EXCHANGE RATES
Discretionary Allowance
The benefits of using your discretionary allowance
Offshore Property and the volatile Rand
BY ANDREW RISSIK
Offshore property investing as a hedge against local volatility
South Africa has always been deeply integrated into a capitalist international political economy . As a result , external factors in the global economy have an influence on our economy domestically . The very government that manages our economy today was born from the party that used internal tactics to influence market dynamics abroad . In the late 20th century , these strategies had powerful effects , eventually coercing the previous regime to make changes to our political landscape .
Ironically , the current government is now being punished by international markets in a similar way . The disregard for the capitalist disciplines of a modern globalised economy , in favour of a blatantly communist system based on patronage and abuse of power , influence international market dynamics where South Africa is concerned .
With this in mind , one needs to understand that as much as we may love South Africa , our local volatility is being further accentuated by this poor economic management . Post 1994 South Africa entered an era of excitement at the prospects of the rainbow nation flourishing . This has soured somewhat since then . The ANC , while in exile , learned the doctrines of a failed communist system . This , coupled with misgovernance and sometimes a total lack thereof , in combination with the end of the commodity boom and dwindling protection from a friendly international community , leaves South Africa very exposed . The country is heading for an investment crisis .
Foreign investors are also shying away due to policy uncertainty surrounding the rights of land ownership ,
as well as tough and unclear BEE guidelines and a very militant labour force . Whilst the Rand is “ cheap ”, our labour productivity is so uncompetitive that potential returns for the perceived risk are simply not worth it . The ANC is business-unfriendly and dislikes Western powers unless , of course , they need something from them .
Tax payers are put under massive strain in SA whilst the government wastes billions of Rands through incompetence and corruption . Disposable income is at an all-time low . An offshore investment should be viewed as a possible yield-generating asset that can derive a hard currency income . This would not only be good for South Africa as hard currency returns are brought back home , but good for the investor too . With all the above in mind , seeking a good offshore investment may be expensive in the short-term , but it could well pay handsome returns long-term .
How to manage your mortgage : Be wary of your gearing If you use your investment funds to purchase an offshore property and you apply for a mortgage bond abroad , you need to be sure that you will always be able to service your payments from a Rand-based income . Be aware that as international interest rates climb , the Rand could well devalue and this could put you in dire straits financially .
RESOURCES
Sable Group
60 AUGUST 2016 SA Real Estate Investor www . reimag . co . za