Stop Timing the Rand! The Right Way to Move Money Offshore

WEBVTT
00:00:00.000 --> 00:00:02.479
A lot of people say, oh, I don't want some of us getting all of my stuff.
00:00:02.560 --> 00:00:02.879
Yeah, yeah, yeah.
00:00:04.719 --> 00:00:06.799
Everybody wanted to get this.
00:00:07.919 --> 00:00:14.640
Yes, so I think the reality that a lot of South Africans maybe just need to come to terms with this that they can see everything.
00:00:14.880 --> 00:00:16.960
There is no world where they don't know.
00:00:18.320 --> 00:00:25.280
Hey everyone, welcome to Solomon the River, a podcast that impacts the financial puzzles shaping your future.
00:00:25.440 --> 00:00:36.640
I'm Andrew Whiteford, and together with Alec Riddle, we explore the ideas, behaviors, and strategies that help people make smarter financial decisions and wealth.
00:00:42.399 --> 00:00:46.799
Lauren, if you could just introduce yourself obviously to the listeners and the viewers.
00:00:46.960 --> 00:00:49.359
I know you were born and bred in Fish Fishhook.
00:00:49.439 --> 00:01:04.159
I don't know if you want to unpack that in a little bit of detail for us, but I think just from a personal point of view, um, who you are as a person, your family, background, and then obviously just plain and simply lead into your professional background, a bit of experience in the industry.
00:01:04.480 --> 00:01:04.879
Sure.
00:01:05.040 --> 00:01:09.840
So yes, born and bred Fishhook, uh Cape Town, so always lived in Cape Town.
00:01:10.079 --> 00:01:16.159
Um I grew up um in Clubelli Country Club actually, uh, worked there from the age of 16.
00:01:16.480 --> 00:01:17.359
Sure, beautiful golf course.
00:01:17.439 --> 00:01:18.239
So Raymond Ackerman?
00:01:18.799 --> 00:01:19.599
Raymond Ackerman, yes.
00:01:20.560 --> 00:01:25.760
Um we had a lot of pick and pay golf days there over the years, um, and managed to get taught how to play golf.
00:01:25.840 --> 00:01:28.000
Uh the pro taught me growing up there.
00:01:28.159 --> 00:01:33.760
Um, and then yeah, started my first office job, just happened to be in a foreign exchange business.
00:01:33.840 --> 00:01:38.560
Um, calling clients, assisting them, and then went into banking for a little bit.
00:01:38.799 --> 00:01:48.959
Um, met my husband, got married, and then when I was pregnant with my second boy, um I was asked to join currency partners, which is unusual.
00:01:50.400 --> 00:01:52.159
Um, I still asked them if they were sure.
00:01:52.640 --> 00:01:52.799
Sure.
00:01:53.120 --> 00:01:53.599
But no one was.
00:01:55.840 --> 00:01:59.120
Um, yes, and join currency partners, and that's now eight years ago.
00:02:01.200 --> 00:02:03.840
Yeah, I mean, it's gone incredibly quickly.
00:02:03.920 --> 00:02:08.560
Um, my boys are now seven and nine years old, so and I'm trying to teach them to play golf now.
00:02:08.879 --> 00:02:14.240
Um, but paddle's taken over my life recently, not a lot of time for golf, paddle allows for it.
00:02:14.639 --> 00:02:23.439
Um, so yeah, so two boys, seven and nine, um, and now uh I am the MD of Currency Partners, and the business has grown significantly.
00:02:23.599 --> 00:02:26.400
So from 10 people when I started to now 50.
00:02:26.639 --> 00:02:29.360
Um, yeah, and it's been quite a journey.
00:02:29.599 --> 00:02:31.360
And now today we sit here.
00:02:31.680 --> 00:02:32.560
Oh, that's amazing.
00:02:32.719 --> 00:02:38.479
And I mean we'll touch on on obviously the growth of the business and the growth of this sector in South Africa.
00:02:38.800 --> 00:02:48.960
But I think one of the first things we probably do need to touch on um is the regulatory changes that have happened, you know, in in the country, in the industry, and so forth.
00:02:49.120 --> 00:02:51.199
Perhaps you'd like to touch on some of those.
00:02:51.840 --> 00:02:52.080
Sure.
00:02:52.240 --> 00:02:54.560
So there's quite a lot that's actually happened this year.
00:02:54.879 --> 00:03:04.159
Um firstly, um, in the beginning of the year in January, um, are probably more relevant to those non-residental foreigners that have been coming to South Africa and buying property.
00:03:04.319 --> 00:03:14.400
Um SARS came out to say that uh those transfers, in order for a transfer to go through, that a non-residental foreigner must be registered for tax.
00:03:14.560 --> 00:03:16.800
So the income tax number had to be registered for them.
00:03:16.879 --> 00:03:27.039
Whereas previously they would come in and buy a property, and if they sold it and there was a there's CGT involved, that wasn't necessarily being monitored or paid uh to SARS.
00:03:27.360 --> 00:03:28.400
So now they've enforced it.
00:03:28.719 --> 00:03:28.960
Okay.
00:03:29.280 --> 00:03:36.400
Before you go into the other regulatory changes, let's just touch touch on the capital inflows and outflows of non-residents, capital things.
00:03:36.560 --> 00:03:36.719
Yes.
00:03:36.960 --> 00:03:41.599
I think the number is almost four and a half times greater coming in than going out.
00:03:41.840 --> 00:03:43.039
Perhaps you'd like to elaborate.
00:03:43.439 --> 00:03:51.039
Yeah, so we um I like to analyse numbers, and so we get all the Reserve Bank reporting of the flows in and out of South Africa.
