South Africa is facing an economic crisis like no other.
With rumours of South Africa’s rating approaching junk status and the Rand depreciating faster (54% against the US$ in the last 5 years) than the rate at which President Zuma goes through finance ministers, our financial future is looking bleak.
So, word that the South African economy is struggling isn’t exactly hot off the press.
The State of the Nation
If you’re serious about making a return on your investments, you’ll need to come to terms with the idea that keeping your funds on our shores isn’t likely to yield the kind of return you seek.
When the people or entities you trust with your future cannot (or will not) protect it in the face of disaster, you need a backup plan. Question is, do you have one?
Currently, South Africa contributes to about 1% of the global GDP – possibly even less. In 2015, it was reported that the Rand was ranked the third worst performing currency for the year, and shows little sign of improving.
When you consider what this means for the outcome of your South African-based investments, you’ll see how they risk being placed at the mercy of our current economy. If international investors don’t want to take the risk of making investments on our shores, it makes sense that we follow suit, even if that means doing so with a portion of our funds.
Keeping your wealth on South African shores could make you vulnerable to the effects of political and financial instability. You risk minimal growth and return. Add the effects of inflation, exorbitant taxes and an all-round volatile socio-political environment to the mix, and your wealth is exposed to a ticking time-bomb, and very little hope for a big return.
The way we see it, the discerning investor has two options:
The Ostrich Response
With all this talk of doom and gloom, it would be tempting to try and stick your head in the sand, hoping and praying that the issues simply go away. This response, tempting as it may be, is just risky and unwise. Come crunch time, having “all your eggs in one basket” could spell disaster.
Taking an “I don’t like to discuss politics” attitude to your investments might help you sleep a little sounder, but the state of our nation has significant consequences for the future of your wealth.
The Informed Response
With this in mind, making the decision to invest offshore now is significant. Moving your capital offshore to a tax-favourable jurisdiction is your best option under the imminent threat of these risks.
Those who have seen the signs and choose to act quickly have a chance to make their money work for them in ways they wouldn’t be able to in South Africa. Once you make your move and successfully place your money offshore, you will be able to move your funds into a range of investment options suited to your wealth management requirements. Investing in a stronger currency will help safeguard you against threats to your financial security.
Why Now is the Time to Invest Offshore
Now is as good a time as any, they say.
Diversifying your investments and moving some of them offshore gives you opportunities to access investment options that aren’t always readily available to your South African investment portfolio, thus making them making them far more inflexible.
Read more about diversifying your portfolio as a hedge against political risk.
The benefits of investing offshore are significant. Firstly, you limit your risk of being exposed to a volatile currency, political turmoil, ratings downgrades (just to mention a few). Secondly, if structured correctly, there are built-in tax efficiencies and savings on set up, administration costs and fees. Lastly, you earn investment returns in foreign currency.
With Carrick taking care of your offshore investments, you could have the tax efficiency of a pension with the protective elements of a discretionary trust.
How do I start the process of moving my wealth offshore?
First and foremost, you will need to consider the recommendations of an accredited financial advisor, so be sure to work with one that is trustworthy and qualified, and has your best interests in mind.
Our Associates treat each client’s portfolio with the sensitivity and professionalism that is required. They will complete a full assessment of your current portfolio and will be able to recommend the best options for your offshore investments.
Read more about seven things your financial advisor should be.
Don’t wait for circumstances to change before you make your move. Protect yourself now.
Contact Carrick Wealth
Tel: 21 201 1000