Bad news for expats living in South Africa – Brexit is about to make life a whole lot tougher

Many of the 300,000-plus British expats currently in South Africa are about to hit harder times as the UK solidifies its plan for a ‘hard Brexit’.

According to Gavin Smith of financial advisor firm, deVere Group, expats living in South Africa are urgently re-evaluating their financial plans, as indications from UK Prime Minister Theresa May are that the country will implement Article 50 before March 2017.

Article 50 is the UK’s official starting point for Britain to divorce from the European Union.

“Following UK government’s widely assumed ‘Hard Brexit’ approach, the pound has fallen considerably against most major currencies,” Smith said.

“Indeed, immediately after Mrs May’s Brexit speech at the Conservative party conference, the pound fell to a 30-year low of $1.27.”

Trading against the rand, the pound has lost even more of its value in local terms, dropping over 20.2% against the rand since the referendum result earlier in 2016.

What this means for expats in South Africa is that their wealth in local terms has lost a fifth of its value in a few months.

“Many are now urgently reviewing their medium and long-term financial plans,” Smith said, showing that there were three big implications:

1. If you’re earning in pounds, you’re losing big

First, the falling value of the pound has a serious negative effect for those who are in receipt of and/or live off a UK pension: they will have taken a 20% hit to their British pension since the Brexit vote.

“Therefore, the cost of living has become more expensive and their purchasing power has taken a bashing,” Smith said.

This is particularly hard-hitting as prices in South Africa have shot up in 2016 – a rising cost of living, coupled with a declining take-home, means double pain for anyone relying on pound-based income.

“To help mitigate the adverse impact of currency fluctuations, there’s been a significant increase in people seeking to transfer their UK pensions out of Britain into an HMRC-recognised overseas pension scheme,” Smith said.

2. If you’re earning rands and sending it home, it’s a bit better

It’s not all entirely bad news, however. The second implication is for expats earning in rand and sending money ‘back home’, where the scenario is quite different.

“A weaker pound helps to repatriate a higher amount straight away. Those who are working in South Africa and have liabilities in the U.K, such as a mortgage, school fees, or a child’s wedding, for example, have got richer with sterling’s fall,” Smith said.

3. Tough times are lying ahead

The third implication is more cloudy: until Brexit negotiations start – and beyond – there remain question marks over the UK’s relationship with Europe and the rest of the world.

“Against this backdrop of uncertainty, many expats will be looking to reassess their investment portfolios, reducing their exposure to UK assets, and increasing exposure to international ones,” Smith said.

 Read: 5 ways Brexit can impact South Africa

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Bad news for expats living in South Africa – Brexit is about to make life a whole lot tougher