Why South African Expatriates Should Consider Offshore Investment Solutions

I have assisted many South African expats with their financial planning requirements, and each one is understandably proud of their heritage and their home country. However,  a common sentiment among expatriates I have found is a lack of confidence in the administration and SARS.

The Case for Offshore Investments

Many South African expatriates leave their homeland to escape economic challenges and earn a better salary for their families. Often, they work overseas while their families remain in South Africa. Given this situation, it makes little sense for South Africans to concentrate all their investments in the very economy they sought to escape.

Numerous South African clients we work with find themselves in challenging situations due to the lack of corporate benefits in remote areas of Africa and Asia. While they may earn higher salaries, they often lack clear guidance on where to invest. Habitually, they tend to reinvest back in South Africa, replicating pre-expatriate investment patterns.

However, as expatriates, you now have access to a variety of financial solutions with numerous benefits. And here is where Skybound Wealth Management add significant value.

Skybound Wealth Management vs. South African-Based Companies

Tax Benefits For Expats

Skybound Wealth Management can provide far more tax-efficient investment opportunities compared to South African-based solutions. In South Africa, retirement annuities limit international investment exposure. Offshore solutions, however, enable your investments to grow with tax advantages during the investment period and upon withdrawal, whether you retire in South Africa or elsewhere. While it is important to diversify and not completely avoid investing in South Africa, utilising the best of both local and offshore investment worlds is key.

Hard vs. Soft Currencies

Investing in stronger currencies like USD instead of the depreciating ZAR can significantly impact financial growth over time. Over the past decade, the USD has consistently outperformed the ZAR, offering more stable and substantial returns. Compound growth in a stronger currency further amplifies these benefits, allowing investments to grow more robustly and securely.

Lack of Corporate Benefits Schemes Locally

Many countries where South African expatriates reside lack corporate benefits and pension structures, leading many to invest back in South Africa. Given the current economic challenges, political instability, and the underperforming rand, concentrating all investments in South Africa can be risky. Offshore investments in stronger currencies provide more tailored financial options and greater tax efficiency, protecting wealth and ensuring diversified growth.

Security

In South Africa, financial institutions and banks do not offer capital protection. Unlike the UK’s FSCS, which protects deposits up to £85,000, South Africa has no equivalent protection. Although a law was proposed to address this, its implementation remains uncertain due to the current political climate. Offshore investments with Skybound Wealth Management can offer better security, safeguarding capital in uncertain times, with some jurisdictions offering up to 90% capital protection, which is also uncapped—ideal for long-term planning.

The Importance of Taking Action

The key to financial success is not just having great ideas but taking action. Consider the following case study:

Case Study: Johan vs. Desre‍

• Johan starts saving $1,000 per month at age 50, earning an annual return of 7% for 10 years.
• Desre starts saving $1,000 per month at age 35, earning the same annual return of 7% but saving for 25 years.

At the end of their respective investment periods:‍

• Johan’s investment grows to approximately $172,000.
• Desre’s investment grows to approximately $810,000.

This illustrates the profound impact of starting early and benefiting from compound growth over a longer period.

Connect with Kieron Donovan

A respected financial adviser at Skybound Wealth Management, Kieron Donovan specialises in helping South African expatriates achieve their financial goals. With many years experience, including significant time based in Abu Dhabi, he possesses expertise in offshore banking, estate planning, and tax-efficient investments. Kieron serves clients globally, particularly in Africa and Asia.

If you are a South African expatriate seeking more secure, tax-efficient, and higher-performing investment solutions, Kieron Donovan is here to help. Let us work together to ensure your financial future is prosperous and secure.