Building Your Offshore Portfolio

Many investors have been rattled by the recent downgrades of South Africa’s credit ratings. However, this does not mean you should just move money out of the country willy-nilly – be sure to weigh up the myriad options carefully before making a move.

- Mariam Isa

Sustained strength in the rand is presenting South Africans with an opportune time to invest offshore, but the step should be taken as part of an overall strategy rather than a mad dash to escape political uncertainty at any cost, financial planners and fund managers say.

There has been a rush to take money out of the country since President Jacob Zuma unexpectedly axed former finance minister Pravin Gordhan at the end of March, triggering two credit rating downgrades that undermined fragile business confidence.

The rand has withstood the shock well, supported by capital inflows into emerging markets, which offer investors better yields than those in developed economies, in addition to what is described as a “risk-on” global environment. (Also see page 22.)

At levels of around R13.60 to the dollar, buying foreign currency is far less costly for South Africans than it was a year ago, when the rand was trading at around R16 to the dollar. There is a chance it could strengthen further, but possible shifts in economic policy and further credit rating downgrades make that scenario unlikely.

“Now, as it stands because of what South Africans are experiencing in the political sphere, people are taking much more offshore,” says Desiree Raghubir, a certified financial planner at BDO Wealth Advisers. “From an exchange rate point of view now is a good time, but if there is that panic setting in, we would encourage clients to look at their portfolio without emotion,” she adds.

Stick to strategy