Magnus Heystek: How to prove yourself from a failed SA

Magnus Heistek reacts to Free Market Foundation CEO David Ansara’s suggestion that South Africans protect their wealth as they grapple with the slow but steady decline of the country. While Mr. Ansara insisted on legitimate tax breaks, he reiterated the long-standing advice of financial expert Mr. Heistek and emphasized the importance of offshore investments. Mr. Heistek argues that state verification of his assets is key to protecting his financial well-being. As South Africa’s economic woes continue, calls for offshore assets have gone mainstream, offering a lifeline to those seeking to secure their financial future in uncertain times.

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How to state how to prove yourself from a failed state

Written by Magnus Heistek

lose financial leeway

I hope David Ansara has thick skin.

For those who don’t yet know David Ansara, he’s the newly appointed CEO of the Free Market Foundation, and the incumbent and long-time FMF architect Leon Lowe has been in charge of the organization and acrimony in just over a year. He assumed the position after parting ways. Before.

I don’t know how thick David’s skin is, but he certainly has a lot of skin. ball* Earlier this week, he stood before a large audience at the Rand Club and spoke about how South Africans should protect themselves from a failed state.

“SA is not a failed state,” he said, but “slowly but surely it is failing”. Little by little, one power plant, one train station, one water pumping station, and one curved coal wagon are added.

At the same time, we also provided investment advice. “Try to pay as little tax as possible or not at all.”

He could not insist that the people stop paying taxes. That would be foolish and probably dangerous. But he advised people to try to reduce their taxes “as much as legally possible.”

And he’s right. It still amazes me how many wealthy people still do not have access to a completely legal system for reducing taxes on interest, for example through endowment schemes. This can significantly reduce both capital gains and interest taxes.

Or you could use gifts to your spouse or children to reduce inheritance taxes someday.

But what caught my attention was the fact that Ansara specifically mentioned that if you are a businessman, you could use the Mauritius holding structure to offshore all or part of your wealth. be.

I can only agree 100%, but I felt Ansara could have gone a little further. I think all wealthy South Africans should “offshore” as much of their wealth as possible to protect their lifestyle in South Africa. In other words, it is a strategy to get off the grid from finance.

In South Africa, an increasing number of people are turning off their water and electricity supplies. While imports of solar panels have surged significantly over the past few years, the boring business has been doing well for a very long time, and judging by the report, it’s only about to get even better. The water crisis is worsening in many regions of the country.

read more: Magnus Heistek: South Africa’s impending economic disaster – debt crisis threatens stability

Offshore is now mainstream

As many readers of this column know, I have been a strong proponent of offshore investing for a very long time, long before it became as mainstream as it is today. This is despite the fact that local fund managers have often avoided saying that SA assets are cheap and readily available. His CIO at M&G (formerly Prudential) David Nee took on the local investment community again last week.

Offshore investing is now mainstream. For the first time this week, we found three major asset managers, Momentum, Allan Gray and Ninety One, offering masterclasses and webinars on offshore construction and planning. There’s no point in trying to give your customers something they don’t want anymore. They simply get it from somewhere else.

Around 2011-2012, my early advice on moving money offshore on platforms like Moneweb and RSG (Afrikaans radio show) was mostly from the local wealth management industry and hellish local-tied advisors. I was met with complete ridicule and hostility. -Eager to flog large sums of local funds to unsuspecting customers.

Remember, there’s an old saying that says, “There’s no anger like disrespecting vested interests,” or something to that effect.

Long before cancel culture spread around the world, it was practiced in the world of SA investing.

In 2017, fellow investment advisor Nico van Giesen, who writes a usually excellent weekly column for Rapport, called me a “bitch” and “complainer” and ignored my advice. It should have been criticized.

Warren Ingram, who is also an investment advisor, called me a “financial pornographer” a few years ago. Because it appears I was using blackmail tactics to increase the number of clicks on my article. He also blocked me on X (old Twitter). (He then wrote a book on offshore investing…..!

A few years ago I attended an audience in Cape Town where Charles de Kock, Coronation’s fund manager, openly called me by name, but on a family website I can’t repeat it, but it rhymes with coos.

read more: Throw away the junk – Magnus Heistek debunks the Big Mac index

Offshore and local returns

A quick analysis of investment returns on offshore and local investments over the past 10-15 years shows that globally, people who do not have some kind of offshore assets, such as real estate (listed and residential), stocks, pension funds, etc., are significantly poorer. You can see that .

For all periods from 1 to 15 years, offshore stock markets significantly outperformed local markets. For example, Biznews’ offshore investment portfolio has shown an annual growth rate of 18.3% over the past 10 years. Compare this to the JSE, whose return over the same period was half that, at less than 9% per annum.

R1 million invested on the JSE ten years ago is now worth R2.26 million (8.6% per annum). It is worth R4,307 million on the MSCI World Index (16% per annum) and R5.7 million on the S&P 500 (19.5% per annum).

if you have the same one too ball If you invested in Nasdaq as an Ansara 10 years ago, your R1 million would now be worth an astonishing R97 million (23% p.a.). So who is better protected from a failed state? Local investors or foreign investors?