00:03:51.199 --> 00:03:58.479
In that specific category, the Reserve Bank monitors how much money is coming in and out for non-residents under capital transfers, predominantly in the property sector.
00:03:58.719 --> 00:04:01.280
Um, and we've looked over the last 10 years.
00:04:01.439 --> 00:04:05.680
Last year it peaked at 32 billion rand coming in under that category.
00:04:06.000 --> 00:04:08.240
From non-residents, from non-residents coming in.
00:04:08.639 --> 00:04:09.680
Largely to purchase property inside.
00:04:10.800 --> 00:04:13.360
And where are the where are these hot spots?
00:04:13.759 --> 00:04:14.319
Interesting.
00:04:14.400 --> 00:04:17.439
I mean, obviously, Cape Town is an obvious one, which a lot of people talk about.
00:04:17.600 --> 00:04:19.279
Garden route, incredibly popular.
00:04:19.439 --> 00:04:21.439
Wilderness, George, uh, plate.
00:04:21.680 --> 00:04:25.680
Um, but outside of that, we're looking at Hood's Brait, St.
00:04:25.839 --> 00:04:27.600
Francis Bay, enormous.
00:04:27.839 --> 00:04:39.360
Um, Hoods Brait, Nelsbrait, now that there's an international airport that you can fly straight into, the weather's amazing, the property is less expensive than Cape Town, and you're effectively living in the African bush.
00:04:39.439 --> 00:04:41.439
I mean, it doesn't really get better than that.
00:04:41.600 --> 00:04:46.560
Um, and now we're hearing on the ground that Durban is a new hotspot.
00:04:46.800 --> 00:04:52.639
So with the Club Med opening there, more foreigners are going to Durban and experiencing that part of the world.
00:04:52.800 --> 00:04:55.600
There's warm water, there's the bush, the beach.
00:04:55.759 --> 00:04:57.040
You can't go wrong.
00:04:57.199 --> 00:05:00.319
And so now Durban is becoming incredibly popular in that space.
00:05:00.560 --> 00:05:08.560
And if sorry, Alec, if you compare to that from an outflow point of view, only 7 billion in 2025 pretty much left our shores.
00:05:08.800 --> 00:05:13.759
32 billion rands worth of assets and primarily being driven into the property sector.
00:05:13.920 --> 00:05:17.680
I think Alec, for us being based in the Eastern Cape, Lauren, and looking at St.
00:05:17.759 --> 00:05:18.800
Francis, we know that St.
00:05:18.959 --> 00:05:20.319
Francis is a hotbed.
00:05:20.480 --> 00:05:41.439
But just to hear those numbers, I think the key thing, Lauren, just obviously taking that back or feeding that back into what you said a little bit earlier with regards to those non-SA tax residents needing a SARS tax number and that windfall going forward, Alec, from a revenue point of view for SARS, which we all know SARS is really, really well run in South Africa.
00:05:41.519 --> 00:05:50.800
Um we chat a lot to Reese and other accountants in town, Alec and SARS, yeah, they really got they switched on, they know what they're doing, they've got really good people employed there.
00:05:50.959 --> 00:05:54.240
So 32 billion is a massive, massive number.
00:05:54.319 --> 00:05:58.480
And I think just to hear that it's happening on our doorstep, Alec and Lauren in in St.
00:05:58.639 --> 00:06:00.639
Francis, it's it's just super positive.
00:06:00.720 --> 00:06:04.319
It makes me so excited that so early on a Friday morning, you know.
00:06:04.879 --> 00:06:07.360
Yeah, I think these are our feel-good transactions.
00:06:07.759 --> 00:06:20.160
Giving a non-residental foreigner a good experience at bringing money to South Africa and moving to South Africa, like it's such a positive thing, and it's a bit of a passion for us that we are able to do that and to guide them.
00:06:20.399 --> 00:06:33.120
Obviously, in this in this sort of um environment, there's exchange control, and so even beyond the SARS thing, they're navigating quite a lot when they come here because they don't have that in their own country, the exchange control element to what they do.
00:06:33.199 --> 00:06:36.000
Um, but the key there is whatever they bring in, they can take out.
00:06:36.079 --> 00:06:38.879
So as long as they've got proof of that, that's how the ruling works.
00:06:39.040 --> 00:06:42.879
Um, but that SARS change also impacts them when they take the money back out.
00:06:43.040 --> 00:06:45.600
They now need an AIT to show.
00:06:45.920 --> 00:06:47.360
What does that acronym stand for?
00:06:47.600 --> 00:06:49.279
Approval for international transfer.
00:06:49.519 --> 00:06:50.480
Sorry, that is a new thing.
00:06:51.199 --> 00:06:54.720
We love our acronyms in this industry, so all our viewers and listeners out there.
00:06:55.360 --> 00:06:58.319
I'll pause loan and we can just decipher all these acronyms.
00:06:58.639 --> 00:07:00.319
But that maybe let me explain what that is then.
00:07:00.480 --> 00:07:06.480
So it used to be called a foreign tax clearance certificate, and it was for South African residents predominantly moving money.
00:07:06.639 --> 00:07:20.319
But all it is is you are effectively doing an application to the to SARS to show the source of the funds that you want to move and showing that you are tax compliant, your tax affairs are up to date, and they then give you approval for that value to then move the money.
00:07:21.279 --> 00:07:22.480
I'm thinking bigger pictures.
00:07:22.560 --> 00:07:25.439
Sorry, I'm just seeing like light bulbs are coming on for me here.
00:07:25.519 --> 00:07:31.120
It's just from an economic point of view, that 32 billion coming in, and like you said, Lauren, going into property.
00:07:31.279 --> 00:07:36.959
But just think about how many more people are being employed, all that money over and above the 32 billion.
