If you’re planning on investing or moving abroad, start now

The notion that South Africans with wealth are scrambling to move abroad seems a tad overstated.

Many want to shift a sizeable portion of their wealth abroad, but don’t necessarily want to emigrate. This is known as investment migration. It starts by diversifying assets abroad to generate hard currency income, then reaping the additional benefits that come with that, such as hedging the rand, building an offshore asset base, or acquiring a second citizenship or permanent residency that will improve their global mobility.

“Often, South Africans want to invest abroad from a diversification point of view – but when you question them, they also have a global mobility requirement and would like the option to acquire a second citizenship or residency at some time in the future,” says Richard Haller, MD of the Offshore Real-Estate and Investment Migration division at Sable International.

“For many of our clients it’s an important objective to have the ability to move more freely around the world, but to also have the financial hard-currency ability to possibly enrol their children in a tertiary institution abroad.

“They don’t necessarily want to fully cut ties with South Africa,” he adds.

For many South Africans, working aboard to gain valuable experience has always been a popular choice. Many will not return, but a growing percentage with young families want to return at some point, usually for family reasons, outdoor lifestyle and because they have always considered SA as their home, says Haller.

If you’re planning on leaving SA at some point, it’s best to start planning now.

“You ideally need to plan with an eight- to 15-year time horizon. The time horizon also depends on your reasons for leaving. If the plan is to relocate abroad for the purpose of educating your children and giving them residency abroad, that needs quite a bit of advance planning.”

University education in the UK can cost anywhere from £30 000 to £100 000 (R717 000 to R2.4 million), not counting accommodation and living allowances.

Trying to save in rands for an overseas education that may be 10 years off poses another problem of rand depreciation.

A decade ago the British pound was worth less than R18. Today, it is nearly R24, a roughly 30% depreciation.

The reasons for investing abroad are well known but worth restating: gaining access to a wider pool of investable assets and building up wealth in hard currencies.

Investment migration, or diversifying abroad, can be a valuable first step to acquiring eventual residency or a second citizenship for your family

Most popular golden visa programmes

The Portugal Golden Visa programme remains the most popular residency-by-investment programme for South Africans looking to gain a second passport that offers full EU access. Under the new Portugal Golden Visa programme rules, an investment into real-estate no longer qualifies to enter the programme but the programme is still available to those investing in approved investment and private equity funds.

“The popularity of the Portuguese Golden Visa programme is that it’s still the most affordable pathway to achieve citizenship in an EU country without having to physically relocate. This programme essentially offers parents and their children the ability to achieve Portuguese citizenship and therefore a Portuguese passport. This is an incredible investment into a family’s global mobility,” adds Haller.

The minimum investment is €500 000 (R10.2 million), all of which goes into the chosen equity investment without the need to pay property transfer fees, as was previously the case with Portugal. This can be attractive for those planning to build an offshore income for the children’s education or overseas holidays, as the investment is typically placed in a fund with exposure to well-diversified large Portuguese companies. These funds have historically yielded more than 5% a year, which means the initial investment of €500 000 could grow close to €700 000 after seven years, and with this comes the ability to acquire an EUpassport and the ability to live and travel freely within Europe.

Another residency programme growing in popularity is Greece’s Golden Visa, with an entry level investment of €250,000 (R5.1 million) into real estate outside the prime areas. There’s no obligation to relocate and no minimum stay requirements for qualifying holders of the Golden Visa, which allows participants the option to live in Greece and then travel visa-free throughout the Schengen area. Furthermore, the rental yields of carefully selected property is as high as 7%, in euros. Therefore, the investment stacks up as well against its competitors as the Greek residency which gives participants access to travel freely in the Schengen area.

Mauritius is another popular destination for South Africans as it is just a 4-hour flight from Johannesburg. A permanent residency permit can be obtained with a $375 000 (R7 million) investment in an approved real estate scheme, which includes dependent children up to age 24.

Another benefit of this programme is low tax for those who relocate, the ability to work in the country, the great beaches, excellent infrastructure and no minimum stay requirements. As long as you own the property, you have permanent residency status.

Other popular residency and citizenship-by-investment destinations are Malta, the US and Grenada – all of which have different requirements.

From a pure investment point of view, there’s a growing interest in the UK, where some real estate investments are yielding 7-10% a year – making this relatively attractive for those seeking to build wealth offshore.

“It is critical for those considering building up offshore wealth or relocating abroad that they start as soon as possible,” says Haller.

“This is not a quick process, and those who want to leave in a hurry find it very difficult to manage all the investment and visa application issues.

“We’ve helped thousands of people move abroad, and everyone will have a different set of circumstances and goals that must be taken into account.”

Brought to you by Sable International. Sable International’s investment migration team works hand-in-hand with the rest of the company to provide an end-to-end service that includes programme advice, foreign exchange, tax clearance, study abroad and more.

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