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Emigrating or semigrating?

Two trends playing out in a troubled country.

Trend: A general movement over time of a statistically detectable change – Merriam-Webster dictionary.

Sometimes you become aware of a trend way before it is reflected in the official statistics. You hear things at a dinner party or over drinks. And when, over a period of time you hear the same things from various sources all the time, you sense that a trend, unreported as yet, is starting to develop.

People who are successful at identifying these trends early often turn them into an advantage for themselves. Sometimes these trends are screaming at us but, for a variety of reasons, we fail to recognise them or act on them too late.

‘Semigration’

One such trend is people ‘semigrating’ to the Western Cape. For years now it’s been one of the more noticeable trends in South Africa: people moving from Gauteng to either Cape Town itself or to one of the many spectacular areas within a 50-kilometre radius of the Cape Town airport.  

At first it seemed to apply to retired people; Somerset West must be the largest retirement village in the country. But in recent years the nature of this trend has changed. More and more younger families are packing their bags and heading south, for a variety of reasons.

Firstly, technology and the ability to work from almost anywhere in SA, enables entrepreneurs and professional people to work where they choose. Some do it from Mauritius, the UK or even as far as Australia, but the lure of good schools in the Cape and family ties tends to limit that option for those who still have school-going children.

Cheap flights have added to this movement: a quick two-hour flight, a short ride on the Gautrain or taxi, depending at which airport you land, and you are sitting behind your desk in Sandton, Bryanston or Sunninghill. I have witnessed first-hand the Monday morning rush-hour from Cape Town airport to either OR Tambo or Lanseria up north. A bit more expensive and a lot more taxing on the body, but folk who make this weekly sojourn insist it’s well worth it. Less crime, less traffic and a more wholesome lifestyle than that on offer in the greater Gauteng area.

Also, did I mention that the DA-controlled Western Cape is a lot better managed than the other eight other provinces in the country?

This move down south has for many years been described, tongue-in-cheek, as ‘semi-gration’. People not wanting to leave their country of birth but definitely wanting to move to a place that is perceived as a safer and better option.

And it’s not merely a perception anymore. Every trip I make to Cape Town I bump into former Gauties, now living somewhere in the Western Cape, either Stellenbosch or Belville—very popular amongst the Afrikaners—or Constantia, the Atlantic Seabord and even Hout Bay.

Further inland you will find that in places such as Val de Vie, the housing estate on the banks of the Berg River in Paarl, more than 50% of buyers come from Gauteng, according to Olympic swimming champion Ryk Neethling, one of the partners of this development.

The Capetonians, who for years tried to ignore this flood of skilled people invading their backyards, seem to have finally given up their traditional haughty-taughtiness and have started accepting their new neighbours from the north. Accepting them, but not inviting them over for a braai or dinner just yet.

Property prices rising faster

One of the reasons for the newfound fondness for their northern brothers is that they have brought with them a flood of money. Hence the fact that residential properties are now rising more than twice the average rate elsewhere in the country.

That’s right, dear readers, in 2014 property prices in the Western Cape rose on average by 13.8% compared with the average growth rate of 6.6% in the rest of the country, according to FNB Property Barometer.

This trend has been ongoing for several years and the average price for homes transacted in the Western Cape in 2014 Q4, at R1 272 303, is almost 30% higher than the national average.

What’s very interesting is that, according to Sars figures, average incomes in the Western Cape are only the seventh highest in the country.

If you delve deeper, you are sure to find that in many provinces average property prices are not only dropping in real terms but probably in nominal terms too.

Emigration

Then there is the other, more worrying trend: emigration.

It’s notoriously hard to find accurate figures for the number of people emigrating. Sometimes people just up and move without formally emigrating, which is now possible with the annual investment allowances: a substantial R11 million per taxpayer per year.

But we know people are emigrating in greater numbers all the time, especially wealthy white people. There is not a financial advisory business in this country that does not have an ever-increasing number of clients leaving either to Australia, Canada or the United Kingdom.

