South Africans Offshore Investing. Protecting Your Rand Income
Ever thought of investing offshore from South Africa. Here’s my take in it…
South Africa has been good to me and I’m fairly sure it’s been good to you. The southern end of Africa (including Botswana, Namibia and Swaziland) has such an abundance of wild life, beautiful scenery, amazingly diverse people and climate variations there’s simply something for almost everyone to fall in love with. In other words, who wouldn’t want to spend their life with one foot in the Atlantic and the other in the Indian Ocean? Did you suddenly visualise yourself sitting on a wooden jetty at Cape Point cooling your feet in the salty water where the oceans converge? (If not before, you just did it now).
If you agree with my rose tinted attempt at winning ‘tourist ambassador of the year’ you may be a little resistant to my next assertion that, while living in Southern Africa is glorious, a Large Percentage of Your Money should be invested offshore. I hear you “why, what’s the problem?”
Why South Africans invest offshore
If we start by ignoring everything that our local SA news stations try to terrify us with, on a daily basis, the South African stock market offers little more than just 1% of all the global equity investment opportunities. That means (yes, you guessed it) around 99% of all equity investment opportunities reside offshore, in other countries. Clearly, as it currently stands, the combined USA exchanges total over 40% of world equity capitalisation, followed by Asia (China, Japan, Hong Kong etc.) at approximately 33% of global listed valuations, with Europe (the UK, Germany etc.) trundling along at a combined total of around 20%. So as South African, if you have no offshore investment exposure to those three major regions you are missing out on 93% of the offshore investment opportunities. Recent stats value the Global Equity market at $70 Trillion!
“Who cares?” you might be saying, because South African property offers great returns (or did for a long time) and you can ‘touch’ it. There is, of course, a lot of comfort in that and, yes, many of you have made good money (in nominal, if not real, terms) from your ventures into real estate. However, once again, the Big Cash Generating Cathedrals have their foundations in distant lands. While this is a hard market to measure, most estimates currently peg the Global Listed Property Market around $8.5 Trillion. The Gorilla is (yip!) the USA at 35% of the pie, Japan at 9%, UK at 8%, then Germany and China around 6% each. While there’s no denying that South Africa has, during certain periods, yielded excellent property returns, it only weighs in around the baby chimp size of 0.6% in Global Listed Property jungle.
Why South Africans are investing offshore
If you accept the above, as an illustration of potential ‘opportunity cost’ I could now, swiftly, move on-to adding fuel to the fire of local SA news about corruption, violent crime, fiscal mismanagement and mafia types masquerading as socialist crusaders but, I suspect, the media has already ‘done that number’ on you. Enough said.
Many of you may now have tippled why I’ve titled this piece ‘Protecting Your Rand Income’
Size of offshore investing company; while we know that smaller offshore boutique firms can often attract some of the most talented managers we simply want to see if they have crested the wave of long-term solvency.
Stability of offshore company; it’s well know that if a business can survive for 5 years it is probably past the ‘bad idea’ risk. 10 years are better and 20 years are better still.
Compliance of offshore investment company; in the past it was far too easy to be heavy on marketing and low on administration. That’s all changing with the rise in offshore investor regulation but, as you know, ‘sharks don’t enjoy changing their spots’ or some adage like that?
Performance; offshore investment management is one of the few professions that searches for guys and gals with grey hair. Let’s face it, you can only have a track record if you’ve spent a bit of time on the track. In my 36 years of connection with the offshore investment markets I have found that the more mature Bulls have learnt a lot about Bears and how to handle them without too much ‘snot n trauma’.
- Your best offshore investing options
- Top offshore investment companies
- Offshore investments tax implications
- Benefits of offshore banking
- Offshore investing risks and rewards
- Offshore investing advantages and disadvantages
- Offshore investing tips
- Types of offshore investments
- Trends within offshore investing
Jim Millar, Managing Director, Financial Fitness
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