FINANCIAL
Moving your
wealth offshore
South Africa’s high net-worth investors are looking to
invest about 50% of their investable assets offshore.
SIDIMA MFEKU
required when externalizing funds via your SDA. It’s
as simple as instructing your bank to send the funds
abroad. Once the funds have been sent abroad, they
can be used for investment or travel purposes.
In addition to this, each South African resident
has an annual foreign investment allowance (FIA) of
R10m, which can be sent offshore. A tax clearance
certificate is needed in order to externalise funds via
your FIA. This is a relatively simple online application
that is done on your SA Revenue Service e-profile
platform. Once your tax clearance certificate is issued,
on presentation your bank will remit the funds
abroad.
Individuals wishing to externalise more than R10m
can do so without the requirement of bringing back
the funds on redemption. Although, it is a more
complicated application and you would need a
special tax clearance which could take up to a few
months to be issued. In addition to this, there would
be a few restrictions on the funds… and annual
reports would need to be compiled and submitted to
the Reserve Bank.
Investors using the rand for the purchase of a
property abroad may take a knock in the conversion
of the currency for the purchase, but can earn income
from other ventures and later sell the property in the
foreign currency and thus make up any perceived loss
suffered at the time of purchase.
I
t cannot be disputed that the real estate and
property market of Africa’s largest economy,
South Africa, continues to grow. The growth in
the property sector is certified by the growing em-
ployment opportunities brought to SA by the sec-
tor. However, with the political and economic insta-
bility, which tends to threaten business growth and
economic development, more investors are taking
their wealth offshore.
Investing in foreign jurisdictions (such as the USA
and some parts of Europe) is ideal as their economies
do not seem to be developing as slowly in relation
to South Africa. It’s also wise as these jurisdictions’
currencies tend to be stronger than the South African
Rand. Investing in fixed property in such jurisdictions
makes the safety of your wealth steadfast. This form
of investment gives offshore real estate and property
investors the opportunity to rent out their property
and make a profit.
When comparing the recent South African
economic recession and credit rating downgrades,
the real estate sector has proven to be recession-
resistant on a global scale and has stronger wealth
innovations, more economic stability, leadership and
government confidence than in South Africa. It is for
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OFFSHORE GUIDEBOOK 2020
this (and other reasons) that entrepreneurs and real
estate investors decide to take their wealth offshore.
Currency conversion
People have different reasons for moving to other
countries. Some are emigrating for financial reasons
and others are moving for better investment
opportunities to escape the weakening South African
Rand. It is crucial that those moving for the protection
of their wealth and business development pay extra
attention to the currency conversion policies in their
countries of origin.
The Tax Consultancy of South Africa has noted that
more individuals are moving their wealth offshore,
and the legal manager of financial emigration at Tax
Consulting SA Jonty Leon said, “the exchange control
system regulates the inward and outward flow of
money in South Africa and it affects both individuals
and companies.”
There are two options to be considered when
moving funds from South Africa. Every South African
has a single discretionary allowance (SDA) of up to
R1m, which can be sent offshore per calendar year
(January to December). No tax clearance certificate is
This allows investors to avoid further knocks from
a declining rand. This sort of solution is appealing
to South Africans because they will be taking funds
offshore and are able to establish a base of family
wealth outside South Africa, that could potentially be
added to at a later stage.
Moving wealth offshore: benefits
Even though real estate investors might be moving
their wealth offshore for wealth protection and
investment purposes, they stand to get more benefits
than they might have anticipated. The global real
estate sector horizons are limitless, with potential
unforeseen benefits that come with investing
offshore. In most cases, a property purchase may
give investors citizenship in their offshore investment
destinations. This can be beneficial for ease of mind,
mobility and security especially to someone who
travels extensively or has business interests offshore
or who have children who may wish to be educated
and work outside South Africa.
Grenada citizenship by investment
The Grenada Economic Citizenship Program,
established in 2013, is one of the fastest and most
efficient citizenship by investment programs in the
world. Qualified individuals and families can obtain
a powerful second passport in Grenada in only 2-3
months by making an approved property investment
of about R5 million or a financial contribution to a
Government fund of approximately R2,1 million.
In addition to making a qualifying property
investment of about R5 million or more, candidates
for Grenada citizenship by investment in real estate
must pay a Government fee. Groups of two or more
related applicants can also invest in Grenada real
estate together – as long as each person pays slightly
more than R3 million (plus Government fees). In order
to maintain citizenship in Grenada, investors must
retain ownership of the property for at least three
years.
USA medical real estate
In some cases, other jurisdictions might show a
different market sense of industries within the same
property and real estate sector. Residential property
might be at its peak in the South African real estate
sector and the Commercial property industry might
be showing the same in a different jurisdiction. That
said, the variation of investment industries differs
according to offshore jurisdiction. Assisting investors
from South Africa and beyond, global real estate
investment company with South African roots offers
tangible property investment opportunities in United
States’ heal care real estate to potential and growth
driven entrepreneurs. “You get to invest like the big
investors in the world and generate and earn the
same returns as the big investors would,” said CEO of
OrbVerst, Martin Freeman.
As a business-friendly economy, the United States
is one of the most favourable markets in the world
to invest in. In 2018, the US gross domestic product,
or GDP, increased by 2.9%, whereas South Africa’s
GDP experienced growth rates of 0.8% for the same
period. Growth is most certified in the US than SA.
The U.S market for medical office buildings is
thriving. The drivers of this beneficial activity are the
increasing need for healthcare services as the U.S
population ages. As healthcare providers look to better
serve their patients and stay ahead of these rapid
changes that are disrupting the traditional models of
‘sick care’, they are creating increased demand for a
new type of real estate – medical campuses or medical
malls that are closer to where patients live and work.
The high-value tenants occupying these buildings and
the need for long term leases make medical real estate
a low-risk and profitable investment with long term
reliable cash flows.
SOURCES Fin24, Investec, Economic citizenship,
Daily Maverick
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