Fear is never a great basis for rational financial planning. Picture: 123RF
Fear is never a great basis for rational financial planning. Picture: 123RF

Extra taxes for National Health Insurance (NHI), the strong possibility of having part of your pension forced into failing state-owned enterprises like Eskom, and the JSE’s nonexistent dollar returns over 15 years are powerful catalysts for emigration — but what if you can’t leave?

The high financial and emotional costs make the reality of emigrating much harder when people start to run the numbers. Many people are also loath to abandon their homeland, and instead adopt a "come what may" approach.

Fortunately, there are steps you can take to insulate your finances against an uncertain future.

Secure a second citizenship

This can be expensive, but it’s important for South Africans to be globally relevant.

Many countries offer second citizenship programmes that allow you and your family to settle, work and move freely — and even pass down your new citizenship to future generations.

Once secured, these passports can be put in the back pocket and used when needed.

Consider cheaper options such as Grenada, which typically charges $200,000 for a family of four.

Portugal offers a golden residence permit programme offering several routes to citizenship, starting at €350,000.

Bear in mind that there is a lot of variability in criteria, as well as different rules on estate duty liability, so deciding on the best country should be done with an adviser.

Buy global private health care

While no-one knows what the final NHI plan will look like, the likelihood of personal taxes rising to fund the programme is high, and it may severely degrade the quality of local health care. While pricey, it’s worth considering something like global private medical care insurance, typically offered by companies in Europe and the US. This allows you preferential access to private health care anywhere in the world.

As an indication, for a family of four, cover starts from R14,000 a month, while for a single person, cover starts at about R4,500 per month.

A second citizenship may also help. As soon as you have your residency permit for Portugal, for example, you qualify for its health-care benefits.

In Grenada, once you have become a citizen, you are able to access the same health care as local residents. St George’s University in Grenada is recognised as one of the best medical institutions in the world.

Invest offshore for better returns

In dollar terms, SA investors in the JSE would have made zero over the past 15 years.

In anyone’s language, that is a significant setback in wealth creation.

Rather, investors would do well to gain consistent, offshore, inflation-beating hard currency investments for the long term.

This helps avoid the frustration of trying to time a volatile rand.

Global equities offer better exposure to growing economies and developments in the world’s best technology companies.

Closely related, many South Africans are keen to give their children an overseas education, but few appreciate just how pricey it is.

For example, in the UK tuition can cost a minimum of £10,000 a year for a decent university.

You can add another £20,000 a year for living expenses.

Ian Edwards
Ian Edwards

Only a few South Africans can fund these amounts with their monthly salaries.

Without hard currency assets producing a decent return, funding an offshore education will be extremely difficult, especially if the rand continues to weaken.

A good option would be to start a ring-fenced hard currency savings or investment account for children well in advance of when they’ll need it.

Sweat SA assets

This may sound counterintuitive, given recent weak returns from the JSE as well as residential property.

Investors in balanced funds, for example, have failed to beat inflation for a while.

But investors do need to keep funds in the country they live in, to match their expenses and liabilities; however, they may need to adopt better, smarter strategies to get the most out of their local assets.

High net worth individuals may choose to gear up their personal balance sheets, or hedge against downside moves in the stock exchange using sophisticated solutions. Regular investors should consider active fund management — at low fees — to get the extra returns.

Edwards is a partner and Africa regional manager of Austen Morris Associates