How do you tell a family, traumatised (but lucky to be alive) by gun-toting thugs who threaten to rape and kill your wife and child before your eyes, to stay and build the country? This is not uncommon anymore but we are so overwhelmed by the horrible crime-pandemic in this country that we almost do not have the emotional capacity to be shocked anymore.

Tucked away in the Wealth Report SA, released last week (FOCE-Wealth Report SA 2015) there are some alarming figures about the ever-growing numbers of US dollar millionaires who’ve left this country since 2007.

According to the report, the total number of dollar millionaires in the country has risen from 42 800 to 46 800, an increase of 9.4%.

This is despite values almost doubling on the Johannesburg Stock Exchange. Part of this underperformance can be attributed to the depreciation of the rand/dollar exchange rate over that period, but Econometrix economist Azar Jammine says it is also the weak performance of the SA economy and its inability to generate wealth.

Taxpayers leaving 

I have a long joked among some of my friends who can stand my particular sense of humor that our biggest export product over the past 20 years has not been gold, platinum or iron ore: it’s been our taxpayers!

It would appear that my warped sense of humor has been right all along. By all accounts more than one million people have let or emigrated from SA over the past 20 years. These people would have formed a large portion of our now ever-dwindling corps of taxpayers in the country.

A further continuation of this trend could have serious repercussions for us remaining taxpayers in the country.

Tucked away in this year’s Budget Review you will find an interesting, but worrying table. There are only 78 543 taxpayers earning a taxable income of more than R1.5 million. You could fit all of them into the Cape Town stadium without filling it up.

But this band of men and women pay almost 12% of all personal income tax in the country.

If one further adds up all the taxpayers who earn over R500 000, 783 421 in total, you find that they pay almost 62% of all personal income tax in the country.

Already there is talk of a tax revolt brewing. This small band of taxpayers, whatever their political affiliation, is starting to feel disenfranchised and financially abused. They are not getting back much in return for their taxes, having to pay for services – such as policing, education and healthcare – that the government should have been providing but is not willing or able to do.

Bear in mind it is this small group of people who have the skills and the money to consider packing up: either semi-grating to the Western Cape or going all the way.

*Magnus Heystek is investment strategist for Brenthurst Wealth. Reach him at magnus@brenthurstwealth.co.za for ideas and suggestions.

COMMENTS   21

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All I can say is, many South Africans are poised to emigrate, you might be silly not to have an exit plan. My investment strategy has always been to have my capital foreign, and any local investments highly liquid. By foreign I mean completely “off the grid”, not through controlled SA banks or finance houses. One thing is to hedge against a falling Rand, but if your so called offshore exposure pays out in Rands you may find it tricky should the Rand completely tank and you need come to get currency worth something. You might as well ask your broker to to redeem in cows.

Great insightful article, concurring, in the last 6 months from direct family 2 x Engineers & 2 x actuaries left SA = 4 x taxpayers & 2 home-owners. We get absolutely nothing for the taxes we pay!

A trend I am hearing is that of folk in their mid-late sixties, who sell up and move. Most noticeably to quiet towns in Australia / New Zealand, where they are welcomed.

Many have bought small businesses to live off, others have just readjusted their finances to accommodate. Most have family there.

But what is most noticeable here in South Africa is the ever dwindling numbers of Europeans aged 25 to 35.

Is this the canary in the coal mine we are not paying attention too?

Hi James Peterson
I would like to talk to you about those offshore investment. How can I contact you?

Will you, in a future column, please deal with the CGT consequence of emigrating, on individuals generally but specifically where assets are held in a discretionary Trust?

I went overseas and lived in London for 9 years. It’s not what its cracked out to be

Now I am back in SA & have been for the last 4 years, and I am happier than I’ve ever been

I’ll be the last one to leave

Less crime in the Western cape? A myth. More traffic , yes. Administration is better by a large margin. Agree , keep your assets liquid and hedge against the falling Rand.

