By James Paynter
For a long time, the storm has been coming. A winter storm. A nasty winter storm.
And now it seems it is just about here.
It is time to take action to protect yourself from the coming blizzard.
The past year has seen the South African economy take a pounding from all quarters, stumbling from one crisis to the next, whether political, social or economic – be it Cabinet reshuffles, rating downgrades, negative growth, #GuptaLeaks, #StateCapture, social unrest, and of course, several failed oustings of Zuma.
And then, exacerbating the situation is a once-in-a-century drought that has not only created crisis-level water shortages in many sectors of the country, but driven an already dangerous (official) unemployment rate to its worst levels in 13 years.
Despite the compounding of these negative events, somehow the SA economy has kept on its wobbly feet – and kept at bay a feared implosion brought on by being downgraded to #JunkStatus.
For far too long, sadly, the Government’s inability (and lack of inclination or resolve) to accept responsibility and address this dire situation – coupled with the lack of will to cut back on expenditure and debt – has resulted in investor confidence sinking further by the day.
What really felt like the final straw, was Gigaba’s mid-term mini budget speech.
While it was difficult to fault the tell-it-like-it-is attitude from Gigaba, there was one crucial flaw:
No meaningful plan to improve the situation. Nada. Zip.
And this is what caused the post-speech negative reaction from South Africans and foreign Investors.
And more importantly, from ratings agency Moody’s, who have been watching the situation closely since Gigaba’s #GordhanGate appointment in March.
They desperately needed to hear the right things – fiscal discipline, a trimming back of the budget deficit and of the national debt.
Instead, we got a fully flavoured socialist budget. With radical economic transformation gravy poured over the top…
Net Result: #JunkStatus has now happened from 2 out of 3 agencies. With only one rating agency left to throw SA to the dogs, it seems that the inevitable has been staved off until after February’s budget.
A downgrade by Moody’s would be the final nail in the coffin. This will result in SA being removed from the World Government Bond Index and lead to an immediate disinvestment of at least R100 billion by foreign investors, plus significant long-term damage to the economy.
So, it is probably best to count down the days to that decision post the February budget.
Severe recession, business downturn, more job losses and reduced revenue are all on the cards.
The truth is this: The economic situation facing South Africans and therefore the security of your Rands has been never been worse. No one can deny it.
So, what are we to do?
We cannot change the economic situation South Africa is in. But we can make our own decisions in order to protect our hard-earned wealth and assets.
And for most, what needs to be done is this:
Invest your funds elsewhere. Even if it is not in an interest bearing foreign bank account – wherever it is, it more likely to be safer there, than in South Africa.
And that is the harsh truth.
Efficient Group’s chief economist Dawie Roodt said it for us a few months ago in an article which featured on IOL.co.za – “Take your money out of South Africa. This country is in deep trouble.”
Some have called this call irresponsible, but If we are reading the signs right, it may well be the most prudent and timely advice yet given by an economist (which is truly something)!
Margaret Thatcher once said that “The trouble with socialism is that eventually you run out of other people’s money.”
Too true. And we are getting to that point. Fast.
But here’s the danger – if government can’t spend foreigners’ money any more, they will look closer to home. Much closer.
Which is why you need to act now.
At present, as a South African Citizen, you have access to a South African Discretionary Allowance, which permits you to legally take up to R1m out of the country every calendar year.
This also applies to your wife or family – if they are a South African Citizen with a tax number, they too are entitled to R1m of discretionary allowance.
And, if that isn’t enough, with a tax clearance certificate issued from SARS, you can also take up to R10 million capital allowance offshore per annum.
…which means you only have a short while left before the end of December, and your allowance for this year is wasted.
That could all change very quickly…
Up to now, the Government has been happy for SA investors to send their funds offshore, as long as there were sufficient incoming foreign investor funds to keep the ship afloat.
BUT that will likely change drastically when full #JunkStatus hits, as an already cash-strapped Government will have no power to stop the significant outflow of investor funds.
And they will have to turn their attention to outflows they can control – YOURS.
And with one simple announcement (there have already been rumblings of this allowance either being reduced, or removed completely), your hard-earned Rands will be trapped in South Africa.
That means it is time to take action – while your window of opportunity is still there.
Talking about windows of opportunity, this is not about best rate of exchange for your funds, but about the door being open or closed…
Whereas there is a chance that you could well get a better rate of exchange a month or two or six down the road, the odds of you being able to actually get your hard-earned Rands offshore at that stage have reduced substantially!
So, how to take advantage of this privilege while we still have it?
For many persons, this is a daunting task. And this is why we have partnered with some of the best companies in the field, to assist you.
They will help you get the best rate for getting funds offshore, either to a foreign bank account, or to where you would like to invest in something. And they will get your tax clearance certificate if you need one.
To learn more about getting setup with a free account to trade, go here: www.forexforecasts.co.za/go/send-money
They will help you:
• Set up a free account
• Complete all the compliance documents, which only take a few minutes
• Assist you with a tax clearance certificate, free of charge
• Ensure you get the absolute best rate and service they can possibly offer
In combination with that, we provide forecasts on financial markets such as the US Dollar, Euro and British Pound against the South African Rand. With our predictions, you can time your exchange into foreign currency to get the possible rate against the Rand.
To learn more about getting setup with a free trial of our forecasts, go here:
The situation and risk is real. And if anyone is not seeing it, they need to take their heads out the sand.
And take action now to protect against the coming storm.
To your success