FACTS TO CONSIDER BEFORE INVESTING IN AN OFF-SHORE VENTURE

Foreign investment acts as a catalyst to economic development for the host country as well as for South Africa. With the current pandemic, it is no wonder that foreign investment has seen a huge decline with many fearing the implications of such an investment in such a volatile economic climate.

As the country opens up for more activity, many companies are now considering their options to invest offshore, broaden their horizons and diversify their risk and opportunity costs.

When considering foreign investment opportunities, there are various compliance matters and policies that companies and individuals need to be aware of and comply with. Non-compliance, thereof, will be met with serious repercussions with the relevant authorities.

It always remains in the best interest of the entity to ensure that all legislation is complied with and this begins with engaging Specialists who can advise on the correct procedure and considerations.

Considerations

When looking to diversify your portfolio of investments certain requirements need to be met. We have consolidated a list of four requirements to be considered to provide you with a full spectrum of the diversity of risks and obligations, delegated by the South African Reserve Bank.

1. The investment must present an underlying benefit to the economy of South Africa

It becomes important to note that whatever sector you choose to invest in, that it provides an underlying benefit to South Africa. This benefit could be tapping into a market not previously engaged by South Africa, integration of supply chain with foreign countries and/or increased imports and export activity. This is a critical consideration for those looking to invest offshore and requirement of SARB.

2. Can I diversify my investment outside of the current business venture?

With foreign investments, there is ample room for flexibility and diversification in your choices, in terms of sectors. Entities are not restricted to the current portfolio of investment and have free reign to change to their new interest.

3. SARB approval is non-negotiable

Yes, these transactions require SARB approval by law. It is important to engage the authority before entering into any agreements and avoid non-compliance with exchange control.

4. What percentage of shareholding will be required as an investment commitment?

In order for a foreign investment to be declared viable, the investor must have a minimum 10% shareholding in the investment and be on the board of directors.

Take Away

It is best practice to consider a professional foreign investment specialist to help analyse your full potential and financial needs to identify opportunity costing and SARB compliance to avoid unnecessary financial risk and potential financial loss.

This will eliminate the risk of entering commitments without the required approval from SARB, which in turn may jeopardise the relationships and result in time wasted for all parties involved.

Our Multidisciplinary team of Foreign Investment Specialists, Tax Professionals, Chartered Accountants (SA) and Forex Consultants are well versed in assisting both companies and individuals in setting up their foreign investment portfolios in line with all regulations.