Fully agree with James Peterson. Get your funds offshore. Magnus also alluded to this recently. R1,000,000 invested in a savings account in NZ over the past 4 years would be worth over R2,000,000 at today’s exchange rate. That is a 20% annual yield from a saving account!

Magnus , I think its even more dire that your article. From what I understand in the table on a Moneyweb article just after the budget , while the top earners (+1.5m) earn 11.8% of the total income , they contribute a massibe 22.7% of the income tax payable. Shocking stats if some of those 78000 people decide to look for greener pastures.

Diversify by all means. But weigh the Rand depreciation against inflation rate in the market you’re investing in. A UK investor would be happy with a 6% return while in South Africa returns have to be higher to beat inflation. Having everything invested in the US or Europe would have bee disastrous. Before you take everything overseas keep in mind millions in foreign capital is being invested in SA because prospects here seem
better.

My family and I are relocating to New Zealand at the end of the month. Things just worked out for us to be able to take hold of this opportunity with both hands. We have many friends and family that are staying behind and it is quite traumatic to say good-bye. Perhaps in a few years time we will be back and put our international skills to good use in SA. Until such time, I will check-in on MW from time to time to see how things are going.

How does one completely invest offshore, i.e. not through local banks. Do you open a trading account in another country? If so are there minimum capital thresholds?

What is the best way to invest R100,000 truly offshore ?

The Wealth Report SA refers to White Dollar Millionaires and African Dollar Millionaires
The main difference is the White Millionaires made their money in business and can migrate with their talents, whereas most of the African Millionaires are BEE parasites, tenderpreneurs, politicians and their relatives and other assorted crooks with no skills or talents except stealing

Quick question. With the new website, where do I click to easily “share” the article via email etc. with friends?

The top 12% taxpayers better start leaving soon before they have to pay for more “projects”

The fix is in for the $50 BILLION Russian Nuclear Power project.
Eskom is already sending their people to Russia to train on their nuclear power stations.

Imagine how many bribes and kickbacks the so called “BEE Contractors” will receive without doing anything.

Probably quite a few more African Dollar Millionaires in the making, that is on top of the ones created by the Medupi and Kusile projects who’ll definitely get on the gravy train again.

Uncle Jacob probably already organized a cut for his obese nephew Khulubuse as well, that is if his lard pumping ticker will hold up until payday.

In addition “buy-a-vote” extends monthly child grants from 18 to 21 year olds, under the disguise of education = “estimated R7bn” if 50% of SA’s 18 to 21’s are unemployed then surely the total bill will be closer to R20bn, wow what a country ! The entitlement “Fuctor”. Whilst there’s always a party & pregnant “children” & everybody has a mobile & DSTV. Just have a look a “Sink” city in Alex. Each one of those dwellings has a DSTV dish! Where does the fund come from.

Keminsky9, the funds will come from the taxpayers, you and the rest will pay for it. It’s the ANC’s Neverland where you never need to work or grow up. You just drink and procreate without a worry in the world and someone else will foot the bill. The only requirement to stay in Neverland is to vote for whichever idiot’s on the ballot every four years.

Same trend for KZN, warm winters and far better lifestyle with some of SA’s top schools and 45 minute flight to Jhb.

The Western Cape is not far enough away. The ANC’s hunger for power and insatiable greed will never stop. In the end the kleptocracy will swallow it as well

I have a lot of respect for magnus – but its all very well having your assets offshore (or some of them) offshore – BUT what about your family – surely they need to be offshore? I understand that my cousin (twice removed) has moved to knysna and her hubby commutes to joburg every 2nd week. what does this achieve? sitting above knysna is a massive squatter camp. you can hide – but they will fund you!

All makes sense, HOWEVER, the stats are skewed to some degree by the fact that the top 10 or so wealthy people in SA would be paying many millions in taxes given that their wealth is in the billions of rands.

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