Magnus Heystek’s advice for anyone taking money out of South Africa

South Africans should not only invest as much money as they can internationally, but also hold their offshore capital in trusts to completely sever any link with the country. 

This is to prevent the South African government from ever accessing that capital through future taxes, repatriation, or other means. 

In effect, putting offshore capital in a trust will protect it from the financial mismanagement of the South African state, which has put government finances in serious trouble. 

This is feedback from Brenthurst Wealth co-founder and investment strategist Magnus Heystek, who explained why the company has enabled South Africans to hold assets in other jurisdictions such as Mauritius. 

Heystek explained to the Truth Report that the main assumption is that tax rates in Mauritius are lower, making it an easy way to avoid paying more of your income to SARS. 

This is not the complete story, as it is also useful to avoid the second-round effects of the government’s continued financial mismanagement. 

Heystek explained that the government is in a precarious financial position, with debt as a share of GDP rising to above 78%. 

While the National Treasury has said it expects this ratio to stabilise in the current financial year, it has made this promise nearly every year over the past decade without success. 

The continued rise in the state’s debt-to-GDP ratio suggests the government will seek ways to increase tax revenue and push SARS to be more aggressive. 

“We are up against the wall, but governments can always increase taxes, which they will. I predict that the offshore money will be a target,” Heystek said. 

“One way or another, the state is going to want to target that money. That is why I recommend to my clients that if they have money offshore, they put it into a trust and cut the link.” 

Heystek explained that offering this service, primarily through Mauritius, was the final part of the Brenthurst Wealth jigsaw puzzle. 

The expansion to Mauritius and the increased sophistication of the business there now allow Brenthurst to put their clients’ money into trusts that cannot be impacted by changes in South African policy. 

Avoiding repatriation

Cutting ties with South Africa entirely is difficult, particularly if the individual or family concerned continues to live there.

Heystek is an advocate of investing offshore in hard currencies to effectively hedge against rand depreciation and generate strong returns. 

This also enables individuals to effectively earn returns or income in foreign currencies while spending in rands, thereby significantly improving their living standards if done well.

One of the ways in which Brenthurst enables individuals to do this is by structuring their clients’ offshore assets so that they spend through an offshore credit card in South Africa.

As a result, individuals do not have to repatriate money from international jurisdictions or sell out of their assets to bring cash back and spend.

“Our clients tend to have enough money in South Africa to live and can bring more in if they need to, with the bulk invested offshore,” Heystek explained.

“We structure credit cards for most of our clients, and they do not have to bring in money. They simply swipe their offshore card here in South Africa.” 

Heystek has long been a supporter of South Africans taking the bulk of their capital out of the country and, at any level possible, investing offshore. 

More recently, Heystek has taken this to the extreme, saying he will not bring any money back to South Africa for as long as he can.

This is despite local assets rallying strongly over the past two years and international investors returning to the local bond market. 

“I am not bringing back my money. Not a cent is coming back to South Africa,” he said.

Heystek argues that the growth prospects remained significantly better offshore and that South Africa is a very small fish in a big pond.

Investing globally provides exposure to sectors such as technology and biotechnology that are not widely available on the JSE.

Heystek believes the South African economy is stuck in a rut due to current political management, high debt-to-GDP ratios, and a lack of infrastructure spending.