EDITORS LETTER
A
s a South African investor, it is becoming
more difficult to find pockets of value locally.
International investments are getting very
expensive as the Rand continues to devalue. In these
volatile and difficult times, investors often turn to
property investment. But where should you invest?
And will you be able to service your mortgage in the
face of rising interest rates and currency volatility?
The consensus is that most investors are currently
risk averse. Things in the US are looking good one
moment and then somewhat glum the next. The UK
and Eurozone are dealing with their own economic
malaise, with the Brexit vote. As a result, markets
are extremely volatile. Investors and traders alike are
keeping liquid positions while flipping currencies
and waiting for some firm ground to materialise.
These conditions, together with political
ineptitude, the worst drought in over 20 years and a
commodity cycle that refuses to pick up, have dealt
some serious blows to the South African Rand. The
incredible Rand slump, precipitated has made many
question whether they should hold any ZAR.
The collapse of the Rand over the last few months
has led to a lot of South Africans sending their
money offshore. When panic strikes, going offshore
may seem like the correct thing to do, but it should
be remembered that there are huge costs in investing
offshore for South Africans right now. There are also
several tax implications that need to be considered
and if investors are careless they could end up getting
their fingers burned.
North of South Africa’s border, there is solid
demand for property within a country’s economic
hubs. We see this in throughout Southern Africa
in cities like Harare, Lusaka, Luanda, Windhoek as
well as Johannesburg and Cape Town. While the five
countries in which these cities are located all struggle
with various economic and political difficulties,
their metropolitan property markets have remained
strong.
The allure of holding non-Rand denominated
assets offshore needs to be carefully weighed against
the costs of doing so. You must also factor the current
turbulence of global markets into this. If you don’t
have a lot of capital, you could quite easily find
yourself in a sticky situation should your offshore
portfolio underperform.
Enjoy the Read
Drew Hook
Endless invention, endless experiment,
Brings knowledge of motion, but not of stillness.
www.reimag.co.za
T.S. Eliot
Offshore Handbook 2016
3