. Although one can use these allowances later in the year, the bleak outlook of the Rand could further impact exchange rates, which means sooner rather than later may be your best bet.
Talk to finglobal.com about your concerns
If you have funds left in South Africa, why not talk to a finglobal.com consultant for a cost- and obligation-free consultation. We can advise on the best course of action for your portfolio and offer you swift service at the best possible rates.