Offshore Investing: At The Right Time And For The Right Reasons

Yes, there are many uncertainties in South Africa. But looking for opportunities to invest in foreign markets should not be borne out of fear of what’s happening at home. The JSE makes up just less than 1% of the world’s investable assets, making offshore diversification a smart investment choice. And there are plenty of options for South Africans to consider. Just make sure you choose them for the right reasons.

- Brendan Peacock

Many a legend has been told of rich South Africans smuggling rands out of the country on yachts or planes at the height of apartheid when sanctions began to bite, inflation was rising and the currency started losing ground against the dollar.

While exchange controls prevented much wealth from leaving the country in the bad old days, these days, for the average South African in practical terms, there are no limits to geographical portfolio diversification. What has tended to keep many South Africans from investing in offshore assets has really been the amount of administration involved, potentially raised costs and double taxation.

For most, the diversification inertia has worked out just fine – the JSE has, over the last few decades, delivered returns that have allowed local investors to ignore foreign territories. Every time the rand weakens there is talk of offshore options, but fund flows have not matched the carpark economics.

Now, though, the situation seems different. Analysts, in talking about the latest wave of sentiment in the wake of local politics, a worsening local economy and massive unemployment, keep referring to “capitulation” of belief in the country’s prospects. And, looking at customer decisions and fund flow statistics, it seems like South Africans have started putting their money where their mouths are.

Galileo Capital executive director Warren Ingram acknowledges that the JSE has turned in a stellar performance in the first six months of 2019, with the All-Share Index returning around 12%. But, he says, take away Naspers* and the mining stocks that have benefitted from rand weakness and the picture changes. What’s more, since the end of June the JSE has retraced several percent.