Coverage of these comparative earnings is often “canceled” by most mainstream media outlets. They simply refuse to publish investment comparison figures when offered. Trust me, I tried.

firing line

But back to Ansara. No doubt he will come under fire from the many vested interests currently threatened.

But I feel he should have gone further.

I have long been a fan of William Rees-Mogg, author of The Sovereign Individual, which is the handbook of the Free Market Foundation here in SA. Greater freedom creates greater wealth.

I believe that the best way to “state certify” you and your family in a place like Mauritius is by establishing a trust, company, or foundation structure, whenever applicable to your personal circumstances. I strongly believe that it’s about creating things. The more we can break the hold that the state has or may have over fiscal matters, the better.

I practice this in my personal life and have been advising anyone who is willing to listen for the past 15 years.

In our practice, we have been advising clients on this for many years, but as investors continue to head to the island nation, I have had to set up my own trust management company on the island, called Brent Consultants. .

This strategy is often seen as a precursor to immigration, but it is not.

Although few of these customers have actually emigrated or are planning to emigrate, their assets have “emigrated” and are thriving as a result.

I remember withdrawing my first large sum of money to buy a property in Mauritius in 2012, when the rand was at R6.80 to the dollar. The dollar growth in real estate and the depreciation of the rand means that real estate has risen four to five times in rand terms.

If I had invested that money in the S&P500, it would have grown almost 1000% over the same period.

Advice on externalizing assets over the past 10 to 15 years has not only been able to protect investors/owners in their capitals from the crumbling ANC state, but also from the effects of ANC pillage and plunder. I have protected my family’s wealth.

Few of these individuals have migrated, but they may do so if the breakdown in SA’s situation becomes unsustainable and dangerous.

read more: South Africa’s fiscal cliff: the chickens have come home to roost – Mpiyake Dlamini

national evidence strategy

I would like to propose the following strategy to “state-certify” itself against ANC mismanagement.

  1. Sell ​​your local real estate assets as quickly as possible. Some areas in the Western Cape are exceptions. Residential and commercial real estate has become a terrible investment, a trap for capital, with all the risks in the owner’s account, all rewards given to ANC-controlled councils, and ownership at rising interest rates above inflation. They just rape people. tax. Salaries are rising and services are becoming non-existent.
  2. Consider renting rather than buying, especially if you’re retiring. I know this may make some people uncomfortable, but rents are cheap and the property owner will likely subsidize your lifestyle. A colleague of mine rents a nice apartment in Cape Town. We calculated that apartment owners earn a return of around 2-3% on their invested capital. The increase in (on paper) capital value is offset by higher-than-inflation increases in interest rates and taxes. Is this wise?
  3. If possible, move all discretionary investments offshore. There are two reasons. One is that as the rand depreciates over time, the amount of foreign currency available for purchase decreases. On 1cent In April 2015, when the offshore allowance was last adjusted, the rand was R12/USD. Currently he is R19. This means that in 2015 he bought R1m for $83,000, but now he can only buy $53,000. In my view, this is a strengthening of foreign exchange management. Secondly, recent adjustments to the eligibility requirements for applications for the Annual Offshore Investment Allowance have resulted in significant delays in obtaining permits and even more refusals. And remember that this route to raising funds offshore can be canceled overnight.
  4. These things usually happen overnight without warning. Remember the old adage from former General Electric Co. president Jack Welsh: “Only the paranoid survive.” Don’t trust anyone in SA, especially the ANC politicians.
  5. To further bring your assets closer to SA’s ANC, consider moving your offshore assets/investment portfolio to a Mauritius trust.
  6. If you have a company that can offshore part of its business, do so. As Ansara says, set up a holding company in Mauritius and run some of your business from there. There are enough qualified and capable South Africans to run your business for you. Try to earn as much as possible in USD.
  7. If you are over 50 years old, please obtain a retirement visa valid for 10 years. This means you can travel to and from Mauritius at your convenience. You can stay as long as you like, if you like. The annual remittance to maintain a retirement visa is $18,000 per year, which is very low.
  8. Open a bank account in Mauritius and link this account to your offshore investment portfolio. All withdrawals from your portfolio can be made from this account. Mauritius debit cards can be used anywhere in the world without any problems.
  9. If you decide to purchase property in Mauritius, do so in the name of a trust with your children as beneficiaries. They can get permanent residency, while you can get residency using a retirement visa. Many SA families take this route, allowing the whole family to reside on the island.
  10. Investing in US dollars is also a way to reduce the tax you pay in SA, as capital gains are not a result of rand depreciation and are taxed only on US dollar gains. This is another powerful strategy investors can implement to reduce taxes and protect themselves from the ANC and a looming catastrophe: a soaring national debt that shows no signs of abating. No one knows how it will end. It’s time to become a boy scout.

Also read:

*Cojones. In Spanish, it means testicles, courage, courage.

*Magnus Heistek is an investment strategist at Brenthurst Wealth.

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