00:07:37.120 --> 00:07:38.399
I don't want to put you on the spot, Lauren.
00:07:38.639 --> 00:07:44.160
I'd love to see that figure attached to the 32 billion from a pure economic point of view.
00:07:44.319 --> 00:07:52.319
All these non-residents, how much money they are actually flooding into our local economy, Alec, and we think all this money is flooding out.
00:07:53.040 --> 00:07:55.360
And think of all the South Africans who are getting the windfall.
00:07:55.439 --> 00:07:55.680
Yes.
00:07:55.920 --> 00:07:58.720
Because property prices are being driven, ratcheted up.
00:07:58.879 --> 00:08:03.120
There could be some people who've owned a property for 30, 40 years, they're now they're going to fund their retirement.
00:08:03.279 --> 00:08:07.120
Suddenly they get three, four times what they were anticipating.
00:08:07.279 --> 00:08:07.439
Yeah.
00:08:07.600 --> 00:08:14.399
So there's lots of benefits, but let's touch on the other regulatory changes which perhaps uh affect South Africans more.
00:08:14.879 --> 00:08:17.040
You know, the the allowances to take money offshore.
00:08:17.279 --> 00:08:18.079
You want to touch on that?
00:08:18.399 --> 00:08:18.720
Sure.
00:08:18.879 --> 00:08:23.839
So um in January there was a second change, and that was around the single discretionary allowance.
00:08:24.000 --> 00:08:30.079
So every South African resident can do, we used to be able to do up to one million rand in within a calendar year.
00:08:30.480 --> 00:08:39.519
In January, they made an announcement to say that if you had used that one million Rand, but part of that was maybe not for investment purposes.
00:08:39.679 --> 00:08:53.360
So let's say, for example, you went traveling, maybe you went to Italy for a little bit, went on a skiing holiday, that spend is actually coming out of your single discretionary allowance, which a lot of people don't realize, even though they're swiping their credit card, it is coming off that.
00:08:53.519 --> 00:09:02.000
Just like Netflix, um, Amazon.com, so any overseas platform that you're purchasing on is all coming out of that single discretionary allowance.
00:09:02.159 --> 00:09:22.159
So the new regulation says that if you've used that$1 million and there's a portion of it that is used that was not for investment purposes, you can apply to Reserve Bank to remove that portion as an outlier outside of your single discretionary allowance, and then re-ap do an application to be able to do that balance for investment purposes.
00:09:22.639 --> 00:09:32.000
Um then three months later, they came out with a second change to say we're gonna not only make that change, but we're gonna double your single discretionary.
00:09:32.399 --> 00:09:33.679
So from one to two million simply.
00:09:33.919 --> 00:09:36.879
From one to two million rand, which is enormous.
00:09:37.200 --> 00:09:47.919
But fundamentally, if you think about how much the RAND has weakened over the last 10 years as an example, it should have been done probably quite a long time ago because it's worth less.
00:09:48.240 --> 00:09:50.000
How long have you been more or less been at a million?
00:09:50.159 --> 00:09:50.799
A long time, right?
00:09:50.960 --> 00:09:52.240
So as long as I can remember, Alec?
00:09:52.559 --> 00:09:52.799
Long time.
00:09:53.840 --> 00:09:54.639
A long period of time.
00:09:54.799 --> 00:09:59.120
Yeah, and what a lot of people don't know is that you can take a further 10 million.
00:09:59.600 --> 00:10:04.000
Yes, but obviously there's a little bit of hurdles to get over.
00:10:04.080 --> 00:10:05.759
You want to just go through that process?
00:10:06.000 --> 00:10:08.639
So if you're South African resident, you've got the two million now, right?
00:10:08.720 --> 00:10:09.279
That's easy.
00:10:09.360 --> 00:10:10.639
There's no additional requirements.
00:10:10.799 --> 00:10:17.600
You give your ID and you give a proof address, and you're allowed to move the two million Rand for a calendar year, so January to end of December.
00:10:17.759 --> 00:10:23.919
Then you've got a second allowance, which is your foreign capital investment allowance, and that is 10 million Rand.
00:10:24.080 --> 00:10:33.360
And in order to use that, you've got to do your AIT, which we spoke about earlier, or approval for international transfer, used to be termed your foreign tax clearance certificate.
00:10:33.519 --> 00:10:38.879
And that application is to show source of funds, tax affairs, um, order, and then you get the approval.
00:10:39.039 --> 00:10:45.120
That approval is valid for 12 months from date of issue, but you can do up to 10 million within a calendar year.
00:10:45.840 --> 00:10:46.879
And how complex is that?
00:10:47.440 --> 00:10:49.919
It's actually it's really not that bad.
00:10:50.000 --> 00:10:53.360
I think people are a little bit, it just sounds complex and hard.
00:10:53.519 --> 00:10:55.039
We do about 100 a month.
00:10:55.279 --> 00:10:56.399
So, what does it entail, Lauren?
00:10:56.720 --> 00:10:57.600
So you say it's not that complex.
00:10:57.679 --> 00:10:58.720
So great questions.
00:10:58.960 --> 00:11:04.320
Like I'm already thinking I I know the answer to a certain degree, but uh obviously what does it actually entail?
00:11:04.480 --> 00:11:08.320
Because people, when it comes to paperwork, we're all like we sigh, right?
00:11:08.399 --> 00:11:10.320
But I it's not that difficult.
00:11:10.399 --> 00:11:11.440
But what do payers?
00:11:11.600 --> 00:11:15.519
And the other thing before you do answer, a lot of people say, Oh, I don't want SARS getting all of my stuff.
00:11:15.600 --> 00:11:17.120
Yeah, you're they've got it already.
