Money Matters
Issue 47

April 2023

Have you ever found yourself overly focused on the exchange rate when investing offshore? Many South African investors tend to spend a significant amount of time trying to predict the direction of the currency, even though it may matter less than they think in the long term. If you’re looking to learn more about the essential factors to consider when investing offshore, we invite you to read the article “Does the exchange rate really matter?”. This will provide you with valuable insights that could help you make more informed investment decisions.

Moreover, it is important not to act impulsively in light of the current political uncertainty in South Africa and invest too large an allocation offshore. Rather ensure that your offshore investments align with your long-term investment goals as outlined in your Wealth Management Plan.

On the topic of Wealth Management Plans, are you including a tax free investment in your portfolio? If tax is a factor, then we recommend that you do. However, in order to reap the most benefits, it is important to avoid common mistakes made. We have highlighted these in the article below.

If you have not already had a Wealth Management Plan drawn up by our team, please contact us.

• There are compelling reasons for investing offshore; however, many investors fixate on trying to time the currency.

• On average, the rand has depreciated by approximately 6% p.a. over rolling 5-year periods, contributing to an offshore investment’s overall rand return.

• Our analysis illustrates that the rand/dollar exchange rate at the time of initial investment (i.e. whether the rand had appreciated or depreciated over the preceding year, used as a proxy for investors’ perception of where the currency will go) does not make a material difference to the overall longer-term return of an offshore investment.

• When investing offshore, investors should take a longer-term view and look past the shorter-term movements in the currency.

• Where you choose to invest offshore is therefore more important than the shorter-term movements in the currency.

My sense is that South Africans are utterly exhausted. So, to give readers a break, this month I am sharing something very different. A real-life story from the ground up.
A former Eskom engineer, his wife and two engineering sons (the Bosch family) have developed a practical example of how electricity distribution in South Africa will change over the next few years.

The engineer-father started working on the maintenance and administration of electricity distribution systems 30 years ago when Eskom embarked on its mass electrification programme of 350 000 houses a year. Eskom made losses on these programmes and then outsourced the management of these to private companies. The father began a family business, contracting his services to Eskom in Hammanskraal, north of Pretoria. The losses were turned around and the services became profitable. What was the secret of their success?