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’.<\/p>\n
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.<\/p>\n
Article 50 is the UK’s official starting point for Britain to divorce from the European Union.<\/p>\n
“Following UK government\u2019s widely assumed ‘Hard Brexit’ approach, the pound has fallen considerably against most major currencies,” Smith said.<\/p>\n
“Indeed, immediately after Mrs May\u2019s Brexit speech at the Conservative party conference, the pound fell to a 30-year low of $1.27.”<\/p>\n
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.<\/p>\n
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<\/strong>.<\/p>\n “Many are now urgently reviewing their medium and long-term financial plans,” Smith said, showing that there were three big implications:<\/p>\n 1. If you’re earning in pounds, you’re losing big<\/strong><\/p>\n 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.<\/p>\n “Therefore, the cost of living has become more expensive and their purchasing power has taken a bashing,” Smith said.<\/p>\n 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.<\/p>\n “To help mitigate the adverse impact of currency fluctuations, there\u2019s been a significant increase in people seeking to transfer their UK pensions out of Britain into an HMRC-recognised overseas pension scheme,” Smith said.<\/p>\n 2. If you’re earning rands and sending it home, it’s a bit better<\/strong><\/p>\n 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.<\/p>\n “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\u2019s wedding, for example, have got richer with sterling\u2019s fall,” Smith said.<\/p>\n 3. Tough times are lying ahead<\/strong><\/p>\n The third implication is more cloudy: until Brexit negotiations start \u2013 and beyond – there remain question marks over the UK\u2019s relationship with Europe and the rest of the world.<\/p>\n “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.<\/p>\n