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The South African exchange rate tends to fluctuate quite quickly and has done so over the past year. From the economy to unemployment, and now Covid-19, the value of our currency often seems more on the proverbial dip than on the upward rise! It’s no wonder that South Africans emigrating are concerned they may not get enough bang for their buck when they transfer money out of South Africa.

What affects exchange rates?

Let’s be honest; absolutely everything affects the value of our hard-earned money! For example, according to FOCUSECONOMICS, the rand hit an eight-month high in November 2021. This was due to positive results seen with Covid-19 vaccine developments and the presidential election of Joe Biden.  But, while this was very positive news for South Africans and their pockets, it didn’t take long for things to take a downward dip with the announcement of the Covid-19 Omicron variant. Spotted where? Right here on our sunny shores!

Currencies and how they affect exchange rates

Some countries have pegged currencies (or fixed exchange rates) meaning their currency is fixed to another currency or precious metals and materials. For example, the Namibian dollar and Lesotho loti is pegged to the South African rand.

However, most large countries use what’s called a floating exchange rate system. This is where the value of the currency is determined by the foreign exchange market. Currency fluctuations are influenced by foreign investment, inflation, import and export ratios and speculation. While the advantage of a floating currency is that it accurately reflects current inflation and the economic situation, this type of currency can negatively impact poorer countries. Often this is because poor economies suffer from inadequate foreign investment.

South Africa uses the floating system. Therefore, Saffas are very aware of how these steep exchange rates continue to affect the precious few pennies left in the bank! 

Cost of exchange rates

The cost to transfer money from South Africa can be pretty pricey. Besides the actual price of the currency you are buying, you will pay transfer fees in most cases. Additional fees may be attached to the method you use to transfer your funds.

Things to consider when moving funds

To avoid unnecessary expense, there are a few things to consider when shopping for the best exchange rate.

  • Shop around

Compare each provider’s exchange rates and fees; this will ensure you get the best price possible.

  • Transaction size

Moving small amounts of cash might prove too costly. Research providers that facilitate smaller transactions and charge lower fees.

  • Extended time frame

Ask the provider if it is possible to lock the exchange rate offered to you and allow the transaction to take the maximum amount of time to complete. This may save you money on fees.

  • Lock the rate

Some providers give you the option of locking the rate. This means that the price you are quoted to purchase the foreign currency remains the same even if the stock exchange rises or falls. This can prevent unexpected costs should the exchange rate change.

Transferring funds out of South Africa

Aside from the exchange rate and costly fees incurred, the exchange control regulations limit the amount you can transfer out of South Africa. These can be quite confusing and can result in financial penalties or a criminal charge if breached. Let’s take a brief look at this.

Funds transferred out of South Africa are subject to the below foreign exchange limits.

  • Foreign Capital Allowance (also referred to as the Foreign Investment Allowance) (FIA)

Ten million rand may be transferred per annum, a tax clearance certificate is required.

  • Single Discretionary Allowance (SDA)

One million rand may be transferred per annum; no tax certificate is required.

  • Special Allowance

Unlimited amounts may be transferred, but you need a tax clearance certificate, and an application must be made to SARB (South African Reserve Bank) for them to consider.

Moving funds abroad can be pretty complex, especially when considering all the fees, limits, and regulations involved. Therefore, if you’re looking to move your
Saffa Rands abroad, it’s probably best to request assistance from those who have a good understanding of FOREX and the rules and regulations. That’s where FinGlobal South Africa come in; our services are easy to use and competitively priced.

Expert advice for SA expats right here at FinGlobal

FinGlobal provides sound financial emigration advice to expats globally. Whether you are at the beginning of your emigration journey or already settled on foreign shores, we are your link to all things emigration.

For fuss-free advice regarding FOREX, pensions, retirement annuities, and tax, the FinGlobal team are waiting to assist. With us, you are guaranteed professional and accredited advice backed by industry experience that spans more than ten years. To discuss your unique needs with our team, simply get in touch with us. Give us a call on +27 28 312 2764 or send us an email at info@finglobal.com, and we will assist you promptly.