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image of a Big Mac burger

Hard Currency Concerns

Rand & Currency Concerns – and obtaining your foreign tax clearance

We all watch the value of our currency with real interest, especially when it has a noticeable effect on regular purchases (such as petrol) and larger lifestyle expenditure (such as imported durable goods and overseas holidays). Unsurprisingly, the most shared concern of our clients, aside from whether they have sufficient retirement funding to increase their investment risk, is how to combat the loss of currency purchasing power. In periods of Rand weakness, it reaches a fever pitch of anxiety and the desire to have more protection against extreme blow outs.

graph of Rand exchange rate against US dollar

Recent Rand weakness

At times like now, with even our children being aware of the Rand weakness, most people believe they don’t have sufficient funds offshore, and start worrying about getting more Rands offshore – immediately. The process is a little daunting, and delays can cause huge irritation as “paper losses” mount. We have a solution.

Registered Tax Practitioners are worth the cost

Alma is a registered tax practitioner, and we are very tax aware in how we advise our clients and in the management of their assets. However when it comes to complicated structuring or obtaining a tax clearance certificate, we utilise various firms and consultants to provide opinions and carry out administrative tasks, depending upon the circumstances.

For those with an urgent need to obtain a tax clearance certificate we can put you in touch with someone to complete the process within 3 – 5 days. Contact us if you’d like to make use of this service.

You’ll need to produce the following:

chart comparing value of various country's cost for a big mac burger

Big Mac Index

We would however spend some time talking about our approach, which is to diversify your assets across geographies, and that we don’t recommend knee jerk currency trading – rather a considered allocation to developed markets and their currencies.

Currency valuation is not a one-way bet: it’s all relative, and ever changing

We encourage our clients to move towards thinking and acting as an international investor, (building offshore exposure by investing in sustainably productive assets) whilst maintaining sufficient capital onshore to meet local liabilities (funding onshore lifestyle with opportunity and emergency liquidity).

graph of OECD country's currency purchasing power

OECD Currency Purchasing Power

I would point out that currently the Rand is undervalued on a number of measures, including the Big Mac Index (a comparison of the burger price across many countries), the OECD purchasing power parity model, and a proprietary leading indicator fair value model developed by Investec.

Make decisions about hard currency risk allocations, not timing

In the short term the Rand could lose more ground or strengthen considerably. We wouldn’t provide advice based upon an expected next move, but we would advise everybody to seriously consider how much capital you should have offshore.

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