South African Investors Can Benefit From Going Offshore, Says Broker

by Phillip Morton, Investors Offshore.com

01 August 2005

South African investors now enjoy greater opportunities to diversify their investments offshore thanks to the recent relaxation of exchange controls and the offshore tax amnesty, according to brokerage firm Investec Private Client Securities.

In a report by Moneyweb, Investec's Raymond Goss observed that it has become much easier for the firm's clients in South Africa to achieve diversification by investing in areas not previously available through the Johannesburg Stock Exchange, including in a range of jurisdictions, currencies and asset classes.

“We all know that global diversification is an essential part of any long-term investment strategy,” he noted. “The question is why so few SA investors make use of this opportunity.”

Goss believes that a restrictive regulatory regime and the desire of investors to protect their anonymity have led many South Africans to make inappropriate and expensive investments in offshore schemes. Onerous tax reporting requirements have also made life difficult for South Africans, who face tough penalties for misreporting of offshore investments. As a result, Goss observed that most have yet to experience the natural benefits of offshore investment.

“We decided that with so many South Africans now declaring their offshore holdings or electing to take money offshore openly, we should offer a way to remove the onus of collecting information to properly file local tax returns for our clients," he explained.

In total, some 43,000 applications were filed under the South African government's offshore investment amnesty, which began in February 2003. Under the scheme, individuals were invited to declare their offshore assets without fear of prosecution in return for paying a 5% tax on money brought back to South Africa.

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