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What are your financial options during a recession?

By September 10, 2018February 1st, 2023Financial emigration

What are your financial options during a recession?

September 10, 2018


The decline in South Africa’s GDP of 0.7% in the second quarter of this year indicates that South Africa has just entered a technical recession. This decline follows hot on the heels of a first-quarter GDP decline of 2.2%. In economic terms, a technical recession is two consecutive quarters of economic decline. Stats SA, which released the latest GDP data on 4 September 2018, reports that the largest negative contributors to the decline in GDP growth in the second quarter were agriculture, transport and trade.

Rand continues its downward trend

The rand was already plummeting prior to the announcement made by Stats SA, with international investors fleeing from any economy that is deemed risky. The declaration that SA is now in a technical recession has furthered the rand’s decline, with the rand falling to R15,23 by midday on 4 September 2018, when the announcement was made by Stats SA. According to Bloomberg, the pressure on the rand could continue to worsen due to traders’ concerns regarding the land reform issue and the far-reaching consequences it may have.


How to hedge your bets

Whether the rand will continue to fall is anyone’s guess, but many South Africans are choosing to place their money offshore to protect it from further rand declines.

1. Offshore allowances

The simplest way to transfer money abroad is by using your allocated offshore allowances. Every South African over the age of 18 has two allowances they can use to transfer funds from South Africa abroad:

  • Single Discretionary Allowance
    As a resident, you may transfer a total of R1 000 000 from SA every calendar year. Please note that all card transactions while you are abroad are included under this allowance.
  • Foreign Investment Allowance
    As a resident, you may also use this R10 000 000 allowance per calendar year. A tax clearance is required from SARS. This tax clearance is associated with the Foreign Investment Allowance and differs from a normal ‘good standing’ tax clearance.

This means that cumulatively between spouses you are allowed to remit R22 million offshore on an annual basis. You can even transfer larger amounts offshore; however, it can take up to six months to obtain approvals from the South African Revenue Service and the South African Reserve Bank.

2. Financial Emigration

Financial Emigration enables the free flow of your funds from South Africa. This process can take place when you leave South Africa, or once you are living abroad. It simply means that your financial status changes from South African resident to ‘non-resident with the South African Reserve Bank (SARB). You will not lose your South African citizenship or your passport and does not affect your right to reside in South Africa.

The benefits of financial emigration are substantial. As a financial emigrant you may transfer offshore:

  • The proceeds of your retirement annuity, even before age 55.
  • South African source inheritance
  • The proceeds of assets declared in your emigration application
  • Passive income, i.e. rent, dividends, director’s fees, salary for services rendered in South Africa and income from discretionary or vesting trusts
  • Proceeds from a third-party life policy

How to ensure excellent exchange rates

All foreign exchange transactions in South Africa are subject to exchange control regulations, which are governed by the South African Reserve Bank. As a foreign exchange intermediary approved by the South African Reserve Bank, FinGlobal is able to offer you complete peace of mind when you move your money offshore.

Our total solution provides you with:

  • Excellent exchange rates
  • Low fees
  • Unrivalled personal service
  • Free exchange control advice
  • Signature-ready documentation
  • Secure and compliant processing

For a free consultation about moving your money offshore and the process of financial emigration from South Africa, contact us today.

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