A smarter offshore strategy for South Africans

In an increasingly interconnected world, South African investors are looking beyond borders to diversify their portfolios and protect their wealth. However, with opportunity comes risk, especially when it comes to currency volatility, tax implications, and limited local investment options. 

Understanding the risks, not just the rand

South Africa’s currency, the rand, is among the most volatile in the world. Historically, the rand has depreciated against the US dollar by an average of 5% annually since the 1960s. This long-term trend, coupled with South Africa’s high inflation and political uncertainty, makes a compelling case for externalising wealth.

While many investors focus solely on currency risk when considering offshore investments, this is just one piece of the puzzle. There’s also the opportunity cost of not accessing global sectors like technology and consumer services, which are underrepresented in the South African market.

What does hedging really mean?

Over the long term, we expect the rand to depreciate due to South Africa’s relatively higher inflation compared to developed markets. This means that if your offshore investment is worth $5 882 at an exchange rate of R17 to the dollar (equivalent to R100 000), and the rand depreciates to R20 to the dollar, the same investment would be worth R117 647 in rand terms – purely due to currency movement. In addition to this, the actual investment return from the underlying international assets must also be considered. By holding assets in a foreign currency, such as the US dollar, euro, or pound, South African investors can reduce their exposure to local currency depreciation. 

Access to global opportunities

One of the most compelling reasons to invest offshore is access to a broader range of investment opportunities. Partnering with Glacier International gives investors access to some of the world’s best portfolio managers and sectors that are underrepresented locally. This global reach allows investors to build portfolios that are not only diversified by geography and currency, but also by industry and asset class.

Glacier International offers three main offshore solutions designed to help investors hedge against these risks and build more resilient portfolios: the Glacier International Global Life Plan, the Glacier International Global Investment Plan and the Glacier Offshore Investment Plan. Each of these solutions allows investors to externalise the rand, converting local currency into a stable foreign currency. This is the first step in reducing exposure to rand depreciation.

Depending on the chosen solution, investors can also benefit from favourable tax structures. For example, the Glacier Offshore Investment Plan, which has a minimum monthly investment of R5 000 per month, is a discretionary investment where capital gains are taxed in the foreign currency, meaning the depreciation of the rand doesn’t inflate your tax liability. Over time, this can result in significant savings.

Managing risk intelligently 

Investing offshore isn’t just about chasing returns – it’s about creating a well-balanced, globally diversified portfolio. While it’s important to be aware of factors like currency movements, geopolitical developments, and market shifts, these dynamics also present opportunities for growth and value creation. With Glacier International, South Africans can confidently explore these opportunities while complying with South African Reserve Bank (SARB) exchange control regulations when externalising funds. By diversifying the rand, leveraging tax-efficient structures, and tapping into the world’s best investment ideas, investors can build resilient portfolios that thrive over time. With Glacier International’s solutions, you’re investing with insight and purpose.

Visit Glacier here for more information or speak to your adviser about our solutions.

Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider. Sanlam Life Insurance Ltd is a licensed life insurer, financial services and registered credit provider (NCRCP43). Glacier International is a division of Sanlam Life Insurance Limited.