00:11:17.360 --> 00:11:17.759
Exactly.
00:11:17.919 --> 00:11:20.799
Everyone's wanted to want to dispose stuff to SARS, right?
00:11:21.039 --> 00:11:28.000
Yes, so I think the reality that a lot of South Africans maybe just need to come to terms with this, they can see everything.
00:11:28.159 --> 00:11:30.879
Um, there is no world where they don't know.
00:11:31.200 --> 00:11:38.480
So with this application, you're putting you're filling out an application form to say this is how much I need I want to apply for to move the funds abroad.
00:11:38.639 --> 00:11:41.360
And then you're telling them where the funds are coming from.
00:11:41.519 --> 00:11:49.519
So if I wanted to apply for five million rand of the 10 million to move abroad, then I've got to tell them how did I source the five million?
00:11:49.679 --> 00:11:56.320
So maybe I disinvested from something locally, maybe I sold my property and then I provide the sale agreement.
00:11:56.480 --> 00:11:58.159
That's effectively all you're giving them.
00:11:58.320 --> 00:12:03.440
The funds then have to be liquid, so the money must be accessible, and you've got to show a statement as to where it's sitting.
00:12:03.519 --> 00:12:06.320
So if it's in my bank account, I'm giving a bank statement.
00:12:06.480 --> 00:12:16.240
Um, with the sale agreement for the property, if that's a source of funds, you send it through and they work on a 21-day working day turnaround time, they come back and they give the approval.
00:12:16.480 --> 00:12:18.799
And they're pretty sharp when it comes to sticking to those timelines.
00:12:19.279 --> 00:12:21.039
Yeah, we haven't had a problem in a long time.
00:12:21.519 --> 00:12:24.879
Um, so it's really not as daunting as people think.
00:12:25.200 --> 00:12:31.600
I think, in my experience, when someone tries to do it themselves, that's often when it becomes a bit more overwhelming.
00:12:31.679 --> 00:12:36.000
So I would recommend using a specialist to help you, but that definitely makes a difference.
00:12:36.639 --> 00:12:38.159
Let's touch on tuition.
00:12:38.480 --> 00:12:38.639
Yes.
00:12:39.440 --> 00:12:43.600
Because a lot of South Africans do educate their children overseas.
00:12:44.799 --> 00:12:50.559
And would often they will ask us, well, does it form part of my discretionary allowance, or doesn't it?
00:12:50.720 --> 00:12:54.639
And perhaps you can also touch upon the capital inflows and outflows on tuition at the same time.
00:12:55.039 --> 00:12:55.360
Sure.
00:12:55.919 --> 00:13:02.879
So it's interesting, and a lot of like you say, a lot of South Africans um have uh kids that are starting abroad.
00:13:03.039 --> 00:13:09.120
It's kind of become a trend, especially in the high net worth brackets, and it gives them great exposure when they're starting abroad.
00:13:09.200 --> 00:13:11.120
So it's very exciting to be able to do that.
00:13:11.360 --> 00:13:13.600
Um, but it's expensive.
00:13:13.759 --> 00:13:24.399
Um, and if you are someone who uses those annual allowances every year to invest, you don't want to use your allowance to pay for tuition because then you're losing out on that portion that you could be investing.
00:13:24.639 --> 00:13:27.759
Um, but you don't have to use your allowance, which a lot of people don't know.
00:13:27.919 --> 00:13:35.919
So if you're paying the university or college directly, you just need an invoice, and then you can actually pay them directly and it doesn't come out of your allowance.
00:13:36.159 --> 00:13:39.360
And what about their board and lodging, particularly if they are staying privately?
00:13:39.759 --> 00:13:42.960
Yeah, so you if you're paying the un if you're paying privately, that's different.
00:13:43.039 --> 00:13:44.399
They would have to come out of an allowance.
00:13:44.559 --> 00:13:47.919
But if it is if you're paying the university directly, then it's fine.
00:13:48.320 --> 00:14:08.639
Just interesting, and I mean doesn't have anything to do with you know moving money and so forth, but I was mentioning earlier, and I think it's important for for viewers to uh to realize this that you know I I met a a German guy, I know I know his brother quite well, and he lectures at a university or heads up a department at a university in Germany.
00:14:08.879 --> 00:14:13.919
And that international students, including South Africans, can go there.
00:14:14.080 --> 00:14:16.639
Free education as long as you're proficient in three languages.
00:14:17.279 --> 00:14:19.279
It can be any three languages, doesn't have to be German.
00:14:19.360 --> 00:14:34.080
Yeah, because uh the medium of teaching is English, so you could have English Afrikaans and Clausa, approve your proficiency, apply to university, you could study for free internationally, and just pay the digs, which is 250 euros a month.
00:14:34.480 --> 00:14:34.879
That's amazing.
00:14:35.039 --> 00:14:35.519
That's some food.
00:14:35.759 --> 00:14:36.320
That is amazing.
00:14:36.480 --> 00:14:37.759
That's cheaper than studying, yeah.
00:14:37.919 --> 00:14:51.039
Yeah, but speaking to that point now, Alec, and obviously bringing you in, Lauren, is how much money came into the country from an inflow point of view, just based on tuition in 2025 was about 5 billion rand, if I remember correctly.
00:14:51.360 --> 00:15:06.159
Obviously, a lot of African students obviously studying in South Africa, but we also touched on it, Lauren, in prep obviously for the podcast today as well, Alec, that a lot of American students, funnily enough, or to us it was a lot, it's about 500 every year, but that's also just amazing for the economy.
00:15:06.320 --> 00:15:10.639
Once again, Alec, just fleshing out this picture from an economic point of view, right?
00:15:10.799 --> 00:15:11.759
We always focused on the company.
