Considering investing offshore?
Warwick Managing Director, Marc Wiese, unpacks the options available to clients.
As we enter the month of May, I am pleased to bring you the latest edition of ‘Wealth Matters’,
where we delve into the intricacies of wealth management and financial insights tailored to meet your needs.
Firstly, I would like to express my gratitude to each and every one of you for your continued trust and confidence in Warwick Wealth. It is our unwavering commitment to serving you with excellence that drives us forward in our mission to help you achieve your financial goals.
In this edition, we will be discussing how to invest offshore or externalise one’s funds internationally.
How to Invest Offshore:
Explained in clear terms
Over the past couple of decades, many South Africans have been asking the question: “How do I go about investing offshore?”, this may appear to be a complicated and tedious process, however, following the rights steps, it can be quite straightforward.
Firstly, you need to consider whether the monies you wish to invest are currently in South Africa (in Rands) or already outside of South Africa in another jurisdiction or currency. In the case that monies are currently within South Africa, probably in a South African bank account in Rands, the following two options exist:
As you can see, an asset swap investment strategy allows for a way to gain offshore investment exposure. However, it does include risks that are outside of your control that the monies may be forced the be brought back into South Africa and could potentially be more expensive in the long term.
Direct Offshore Investment
Investing directly offshore involves utilising one’s offshore investment allowances and foreign exchange clearances to exchange South African Rands into foreign currency (for instance US Dollars). This process can be relatively complex without the correct guidance and assistance from experts in the field.
The following values are allowed to be transferred out of South Africa, per individual, per annum. It should be noted that a husband and wife may each transfer, in their own names, the below mentioned values, therefore as a married couple, the value could be doubled.
Once the required approvals and clearances have been received, the next step is to exchange the South African Rands to the foreign currency. This can be done by utilising a reputable bank or foreign exchange intermediary. It is crucially
important to understand the costs involved during this process, including but not limited to transaction costs and the ‘spread’ being taken by the company conducting the currency exchange. The ‘spread’ refers to the margin being
taken between the buying and selling price. For instance, when buying one US Dollar for R19, the institution can charge you R19.30, allowing for a cost of 30c or 1.58%.
The above-mentioned processes may seem like a complex affair, however, as the need for such services has drastically increased in recent years, there are several reputable institutions that can assist you in obtaining the required clearances and approvals and the overall process can be quite simple.
Conclusion
What solution is best? This will depend on your individual needs and requirements. Many High- Net-Worth individuals who aim to investment R1m or more generally opt to investment directly offshore rather than an asset swop, where the investment is effectively still domiciled on a South African balance sheet.
At Warwick, we meet with each client personally to discuss their financial needs and advise on the
best plan of action. We offer a client the ‘end-toend’ solution, assisting them with the required SARS and SARB clearances, foreign exchange transactions and eventually the underlying investment advice, making the process as simple and seamless as possible.
Finally, in this election month, and as we look ahead to the rest of the year, I am confident that Warwick Wealth is well-positioned to navigate the challenges and opportunities that lie ahead.
With our unwavering commitment to excellence, dedication to serving our clients’ best interests, and relentless pursuit of innovation, we will continue to deliver superior value to our clients and stakeholders.
In closing, I would like to thank you once again for your continued support and trust in Warwick
Wealth. Should you have any questions or require any assistance, please do not hesitate to contact your dedicated wealth advisor.
