EXCHANGE RATES
Investments for the Brave
Servicing Rand debt with foreign assets
BY ANDREW RISSIK
As a South African investor , it is becoming more difficult to find pockets of value locally . International investments are getting very expensive as the Rand continues to devalue . In these volatile and difficult times , investors often turn to property investment . But where should you invest ? And will you be able to service your mortgage in the face of rising interest rates and currency volatility ? Well , there may be a way …
When panic strikes , going offshore may seem like the correct thing to do , but it should be remembered that there are huge costs in investing offshore for South Africans right now
The current situation The consensus is that most investors are currently risk averse . Things in the US are looking good one moment and then somewhat glum the next . The UK and Eurozone are dealing with their own economic malaise , with a possible “ Brexit ” being only one of many problems . As a result , markets are extremely volatile . Investors and traders alike are keeping liquid positions while flipping currencies and waiting for some firm ground to materialise .
These conditions , together with political ineptitude , the worst drought in over 20 years and a commodity cycle that refuses to pick up , have dealt some serious blows to the South African Rand . The incredible Rand slump , precipitated - but by no means solely caused by - Nene-gate , has made many question whether they should hold any ZAR .
The collapse of the Rand over the last five months has led to a lot of South Africans sending their money offshore . Many of these investors , particularly in the small-to-medium range , were convinced to pull as much as they could offshore , as quickly as possible .
When panic strikes , going offshore may seem like the correct thing to do , but it should be remembered that there are huge costs in investing offshore for South Africans right now . There are also several tax implications that need to be considered and if investors are careless they could end up getting their fingers burned .
Think local , think property
Something we ’ ve noticed over the last few decades is that even north of South Africa ’ s border , there is solid demand for property within a country ’ s economic hubs . We see this in throughout Southern Africa in cities like Harare , Lusaka , Luanda , Windhoek as well as Johannesburg and Cape Town . While the five
60 JUNE 2016 SA Real Estate Investor www . reimag . co . za