Alec Hogg: Revolutionary change on SA retirement funding will slow financial emigration
SA's worst financial legacy of apartheid is exchange control, draconian rules which block citizens from invest their savings wherever they like. Although the ANC government has progressively relaxed regulations, excon still forces SA citizens to keep their money in the country. Most notably, they force 70% of savings for retirement to be invested domestically – which in recent times has become a needless additional tax.
For some years now local investment returns have badly lagged those available in the other 99% of the investible universe. This has made financial emigration an increasingly popular option among rational beings. The result: bleeding an already stressed tax base in a country where social grant recipients outnumber income tax payers six to one.
At last, SA's government has started to apply a tourniquet to slow and hopefully reverse this haemorrhaging of productive citizens. A revolutionary change to retirement related excon regulations was quietly mentioned in last month's mini Budget. Rand-denominated ETFs with purely offshore investments have been reclassified as 'domestic' rather than 'foreign'. That change means South Africans can effectively invest their entire retirement portfolio in foreign assets.
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