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Living abroad with financial interests back in South Africa means you’re probably used to living and thinking in two currencies and making international money transfers. But have you ever stopped and given much thought to what foreign exchange actually entails?  How do you transfer money from South Africa overseas? Let’s take a quick look at foreign exchange and how to use it.

International Money Transfer From South Africa

What is foreign exchange?

The foreign exchange market is the largest securities market in the world, but it has no centralised location. Instead, the forex market consists of a digital network of banks, brokers, international institutions, and individual traders who trade mostly through brokers or banks themselves.

Foreign exchange (aka “forex”) refers to the process of converting one currency into another currency for a variety of purposes, such as commerce, trading, or tourism. It’s a process that sees more than $5.1 trillion in daily forex trading volume according to a 2019 report from the Bank for International Settlements, which is a global bank for national central banks.

How does FOREX work?

  • In a free economy, each participating country’s currency is priced according to the laws of supply and demand.
  • One currency’s value can be linked to another country’s currency, like the U.S. dollar, or even to a cluster of currencies.
  • The value/price of currency is known as an exchange rate, which is determined by the market.
  • Currencies are listed in pairs for exchange purposes – such as USD/ZAR, EUR/USD, or USD/JPY.

How do I transfer money from South Africa overseas?

First, you have to consider: how much money can you transfer out of SA?

As a non-resident, there is no limit to the amount of money you can transfer out of the Republic to a global destination, save for the fact that you’ll need to be able to verify the legitimacy of the source of your funds. As a South African resident for exchange control purposes, you are limited as to how much money you can shift offshore annually.

Foreign investment allowance (FIA):

  • Lets you move R10 million per person per calendar year.
  • Transfer requirements: 18 or older, obtain a Tax Clearance Certificate  – FIA from SARS and have a green bar-coded South African ID book or a Smart ID card.

Single discretionary allowance (SDA):

  • Lets you move R1 million per person per calendar year.
  • Transfer requirements: 18 or older, with a green bar-coded South African ID book or a Smart ID card. No tax clearance required.

If you’ve been using your bank to make international transfers purely for the convenience factor, it might be time to rethink this strategy and save yourself some money. South African banks might offer secure global wire transfers, but making use of this facility isn’t cheap. Surprisingly, banks offer lesser exchange rates, higher fees and less choice in how you send and receive cash when compared with a money transfer/forex service.

Factors to consider when making an international money transfer from South Africa

How will you know you’re getting the best deal when it comes to making international money transfers from South Africa abroad? These are some of the factors you’ll want to consider and compare:

Exchange rates:

  • Almost all forex providers angle their exchange rates to make a profit.
  • Compare your offered rate with the mid-market rate (which is the price that financial institutions use when transacting between themselves) and then hunt for the rate with the smallest difference (margin) between them.

Transfer fees:

  • You’ll want to know how you’re going to be charged – flat fee or a percentage of each transaction?
  •  Flat fee is generally best, but if you’re transferring a large amount, it’s worth asking if you qualify for a fee-free transfer.

Payment and effective delivery options:

  • Certain transfer facilities give you the choice of paying (sometimes by phone or through an app) with a bank transfer or using your credit card – investigate your options so you can minimise the hassle.
  • Find out how you can receive these funds abroad – directly into your bank account, cash pickup, mobile money transfer and so on.

Transfer speeds:

  • You’ll pay more for speedier clearance, but if you have more time you can shop around for  better rates and fees.

Flexibility in transfer options:

  • Investigate the potential cost-saving in scheduling repeat payments or protect your international transfer against fluctuating market rates with a limit order or forward contract.

Transfer limits:

  • Aside from the applicable exchange control limits in South Africa, other international money transfer providers can impose a minimum/maximum transaction limits.

Transfer destinations:

  •  Check to see if the providers you’re considering will allow you to send money from South Africa to your intended destination.

Customer support:

  •  Most companies offer customer service via online chat, phone, in person, or by email. It’s worth checking whether a company’s help centre is located in South Africa or overseas so you can make sure help will be available if you need it.

Security:

  • You want to know your money is in safe hands, especially when you’re transacting online.

 Tax compliance:

  • If you’re transferring large amounts of money from South Africa, will your service provider handle any necessary compliance steps, ensuring that you’re compliant with your tax authority?

FinGlobal: Forex experts for South Africans

If hunting down the best foreign exchange rate every time you want to make an international money transfer from South Africa sounds like hard work… you’ll be pleased to know that it’s hard work that can be outsourced. FinGlobal is here to walk you through the foreign exchange process and make your transfers simple and hassle-free.

FinGlobal offers highly-competitive exchange rates, security, convenience, transparent fees and unparalleled personalised service on every transaction. Get in touch to discuss your foreign exchange needs today!