In the first of our series of country-specific blogs, we look at how to plan for crisis in South Africa.
In my 30 years as an international tax & immigration lawyer, I am very aware of the steady outflow of South Africans over that time. Indeed, I have advised several HNW South African individuals and their families. Even so, in light of the current widely-reported and escalating difficulties over the past few years, months and most notably over the past few weeks, I am curious as to how many HNW individuals remain. Why do they remain whilst their family and friends leave? Do these ‘remainers’ have sufficient backup plans in place?
What is a Backup Plan?
By a Backup Plan I mean an integrated plan that will legally protect both your wealth and well-being. This is what I sometimes refer to as “protecting your ass and assets”!
I am concerned that there may be individuals and families who remain in SA who have false confidence in the plan they have in place. How many of these plans will actually deliver the desired outcomes?
I am also curious about those who stay and don’t have a Backup Plan. I am very interested to find out why not. Do they have an intention to formulate one soon? My years of experience tell me everyone should.
Let me deal with each separately.
Scenario One: Those who have chosen to remain and have some or all of the elements of a backup plan in place. How many of these plans will actually deliver the desired outcomes?
You have no doubt heard reports that, due to the internet, doctors increasingly spend the first minutes of an appointment dispelling misinformation their patient has picked up on Google. The same applies to international tax and immigration. I regularly have to deal with incorrect and out-of-date information picked up by new clients on Google. Moreover, I must deal with incorrect and often missing information given to them by commissioned salespeople. These self-proclaimed “immigration consultants” are often focussed on selling whichever RBI or CBI program[i] generates the best commission FOR THEMSELVES. This will be their first concern, not what is in the best interest of the client.
This blog was prompted by a recent discussion with a well-educated HNW professional in Johannesburg. She was given incorrect information about acquiring residency in a well-known offshore jurisdiction. The real solution was incredibly simple… a slam dunk… However, she and her British husband were convinced to pay a lot of money for a solution that was both time-consuming and carried unnecessary uncertainty.
I also often have to inform prospective clients that the second citizenship they acquired has or will create tax problems. These almost always could have been avoided. In some cases, I even have to inform clients that their ‘bargain’ second passport is actually a sham that confers no actual citizenship rights.
How to Plan for Crisis in South Africa: Be Cautious of Self-Sourced ‘Advice’
I then did a bit of Googling myself just for fun. One of the first listings was some very out-of-date and potentially harmful advice. It gave ‘information’ about currency transfers from a well-known firm in South Africa. Either they did not know that the rules have recently changed – or didn’t care. Their priority seemed to be a self-serving pursuit of leads they could hand over to their sales team. Avoidable and potentially harmful situations like these told me that I needed to do something.
The combined topic of taxation and immigration is very complex and particular to each person. Rather than going into a lot of detail here let me provide a link to a whitepaper.
As you will see, the paper walks through in detail what a proper Backup Plan should include. A well-executed plan will allow a wealthy individual and family to deal with current and potential future negative events… from whatever source. Like having both fire insurance and a fire escape plan, an effective Backup Plan is not only a lifesaver in times of strife, but it also allows the family to immediately take full advantage of business, education, and lifestyle opportunities in a globalised world. Many of these are overlooked by accident… or dare I say intentionally.
If you are not sure that you have a proper and up-to-date backup plan that will achieve all your desired outcomes, please take a read. Feel free to reach out to me if you have any specific questions about your particular situation.
Scenario Two: Those who have chosen to remain and don’t have a backup plan in place.
It is difficult to know for sure the size of this group since over the years there have been many reports that wealthy South Africans have been leaving. That being said, this same report states “South Africa is still home to over twice as many dollar millionaires than any other African country.”
Given the well-worn paths for emigration, the obvious question is why do the remainers stay? There are undoubtedly a wide range of emotional, family, business, patriotic and personal reasons. Based on my discussions with HNW South African and their advisors, they stay for two practical reasons:
- The inability to legally move their substantial assets out of the country; combined with
- A belief (hope?) that things would never get bad enough to break their life inertia which is “the tendency of people, having once established a life trajectory, to continue on that course unless acted on by a greater force.”[ii]
Fortunately, the first financial reason has changed for the better, while sadly the security situation in South Africa may be hitting a tipping point sufficient to break the remainers’ life inertia.
How to Plan for Crisis in South Africa: More Advice
Every family and every case is unique. The one constant is the importance of unbiased, independent advice. If you would like to discuss your individual case and needs – get in touch for a confidential, no-obligation discovery call.
[i] RBI = Residence by Investment, CBI = Citizenship by Investment