The Benefits Of An Offshore Bank Account

An offshore account holds numerous benefits, and it is not as time-consuming, complicated or expensive as you think.

- Magnus de Wet

Investors wanting to get offshore exposure in their portfolios can either take their rands offshore and invest (for example by buying the S&P 500 exchange-traded fund on the New York Stock Exchange) or invest locally in a rand-denominated offshore investment (like the CoreShares S&P 500 ETF on the JSE). In theory, the returns from either investment option should be exactly the same with a slight difference in taxes and tracking error from the ETFs. In the case of the latter option though, your returns from the investment are still in rand, with your rands never actually leaving the country.

Rand-denominated investments are also not affected by exchange controls, which limit the amount you can take offshore. In short, South Africans are currently allowed to take up to R10m a year offshore subject to tax clearance, and up to R1m without a tax clearance certificate. For a normal investor, this should not pose a problem, and the current exchange control limits would only affect the very wealthy. There is of course a risk that the government can reduce the exchange control limits overnight.