Emigration Seeming Viable Option in SA

Emigration Regains Appeal

An article published in The Times has reported on the idea of emigration as holding a renewed appeal for local South Africans. A wealth survey carried out in August last year showed that 96% of people who responded thought emigration wasn’t an option. However, in the follow up interviews this year, just 75% said emigration wasn’t on the cards.

Nic Andrew, head of Nedgroup Investments said that people are also starting to pay more attention to offshore investments. People with significant assets have always been inclined to diversify their investments geographically. Exchange control has relaxed over time, which has given people more opportunity for offshore investment.

According to Andrew, “In the period when there has been opportunity for meaningful offshore investment, we have seen two major cycles. Between 1998 and 2000, as the rand depreciated people became very nervous and a large amount of money went offshore”. However, at the time, this was more of a ‘panic currency hedging’ than a clearly strategic investment.

Those who did move money offshore generally did so ‘after the horse had bolted’ and this resulted in people paying a premium as the rand hit all time lows. For the past 3 or 4 years, the industry has seen relatively little offshore investment, mainly due to the fact that investors have been burnt overseas. South Africa was also enjoying a period of above-average returns, particularly in the equity and property markets.

The second half of last year saw this change, with investors looking to diversify and then being hit by a number of emotional factors, including political uncertainty, the Scorpions debacle and the Eskom crisis. “In January, Eskom had a particularly negative effect on people living in Gauteng. Together with some rand nervousness, these factors have resulted in a significant increase in offshore investment,” said Andrew.

He added that during this time, there had been investors who had made astute investment decisions, which included appropriate levels of diversification. However, the rise and fall of offshore investment depends largely on emotional factors and is driven by popular perception of South Africa’s future.

“There are a large number of people looking at diversifying to protect their wealth as a form of insurance. In addition, there are a number of wealthy people who are either emigrating or they are deciding not to invest in South Africa,” Andrew said.

Andrew said that another consideration had to do with many investors under investing offshore over the past 4 years, who had seen significant growth in the local assets in their portfolios. Thus, some capital outflows were being seen as investors looked to rebalance their portfolios.

The information in this article is courtesy of Andrew Gillingham (“Idea of emigration retains its appeal”, The Times, 22 June 2008).

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