Since Minister of Finance Trevor Manuel’s easing of exchange controls in February, First National Bank (FNB) reports a renewed interest by South Africa’s newly emerged elite in investing offshore.
“The near-threefold increase in the foreign capital allowance has spurred interest in investing abroad, from both local residents and also emigrants whose assets have been blocked inside the country up to now,” comments Lovemore Fuyane, who heads up the retail segment of FNB International Banking.
This one-off investment limit of R2-million is applicable to private individuals who are taxpayers in good standing and over the age of 18. To qualify for the investment allowance, a tax clearance certificate must be obtained from the South African Revenue Service.
A foreign-currency account (FCA) must then be opened at a local bank to hold the preferred currency. Alternatively, the funds can be transferred offshore for other investment purposes, subject to international management fees.
While Manuel’s increased foreign capital allowance gives South Africans more flexibility and scope in managing their investments, it also stands to benefit people wishing to leave the country. Emigrants who previously had to apply for the release of blocked funds subject to an exit levy of 10% now stave off that levy until a bigger cut of their funds has been transferred.
“Previously, a typical family unit was able to transfer up to R1,5-million offshore on emigration. This limit has now increased to R4-million. Similarly, the foreign capital allowance available to a single person has also increased from R750 000 to R2-million,” adds Fuyane.
“However,” he warns, “it is important to note that if any part of the capital allowance has previously been utilised for investment purposes, this amount will be deducted from the amount available for emigration.”
Should emigrants wish to release a portion of their blocked funds in line with the latest increase in capital allowance, but prefer to remain exposed to the rand and local markets, it is possible to open an FCA to facilitate this.
Fuyane concludes: “This is an attractive option, due to the recent performance of the rand against major currencies and the performance of the local markets and international markets of late, and effectively allows the emigrant to invest in local markets as a non-resident.”