High-net-worth South Africans are looking to leave South Africa as the power crisis intensifies.
Speaking to Moneyweb, Amanda Smit, a managing partner at investment advisory firm Henley & Partners, said that there has been an uptick in people inquiring about investment migration products in South Africa and countries abroad.
Smit said that many of the people looking into migrating their investments or leaving the country see it as a way to improve their standard of living, their ability to travel, access better education for their families and safeguard their wealth.
According to the managing partner, one can attribute the spike in people looking to leave the country to growing concern among South Africans regarding the dire power situation, the volatile currency, and the general state of the economy.
South Africa’s energy crisis is in the worst position it has been in for years, with everyday citizens facing blackouts ranging from two to four hours at a time, sometimes three times a day.
Cumulatively this year, the country has experienced roughly 35 days of blackout time.
According to Smit, the type of people that are deciding to leave include highly successful and established business people with a family wanting to get their ‘Plan B’ in place.
There has, however, also been a growing trend of people from less financially well-off positions also leaving.
Recent data from the South African Revenue Service (SARS) showed that thousands of South Africans have ceased their tax residency in the country – indicating a large number of people emigrating.
In February, Edward Kieswetter, the commissioner of the tax authority, admitted that over 6,000 people had left the country. However, he said that headlines noting wealthy people leaving the country are overstated.
Despite Kieswetter making this assertion, tax figures from SARS’s national taxation report for 2022 revealed that since 2017 more than 40,500 taxpayers have indicated that they ceased to be tax residents in South Africa.
It is important to note that a taxpayer can still be a South African citizen while being a tax resident in another or multiple countries; however, various tax experts, including Thomas Lobban from Tax Consulting SA, have said that ceasing tax residency has become more difficult and as a result, the true number of people leaving may be higher.
In light of the growing trend of people moving abroad, the taxman has upped the ante in terms of tax emigration procedure and tax compliance.
Danielle Luwes, a tax manager at Hobbs Sinclair, said that taxpayers are legally obligated to pay taxes to SARS on their worldwide income, both local and foreign, and estate duty on their worldwide assets.
She said that it is becoming increasingly important for taxpayers to ensure that their taxes are aligned with the law prior to leaving.
Where are they going
Henley & Partners says places such as Portugal, which offers a residency programme through investment and become very attractive to wealthy individuals.
Additionally, Smit added, Namibia has emerged as an interesting option which, on top of being similar to South Africa in terms of culture and wealth – it has a taxation system that offers various advantages.
“It’s a source-based taxation regime, you’re not taxed on worldwide income. They have got no gift taxes, no inheritance taxes, no estate duty. So it makes a whole lot of sense for high-net-worth South Africans to have a secure alternative residency in Namibia.”