00:15:11.919 --> 00:15:13.200
That's just with one company, isn't it?
00:15:13.360 --> 00:15:14.159
That was just one company, yeah.
00:15:14.639 --> 00:15:15.840
Oh, sis, sorry, one company.
00:15:16.159 --> 00:15:20.960
That I mean, I met the lady last week, I was chatting to her, actually, such an exciting business.
00:15:21.120 --> 00:15:33.679
Um, so what they do is they go and market to the universities in America and Canada, um, and they've got offices in Zimbabwe and Ghana and Botswana and throughout Africa, and she runs the office for South Africa.
00:15:33.840 --> 00:15:59.440
Um, and she was just saying that at the minimum they'll do 500 American students alone that come to South Africa every year on educationals, um, and they get to pick an experience basically, and these guys do all the logistics and they put them on the ground and take them around and show them whatever they'd like to see here, and they learn about our culture and about and that I think gives South Africa so much positive exposure in those countries, which is great.
00:15:59.679 --> 00:16:12.639
You know, it's amazing, and just back in the day I used to do the fundraising and marketing for the gray schools here in Port Elizabeth, and uh I went to America and Canada to visit universities to learn from them uh about fundraising ideas.
00:16:13.039 --> 00:16:21.519
And incidentally, 60% of their budget is run from their sort of their gifting from you know bequests and things like that.
00:16:22.879 --> 00:16:33.039
So the alumni there they give massively to the universities, and those endowment funds of the universities, we see it here in South Africa, you've probably seen it on the inflows.
00:16:33.519 --> 00:16:38.480
Um there's massive investment from American university endowment funds into South Africa.
00:16:39.039 --> 00:16:39.919
Yeah, that's amazing.
00:16:40.000 --> 00:16:53.120
I mean, I have to say, I mean, even those inflows that we're looking at, um, that five billion that came in last year for tuition, there is a lot in terms of sort of African students coming in and studying in South Africa, but there's students from all over the world.
00:16:53.200 --> 00:16:55.039
I mean, it's it's quite enormous.
00:16:55.200 --> 00:17:02.480
I think there's an ability for people to now study and work from anywhere and to get a good education, but also get an experience.
00:17:02.559 --> 00:17:07.440
So it kind of elevates your learning in what you're doing at university, which is quite amazing.
00:17:07.759 --> 00:17:10.160
Alec, maybe I could just take us a little bit back.
00:17:10.799 --> 00:17:17.119
So we've spoken a lot about more holistically, strategically, which I think for our listeners and viewers is phenomenal.
00:17:17.279 --> 00:17:22.240
But take us back eight years, and I think that's the first time Alec and I probably met you, right?
00:17:22.319 --> 00:17:25.920
You were in a slightly different role and still at currency partners, like you mentioned.
00:17:26.079 --> 00:17:28.000
You weren't the managing director then.
00:17:28.240 --> 00:17:31.359
But what is your bread and butter actually at currency partners?
00:17:31.519 --> 00:17:35.359
We've mentioned all these beautiful statistics, money moving in and out of the country.
00:17:35.519 --> 00:17:39.519
But what do you guys actually do on a day-to-day basis at currency partners?
00:17:39.599 --> 00:17:46.559
And what's the big value add in our lives as financial planners and how we partner to help our clients?
00:17:46.960 --> 00:18:05.039
Okay, well, so currency partners is born in the wealth space, so our business was built primarily for financial advisors like you guys, um and supporting your clients, and the key there was to give a level of service and support that made it easy for clients to move funds in and out of South Africa.
00:18:05.279 --> 00:18:13.119
So we effectively help clients execute at a preferential exchange rate, and everyone always asks me how that's possible, so maybe I'll explain that quickly.
00:18:14.559 --> 00:18:15.440
I think it's an important one.
00:18:16.799 --> 00:18:24.960
So being an ex-banker, um, you know, people tend to say, oh, the banks rip us off, and it's not true, you know.
00:18:25.119 --> 00:18:29.119
The thing for us we can debate that, but we're gonna take the diplomatic reply.
00:18:29.359 --> 00:18:31.279
Okay, I'll talk about it in my domain.
00:18:32.000 --> 00:18:37.279
Um, so you know, if you look at us, we are seen by our banking partners as one client.
00:18:37.599 --> 00:18:42.720
We effectively offer the service and do all the work in order to get the clients' funds to move abroad.
00:18:42.880 --> 00:18:48.160
They do processing in the background, but they rely on us to do all the checks and the services, etc.
00:18:48.640 --> 00:18:52.880
Um, so the bank benefits from that, from having that consolidated.
00:18:53.119 --> 00:19:03.440
And because we don't have the overheads anywhere near to what a bank has, um, you know, banks have got these insane compliance teams and exchange control and the infrastructure and the branches.
00:19:03.599 --> 00:19:06.000
Um, it's incredibly costly to run.
00:19:06.160 --> 00:19:11.119
So they have to charge more in order to cover the running of what they're trying to achieve.
00:19:11.279 --> 00:19:22.480
Um, but having us as one client means that they give us preferential exchange rates and we are then able to pass that benefit on to our clients, and that's effectively why we're able to offer clients competitive exchange rates.
00:19:22.880 --> 00:19:24.799
But that's not enough for clients, you know.
00:19:24.880 --> 00:19:36.480
I think South Africans are very service-driven, and so it's very important that we offer preferential service, and moving money in and out of South Africa is not an easy thing to do because of exchange control.
00:19:36.880 --> 00:19:41.920
So we basically take care of any requirement that you need in order to move money.
