Never let a good crisis go to waste

How offshore investing can and should be done.

“Never let a good crisis go to waste” – Winston Churchill. These words were spoken during the bleakest moments of WW2, yet they hold so much truth and hope. In times of controversy and change there is always opportunity.

Offshore investing is a term often used, but that means different things to different people. This can lead so some confusion that will hopefully be clarified today. In Europe, this term usually refers to making use of tax havens to invest your funds whereas in South Africa, the meaning is to diversify your portfolio by including offshore assets.

The PSG Wealth R21 team is experienced in advising clients on offshore solutions.

Today, I would like to explain how and why offshore investing can and should be done.

1. Diversification

Including offshore exposure in your investment diversifies risk across different economies, different regions, sectors, securities and fund managers. Locally, we have approximately 1 300 funds registered with the Financial Sector Conduct Authority (FSCA). Globally, there is more than 200 000. Looking at stocks, there are roughly 350 listed on the JSE’s main board, compared to 60 000 globally.

Just as asset classes behave differently in different market cycles, the same diversification of risk applies to different economies and regions – when one is under pressure, another might be doing well.

Source: PSG Wealth

2. Hedging against a weak rand

Protecting yourself against the longer-term depreciation and volatility of the rand is another benefit. Be sure not to try to time the market when investing offshore, as exchange rate movements – especially with the rand volatility – are very difficult to predict.

3. Using offshore investments when working or traveling abroad

With many people globalising their lives by either living or working (or both) abroad, structuring an offshore portfolio for your earnings and spending offshore can be beneficial.

How do we do this?

There are several ways to invest offshore or to increase your offshore exposure. I would advise speaking to a financial advisor to discuss which route is more suitable for your needs as making the wrong decision can be costly and incur unnecessary taxes.

Option 1 – Asset swap (Feeder Fund consideration)

An asset swap account allows a range of entities (for example individuals, trusts, companies, partnerships and joint account holders) to invest offshore without making use of their foreign allowance. Instead, the investor uses the asset swap capacity of the service provider.


  • No Sarb approval needed.
  • No foreign allowance used.
  • Available within 48 hours.
  • Investment can be made within a SA trust.
  • No probate or executor issues.


Under the jurisdiction of South African Reserve Bank’s (Sarb) limited fund choice.

Investment allowance:

Not applicable with this option – meaning no limit.


Locally, in rand only.

How to invest:

Asset swap funds are available on all major local investment platforms. Our preferred platforms are PSG, Allan Gray, Investec, Momentum, and Glacier.


Capital gains tax (CGT) will be payable at your effective tax rate on the disposal of units/shares. This can be discussed in detail with your advisor.

Estate implications:

Holding asset swap assets is less complicated from an estate planning perspective, as in some cases there is no need to consider foreign legislation.

Option 2 – Direct offshore investing

South Africans are allowed to invest up to R10m offshore every year, subject to tax clearance, and up to R1m a year without tax clearance.


  • No South African jurisdiction or authority over these assets.
  • A much larger investment world available with more funds and stocks to choose from, and fund managers with more assets under management.
  • Complete diversification from your SA portfolio.


  • Involves more paperwork and requirements.
  • Investments above R10 million per annum require tax clearance.
  • Potential probate and inheritance tax issues.


For South Africans the offshore investment allowance is R10 million per year.

How to invest:

Direct offshore investments can be made through a number of platforms. I recommend speaking to a financial advisor about this. Investors can choose to invest in either unit trusts or shares.


CGT is determined in the foreign currency before the gain or loss is converted into rands. The result is that currency movements over the investment term have no impact on CGT.

Estate implications:

Consideration must be given to foreign legislation. Specialist fiduciary and tax planning services may be required. I recommend speaking to an offshore trust and tax specialist as well.

Offshore investing not only offers an opportunity, but is definitely recommended as part of a diversified portfolio. If there is one thing we have learnt in the past year, it is that the world is one big village! Why should your investments not also have global exposure? Remember offshore investing is a specialist area and a reputable financial advisory service, like PSG Wealth R21, can provide you with expert advice.

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“…Remember offshore investing is a specialist area and a reputable financial advisory service”

That’s part of why EasyEquities exists

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