Second passports ‘no longer just talk’

Henley and Partners on second citizenships

Nigel Barnes, Managing Partner at Henley & Partners

The recent credit downgrades by Fitch and Standard & Poor’s ratings agencies, and the potential effects of junk status, has wealthy South Africans seriously reviewing the available options for diversifying their personal interests and investment assets beyond the country’s borders.

“We’ve certainly noticed an increase in local enquiries in the last couple of weeks,” says Nigel Barnes, Managing Partner at Henley & Partners, a residence- and citizenship-planning consultancy that services wealthy individuals and families, as well as their advisers, all over the world.

“I think that concerns over the future growth and development of South Africa, and uncertainty about the sustainability of sectors, such as education, is finally driving South Africans to assess their alternatives in earnest. In short, they are now acting on their concerns, rather than just voicing them amongst family and friends.”

Barnes points out, however, that current trends are really just an uptick on what has been a steadily growing local interest in investment migration over the last few years. In fact, it was this rising demand for alternative citizenship that prompted Henley & Partners to launch a regional branch in the country towards the end of 2016 (before that, the firm serviced South African clients largely through its London office).

He adds that this interest is by no means unique to South Africa: “Wealthy citizens from most emerging nations have woken up to the benefits – from global-market access to future security – of obtaining a second, or even third, passport. Add to this the potential impact that major recent events – including Brexit and the election of US President Donald Trump – could have on transnational mobility, and it’s not surprising that they are taking steps to ensure freedom of movement, which most consider a crucial factor in deciding their wealth management and sustainability strategies.

Data from New World Wealth supports Barnes’ observation. According to the market-research firm’s 2017 Global Wealth Review, some 82,000 high net worth individuals (HNWIs) migrated in 2016, up from 64,000 in the preceding year.

Barnes notes that, of late, there has been a particularly significant increase in enquiries from HNWIs from other African countries. “This is hardly remarkable given that the continent’s citizens are, on the whole, the most restricted in the world when it comes to movement,” he explains.

Over the last decade, African countries account for 16 of the 20 biggest fallers on the annual Henley & Partners Visa Restrictions Index, a ranking of the world’s countries based on the degree of travel freedom enjoyed by citizens, which the firm produces annually in partnership with the International Air Transport Association. In fact, on the 2017 Index, released last month, Africa suffered the most dramatic decline of all the continents.

Where to from here?

“Of the several international investment-migration options currently endorsed by Henley & Partners, the Malta Individual Investor Program (MIIP) is the most successful of its kind in the world, and one of the most popular with South Africans,” says Barnes.

A Maltese passport offers its holder the right of settlement in all 28 EU countries as well as Switzerland. “For those seeking European citizenship that can be passed down unlimited family generations (even dependent parents aged 65 and older may be included in the application), this is a very attractive programme – and the only one of its kind to be sanctioned by the EU.”

While the firm also consults on various global residency-by-investment programmes, including those offered by Malta, Portugal, Cyprus, Australia, Canada, the UK and the US, the majority of its clients have no intention of permanently relocating, Barnes points out, adding that there is no need to do so either. The citizenship-by-investment programmes offered by some of the island nations in the Caribbean, which are among the most competitive in the world, have no residence or visitation requirements at all, he explains.

“Take citizenship to St Lucia, where we recently opened an office (our fourth in the Caribbean): a St Lucian passport can be obtained from as little as USD 100,000 (for a single applicant) and grants visa-free access to 127 countries, including the EU’s Schengen area, the UK, Singapore and Hong Kong. Grenadian citizenship, meanwhile, requires a capital outlay of between USD 200,000 (non-refundable contribution) and USD 350,000 (property investment), and offers unrestricted access to 124 countries, including the UK, the Schengen area, Brazil, China and other key markets. The country also holds an E-2 Investor Visa treaty with the US, allowing citizens to be eligible to apply for a non-immigrant visa. Neither programme has any residency or visitation requirements, and processing for either passport can take less than four months. And, as with Malta, citizenship is transferrable by descent.”

He emphasises that Henley & Partners is not in the business of convincing South Africans to flee the country: “Yes, a second passport is certainly a hedge against future uncertainty, not just for the applicant but also for his or her family. But dual citizenship is more than just a plan-B exit strategy. It can also provide freedom to move within the broader market, which, as the world becomes ever more globalised and people live and conduct business on a progressively more international scale, can confer a decided edge.

“Our firm focuses on providing long-term sustainable solutions that will significantly enrich the lives of global citizens,” he says. “We offer a needs-based solution and don’t charge clients for an initial consultation. However, we only enter into contract with those who we are convinced we can assist.”

 

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