00:19:42.079 --> 00:19:56.480
So whether that's the AIT or foreign tax clearance certificate, um, whether that is a Sab application, which may be required, um, now you've got the income tax numbers, there's various things you need in order to move money, and we just basically do all of that for clients.
00:19:56.720 --> 00:20:10.240
Um, and what's been great is that you know, although we were born in wealth, and when I started, wealth is probably 85% of our business, and we had a few business clients who are also using us, it's now grown so significantly, but only half the business.
00:20:10.400 --> 00:20:21.839
So we've managed to grow in other segments, uh working with attorneys and helping them with various transactions, state agents on the property, so those feel-good transactions coming into South Africa.
00:20:22.000 --> 00:20:31.119
Um, our corporate book has grown, so helping importers and exporters, foreign direct investment coming in, foreign loans, and that's been really exciting, and also some feel-good.
00:20:31.359 --> 00:20:35.359
Just to interject, Lauren, just thinking importing importing, sorry, and exporting.
00:20:35.440 --> 00:20:38.559
Obviously, there's a lot of uh fluctuations from an FX point of view.
00:20:38.640 --> 00:20:43.839
We're seeing obviously the RAND at the moment blowing out, um, obviously back end of July at this point in time.
00:20:44.000 --> 00:20:46.160
You guys get quite involved there too, eh?
00:20:46.480 --> 00:20:50.000
From a or should I say from a almost a pegging a rate point of view?
00:20:50.480 --> 00:20:51.680
Am I correct in my understanding?
00:20:51.920 --> 00:20:59.039
Yeah, so we would offer hedging products in that space, um, and we have dedicated dealers on the desk to support our corporate clients.
00:20:59.200 --> 00:21:07.839
The key there is for us to help them build in their margin and guarantee their profits when they are bringing orders into the country predominantly and also going out.
00:21:07.920 --> 00:21:12.160
So if you want to guarantee your costs here, we can lock in those rates for funds being expected.
00:21:12.240 --> 00:21:16.720
You know, it's just about giving them tools to be able to take the risk out of what they're doing.
00:21:16.960 --> 00:21:20.240
Importing and exporting is not an easy business to be in at all.
00:21:20.480 --> 00:21:23.119
So you want to try and mitigate your risk as much as possible.
00:21:23.680 --> 00:21:32.960
Let's bring it back now to the man in the street who comes and knocks on our door and says, Right, you know, I've heard about this uh single desk gracious allowance of two million Rand.
00:21:33.039 --> 00:21:36.160
Um, I've got a million and a half, my wife's got a million and a half.
00:21:36.319 --> 00:21:37.200
How do we go about it?
00:21:37.279 --> 00:21:44.799
So this I'm just gonna unpack it quickly because it's it's actually almost as easy as investing into a South African unit, trust, strange enough.
00:21:45.119 --> 00:21:48.880
So, what we do is we'll open an investor corporate cash manager account for them.
00:21:48.960 --> 00:21:51.519
That generally takes about two maximum three days.
00:21:51.680 --> 00:21:54.960
Uh, we get them to deposit to avoid cybercrime.
00:21:55.039 --> 00:21:56.319
We do a little test uh deposit.
00:21:56.720 --> 00:21:57.279
One rand, yeah.
00:21:57.440 --> 00:22:02.880
Yeah, we get the money into there, we've already Alerted you that uh this money's gonna go.
00:22:03.039 --> 00:22:05.920
We tell you the money's in, you phone us, right?
00:22:06.000 --> 00:22:07.759
This is a spot rate at the moment, right?
00:22:07.839 --> 00:22:10.480
Accept the spot rate, and the process is starting.
00:22:10.640 --> 00:22:24.880
And within literally no time, their money is offshore in a global market, hedged against the RAND, wider investment universe, currency diversification, uh, geographical diversification, and so forth.
00:22:24.960 --> 00:22:27.759
So, so many advantages of doing this.
00:22:28.160 --> 00:22:32.000
And you know, if you think as a South African, most of your wealth sits here.
00:22:32.079 --> 00:22:36.640
You've got your property here, you've got your pension fund here, and whatever the case is.
00:22:36.799 --> 00:22:46.480
So, if we've got a situation where our market is less than half a percent of the world market, we shouldn't have 100% of our wealth sitting here.
00:22:46.720 --> 00:22:55.519
You know, so diversification is important, and just as you mentioned now, you're diversifying your own business, which is which is um uh quite significant as well.
00:22:55.680 --> 00:22:56.799
How has the business grown?
00:22:56.880 --> 00:22:58.240
You said it's it's grown.
00:22:58.400 --> 00:23:02.559
Uh you don't have to give us numbers, but uh yeah, I mean 2x, 5x.
00:23:04.400 --> 00:23:07.599
No, I mean, in staff in itself, that's a good indicator for us.
00:23:07.759 --> 00:23:10.319
Um, we'd like to keep it at 50 if we can.
00:23:10.480 --> 00:23:18.240
Um yeah, look, there's been a lot of hard work that's gone into it, um, but it's something that we're all very proud of.
00:23:18.319 --> 00:23:39.759
I think this year we actually did a full rebrand of the business too, and the purpose of that was actually to better align the brand with the business that we are now and to connect the culture that we have within our business with the way that the market sees us, um, in terms of just you know doing the right thing, having a driven culture, being forward-thinking.
00:23:39.920 --> 00:23:42.640
Um, so that was quite a big thing for us.
00:23:42.720 --> 00:23:49.359
I think for Ike as our founder, it was a big moment for him 13 years later to do this brand refresh.
00:23:49.599 --> 00:24:01.920
And um, we actually did a presentation to the staff to with photographs looking at the journey from when we first moved into our first offices and you know that journey through growing, and it's quite amazing to look back.
