Emotion costs South Africans on cross-border investment: Andrew Rissik
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According to the latest estimate from the Rand Merchant Bank, 23,000 people leave South Africa each year, but this figure is likely to be much higher as many leavers are not part of official statistics. Push factors are well known in South Africa; crime, corruption and blackouts, but the violence of July last year and self-reflection during the Covid restriction led to another wave of South Africans leaving the country for good. Andrew Rissik, the international director of Sable International, warned that South Africans should be careful that their decisions about investments or cross-border moves are not clouded by emotion. He spoke to Biznews about the pitfalls of cross-border investment decisions.
You need to have a cool head when considering an investment or cross-border emigration
What I like to drive home in this conversation today is the things that we see with South Africans coming out of a very emotional and quite vulnerable state and making a lot of irrational decisions when investing in the ‘foreigner…
More South Africans make bad cross-border investment decisions than South Africans who make good decisions. And the reason is simple, if you look at our foreign exchange business, we move money from the UK to South Africa and we move a lot of money from South Africa outwards. Over the years I have been very involved in this business. Remember the days when Pravin Gordhan got fired and we had Des van Rooyen, the rand went to R24 to beat; I think it was 20 for a dollar. I have friends and clients who phone saying, “I want to get my money out of South Africa” and you know, absolutely the worst time to do that when the rand is very, very undervalued and that you are paying too much.
To date, and we’re talking about five or six years later; the rand has never been weaker again. Thus, the rand will always tend to go up on a long-term trend line. But at this time of watching the currency and feeling all the political pressure in South Africa, there is a lot of negativities amplified by social media and the press. People get emotional and talk about dinner; everyone talks about a plan B, let’s get out of SA. So it’s definitely something that people should do, but it’s really about timing, and it’s about taking very thoughtful steps and planning how you’re going to protect yourself abroad through of investments. If you are looking to relocate; these are all things with very different implications and potentially very large unexpected costs if you get it wrong.
For Golden visas, Cyprus is out, Portugal and Malta still going strong
Historically, there have been a lot of programs that have had a pretty bad reputation for letting disreputable rich people into the back door of Europe, it’s also very political. In October 2020, it was Al Jazeera that lifted the lid on the ongoing scandal in Cyprus, where officials are said to be bribed by mainly Russian investors and they basically buy European passports. And within a week that program was shut down, and I don’t think it will ever come back.
Countries like Portugal, Malta, always have very interesting programs and due diligence on investors is very strict, source of funds. So people like us who work in this space, it’s up to us to prove to these authorities the source of where client funds are coming from. In the South African context, this is quite easy because South Africans cannot withdraw large amounts of capital from the country without having a SARS tax clearance. And generally, if you have SARS tax clearance to move your money, then the money is taxed as legitimate money. So in our world it’s actually quite easy, but it puts a lot of pressure on the industry as a whole.
Lockdown led to ‘lock up and go’
It was an incredible time for self-reflection. I think in the early parts of COVID when this first happened the whole world was in kind of a shock for two or three months when no one was spending money, no one was doing anything . No one made any major decisions in the period that followed. I think everyone sat down and thought about what life was like.
I think there’s kind of a feeling in every country that their government has handled COVID pretty badly and maybe the grass is greener on the other side. I’ve had the privilege of traveling a lot during Covid and every country has handled it well and badly along the way. But yes, people have used the time of COVID to reassess what life is. Is this where our future lies? And we see huge pent-up demand for South Africans to leave. And I was talking to my manager the other day about our investment migration business and she told me that there’s been a marked shift in inquiries from people investigating a plan B as opposed to people who are now talking about leaving physically. And I think to some extent the riots last year played a pretty big role in that and the much publicized Zondo commission [report], where no real heavy hitter has yet gone to jail. I think people are quite disappointed. South Africans are definitely on the move right now.
Saffers heading for the Anglo-Saxon world… but not for confinement Australia
People come in with kind of a broad scope and they will look at whatever is available. What we tend to see at the end of the day is that people like to go to places where English is spoken and understood. So really the Anglo-Saxon world. We have business in Melbourne and Australia, but as you know New Zealand and Australia have been particularly tough in handling the lockdown of any overseas travel. So, it’s pretty funny; people are now turning around and saying even if Australia would take us; we would never go there because they didn’t like the way the Australian government was handling it. People have family and friends they haven’t seen in two years. And so there are all sorts of other considerations that have crept in. But the UK is very, very popular. There is no doubt; it is our largest immigration office. We handle all kinds of immigration, UK skilled visas, sponsorship visas and student visas. The UK definitely remains our number one business.
Greece has become an essential destination for property investments abroad
International real estate is something that has been close to my heart for a long time and through the investment migration sector, Portugal, Malta, etc. I have to work with many foreign property developers, and we have many clients who have actually invested in Portugal, for example, where it was purely from an investment perspective that didn’t need a golden visa. But I think if you look at it from a South African perspective, there are a few markets that we really like.
We still love the UK. I just think the UK gives you the rule of law as a business and a legal system that I think we really understand… I think the post-Brexit UK is going to do some magic stuff at the to come up. And I personally think right now they still have that post-divorce and post-COVID stress. But in three, four or five years; time, I think the UK is sailing well.
We also love Germany and we think Germany is the leader in the EU; it is a different currency area. I think the euro as a currency is a big currency. Being invested in Germany will always be, I think, for the foreseeable future the engine room of the EU and there are cities that we have selected and found really interesting investment stock.
We’re looking at Greece, funny enough at the moment, because Greece, if you invest in real estate in Greece, you can also get residency. I don’t necessarily think it will ever translate into citizenship because it’s very difficult to become Greek. But for someone who maybe wants to go and live six months a year in Greece or retire; there are also very interesting opportunities there.
UK property market, overheating in the South, London cooling and opportunities in the North
I think you have to be very careful when investing in the UK. I think the general narrative is that London is cooling off because London was probably the real estate market most affected by Brexit because there were some high profile companies that decided to position themselves in the EU. But if you look at Unilever and Shell, for example, they both recently went through the process of delisting from the Amsterdam Stock Exchange and moving their headquarters to the UK. So the UK will fight back in time and create incentives for businesses to move or stay in the UK. They won’t just lay down and let it go. So I think right now you could probably do some good business in London. So when the markets are under pressure, it’s a good time to consider investing. And then in the northern towns, the government has long-term incentives for British companies to try to decentralize and move people from the southeast corner of England further north. And I think it’s going to be a long-term game as well.
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