As South Africa’s power crisis worsens, high-net-worth individuals are increasingly considering leaving the country, according to Amanda Smit, a managing partner at investment advisory firm Henley & Partners. Smit revealed that there has been a notable increase in inquiries about investment migration products, both within South Africa and in other countries.
Those exploring investment migration or relocation see it as an opportunity to enhance their quality of life, improve travel options, access better education for their families, and protect their wealth. The surge in interest can be attributed to mounting concerns among South Africans about the severe power situation, currency volatility, and the overall state of the economy.
South Africa is currently facing one of its worst energy crises in years, with citizens enduring frequent blackouts lasting from two to four hours, and sometimes occurring three times a day. This year alone, the country has experienced approximately 35 days of blackout time.
Smit noted that the individuals opting to leave include highly successful businesspeople with established careers who are seeking to establish a “Plan B” for their families. However, there is also a growing trend of people from less affluent backgrounds choosing to emigrate.
Recent data from the South African Revenue Service (SARS) revealed that thousands of South Africans have renounced their tax residency, indicating a significant number of emigrants. In February, the commissioner of SARS, Edward Kieswetter, acknowledged that over 6,000 people had left the country. However, he emphasized that reports highlighting the departure of wealthy individuals were exaggerated.
Nevertheless, tax figures from SARS’s national taxation report for 2022 indicated that since 2017, more than 40,500 taxpayers have indicated their cessation of tax residency in South Africa. It is important to note that individuals can still be South African citizens while being tax residents in other countries. However, experts suggest that ceasing tax residency has become more challenging, implying that the actual number of people leaving may be higher than reported.
Considering the growing trend of migration, the tax authorities have heightened their focus on tax emigration procedures and compliance. Taxpayers have a legal obligation to pay taxes on their worldwide income, including local and foreign earnings, as well as estate duty on their global assets. It is becoming increasingly crucial for taxpayers to ensure their tax affairs are in line with the law before departing.
Henley & Partners identified countries such as Portugal, which offers a residency program through investment, as an attractive option for wealthy individuals. Additionally, Smit highlighted Namibia as an interesting alternative due to its cultural and economic similarities with South Africa and its advantageous taxation system. Namibia operates on a source-based taxation regime, exempting individuals from worldwide income taxes, gift taxes, inheritance taxes, and estate duty. Consequently, securing alternative residency in Namibia is an appealing choice for high-net-worth South Africans.