00:24:02.240 --> 00:24:05.599
And also, Alex, sorry, just to add, we know Lauren really well.
00:24:05.759 --> 00:24:15.119
Like I said, we we've walked a journey with them for eight years, and it's awesome for us to see Lauren a business like yours also promoting from the inside, plain and simply, right?
00:24:15.279 --> 00:24:31.519
Ike, you mentioned now, founder, he was the managing director for uh a long period of time, and very recently you've taken over the reins, but someone that has worked inside that business for a long period of time, built these structures, knows the business inside out, and you've been promoted.
00:24:31.599 --> 00:24:34.240
Now you leading the business, a young, fresh face.
00:24:34.480 --> 00:24:36.480
For us, it it's absolutely phenomenal, Alec.
00:24:36.640 --> 00:24:37.920
I think personally, yeah.
00:24:38.160 --> 00:24:39.440
Yeah, no, it is, it's great.
00:24:39.519 --> 00:24:43.920
And I mean, there's a lot of lot of positivity around South Africa, but there's also a lot of negativity.
00:24:44.079 --> 00:24:44.319
Yeah.
00:24:44.559 --> 00:24:46.079
So difficult question.
00:24:46.240 --> 00:24:54.160
Oh no, is what's happening in South Africa or you know, the state of South Africa, is it driving wealth offshore?
00:24:54.240 --> 00:24:58.160
We've seen in some of the other capital transfers there's more coming in than going out.
00:24:58.319 --> 00:25:00.720
But what is the what is the general experience there?
00:25:01.039 --> 00:25:04.000
I'd say don't underestimate how crazy the world is at the moment.
00:25:04.160 --> 00:25:22.640
I mean, as a starting point, um, so if we're just talking about wealth as a segment or industry um in terms of clients moving money in and out, traditionally in South Africa, every single year we have seen that under the two the single discretionary allowance and the foreign capital allowance, we have seen those flows increase year and year and year.
00:25:22.799 --> 00:25:25.039
But we've also seen the RAN depreciating.
00:25:25.279 --> 00:25:31.759
So, you know, it's been a it's been challenging, but more and more flows have gone out, and we've seen that there's been a big push.
00:25:31.839 --> 00:25:35.119
Clients must get diversification and they must put money abroad.
00:25:35.359 --> 00:25:37.920
Um, this year has been slightly different.
00:25:38.079 --> 00:25:43.680
Um, I don't think the flows are less, but it's definitely been quieter and more South African positive.
00:25:44.160 --> 00:25:48.400
Um, and we've seen a lot more money coming into South Africa, which is interesting.
00:25:48.559 --> 00:25:52.960
So disinvestment abroad and then being invested locally.
00:25:53.440 --> 00:26:02.720
Obviously, I think the percentage going offshore is pretty um consistent in that we are seeing money going off, but it's definitely been a different mindset.
00:26:02.880 --> 00:26:10.319
I think people are a little bit nervous with things that are going on in the world, and so they're just being a little bit more cautious about that offshore exposure.
00:26:10.640 --> 00:26:13.119
Then let's touch on one of the biggest myths.
00:26:13.359 --> 00:26:13.680
Okay.
00:26:15.359 --> 00:26:18.559
People say, I want to wait for the RAN to strengthen.
00:26:20.559 --> 00:26:22.000
Where's the crystal ball, Lauren?
00:26:22.240 --> 00:26:23.759
Have you putting him on the spot, Joe?
00:26:24.880 --> 00:26:29.599
You've already experienced somewhere that says, no, I want to wait for the rent to strengthen and it continues to blow.
00:26:29.759 --> 00:26:31.200
Can we call the trade desk, Lauren?
00:26:31.759 --> 00:26:32.559
We can dial them in.
00:26:32.880 --> 00:26:33.279
Oh my gosh.
00:26:33.359 --> 00:26:34.480
Jonathan loves this question.
00:26:34.640 --> 00:26:35.599
He gets it all the time.
00:26:35.759 --> 00:26:39.039
Um so John is our head dealer and he's got some wild stories.
00:26:39.200 --> 00:26:39.920
Um, but yes.
00:26:41.599 --> 00:26:42.960
Yes, I can share one with you.
00:26:43.119 --> 00:26:45.759
We will not we won't um double into detail.
00:26:45.920 --> 00:26:49.519
But um we had a client who we did a special approval for.
00:26:49.680 --> 00:26:53.839
So the special approval is for a value over your 12 million, so your two and your 10.
00:26:53.920 --> 00:26:55.039
And we do quite a lot of those.
00:26:55.200 --> 00:27:04.000
So it usually occurs when someone sold a business um or there's an inheritance payout of some sort, but this was a very large number, very, very large.
00:27:04.240 --> 00:27:08.720
And the approval had been in place for 12 months and it was going to expire.
00:27:08.960 --> 00:27:13.839
So it's when you get the approval, it's valid for a 12-month period from date of issue.
00:27:14.079 --> 00:27:22.000
And they were waiting for in those days, I think the rate they were looking for was around 1430, so it was quite a long time ago.
00:27:22.400 --> 00:27:30.480
Um, and we were COVID had was you know in the mix, but we weren't in lockdown yet.
00:27:30.960 --> 00:27:34.880
Um and we were getting close to that rate, and I think we were waiting.
00:27:35.039 --> 00:27:36.079
And he wanted you to get to it, right?
00:27:36.160 --> 00:27:36.799
He wanted to get to it.
00:27:37.039 --> 00:27:39.359
Specifically, yeah, like that spot rate, that's what they wanted.
00:27:40.000 --> 00:27:44.319
And um, we phoned the client to say, I think we two cents off, you know.
00:27:44.559 --> 00:27:49.119
Um and he said he wants to wait.
00:27:49.440 --> 00:27:52.079
And lockdown hit, and the RAN went to 19.
00:27:52.559 --> 00:27:53.599
14, 32.
00:27:53.920 --> 00:27:56.480
And he panicked, and he did push the button.
00:27:56.799 --> 00:27:58.079
So 19.
00:27:58.319 --> 00:27:58.559
Yeah.
00:27:58.799 --> 00:28:00.799
When you could have got 14, 35, we had a lot of clients.
00:28:02.319 --> 00:28:02.799
It's a lot.
00:28:02.880 --> 00:28:05.279
We had a lot of clients though that did panic in that space.
00:28:05.519 --> 00:28:10.960
It was quite hectic and and quite scary, I think, because people didn't know what was going to happen.
00:28:11.039 --> 00:28:13.440
No one really could see past that.
00:28:13.759 --> 00:28:17.279
Um, that obviously was a big number, so the impact was more severe.
00:28:17.359 --> 00:28:18.880
But we had a lot of clients that panicked.
00:28:18.960 --> 00:28:20.480
It wasn't in isolation.
00:28:20.640 --> 00:28:28.559
Um, because I think I think business owners probably in South Africa were in the same position in that it was the RAN blew out.
00:28:28.640 --> 00:28:31.359
I mean, if I was an importer, I'd probably also be in a bit of panic mode.
00:28:31.759 --> 00:28:32.960
Like, is it gonna recover?
00:28:33.039 --> 00:28:34.319
Is this our new norm?
00:28:34.720 --> 00:28:41.599
Um, but yes, so uh unfortunately uh we we weren't able to achieve the rate that he wanted.
00:28:41.920 --> 00:28:50.160
So often investors will see the RAN blow out like that and think to themselves, oh I can't invest now, I can't make my money offshore into an investment.
00:28:50.400 --> 00:28:57.039
But very often, when the world's in a bad state, the offshore markets have dropped by more than the RAND has weakened.
00:28:57.519 --> 00:29:02.640
And incidentally, during COVID, I have a few clients that actually made the investment at 90.
00:29:03.039 --> 00:29:03.599
Oh wow.
00:29:03.839 --> 00:29:06.720
But they were getting a 40% discount into the SP 500.
00:29:08.240 --> 00:29:11.759
And uh so so they've done far better than if they'd have waited.
00:29:12.079 --> 00:29:20.960
Yeah, I mean, the thing is at the end of the day, and and Donna and the guys on the desk always have this conversation, you're benefiting from getting the funds offshore and invested.
00:29:21.119 --> 00:29:24.480
So you don't want to be too picky about where the rate's going.
00:29:24.799 --> 00:29:30.319
Fundamentally, also I think a lot of clients put too much emphasis on the rate and not really what that rand difference is.
00:29:30.480 --> 00:29:39.839
Like if you had to calculate the difference on the five cents versus having your funds invested offshore, it's not it's not really tangible.
00:29:40.000 --> 00:29:49.039
So I think John O, he's very pro just educating clients to say, you know, let's look at it fundamentally in the difference.
00:29:49.200 --> 00:30:02.319
Um, but ultimately we don't give advice on when to execute, we just tell clients, you know, this is what the events are that are happening in the market, this is what we should we could could expect, and we allow clients to make the decision.
00:30:02.400 --> 00:30:03.920
It's not for us to influence them either way.
00:30:04.160 --> 00:30:07.119
I just say to my clients, whatever the rate is, when they phone me, we're taking it.
00:30:07.279 --> 00:30:10.079
Yes, and we see that from a lot of our our big clients.
00:30:10.240 --> 00:30:13.279
I'm sorry, Lauren and Alec, before we close, prime example year to date.
00:30:13.359 --> 00:30:15.599
If you think about it, Alec, SA equities are down.
00:30:15.680 --> 00:30:18.079
Let's just call it at this point in time SA equities are down five.
00:30:18.160 --> 00:30:21.279
Lauren, you were saying people bringing money back into SA, right?
00:30:21.440 --> 00:30:24.559
The US is up, call it the SP or the NASDAQ, round number 10%.
00:30:25.119 --> 00:30:28.880
Emerging markets, certain emerging markets year to date are massively up.
00:30:28.960 --> 00:30:35.359
So I think the key thing is you've got to take, once again, this strategic, this holistic view, yeah, this long-term view, Alec.
00:30:35.440 --> 00:30:37.680
It's not just focused well diversified as well.
00:30:37.920 --> 00:30:38.400
Exactly.
00:30:38.480 --> 00:30:47.039
The the two cents, and that two cents, like you said, Alec cost him 34 to 35 percent him or that individual, just on the rate alone.
00:30:47.440 --> 00:30:51.039
Hopefully, the investment was worth it anyway.
00:30:51.279 --> 00:30:51.440
Yeah.
00:30:51.680 --> 00:30:54.079
Maybe you got a 40% discount into the offshore market.
00:30:54.400 --> 00:31:02.880
So we we do but yeah, Alec Lauren, a massive thank you, I think, to all our listeners and viewers.
00:31:02.960 --> 00:31:04.400
That was super educational.
00:31:04.559 --> 00:31:08.480
Lauren, once again, thank you for flying up for Cape Town and joining us on the show.
00:31:08.640 --> 00:31:10.400
Um, this is the first recording.
00:31:10.480 --> 00:31:21.359
Um, we are going to be partnering a little bit later in the year, so we looked uh look forward to further insights with regards to to foreign exchange, tax moving money in and out of South Africa, global markets.
00:31:21.440 --> 00:31:30.640
So, just a massive thank you once again, and to you, Alec, as always, a massive thank you, and to everyone out there, don't forget to listen, view, and subscribe.