The South African rand has always been a vulnerable and volatile currency. The reason for its vulnerability and volatility is because it’s often affected by political rhetoric and other economic factors that affect its value. More recently, South Africa’s currency has been affected by talk of land expropriation, investor confidence, and the fact that the country has recently slipped into a technical recession.
One of the ways a South African can protect his or her wealth is by investing abroad in a currency that enjoys less volatility (erratic and unpredictable fluctuations) and more stability. The American dollar is often looked favorably as a ‘shelter’ among South African investors. This is because the US dollar is considered a safe haven investment. It is one of the countries least likely to default on its debt and with such an enormous economy as a backer, it will provide stability to investors – particularly international investors.
That’s not to say that the US dollar doesn’t come under pressure from time to time. Tensions with China can affect the currency’s value, for example, but investing in the American dollar means that savers are not as prone to as much volatility and uncertainty as they would if they invested in South Africa’s Rand.
One way for South Africans to expose themselves to the US dollar is through the investment of local real estate through the EB-5 visa program, which is an immigrant investor visa program created by the United States Congress in 1990 that allows eligible immigrant investors to become lawful permanent citizens by investing a minimum required amount into a designated project and creating a minimum of 10 jobs in the process.
There are many advantages to investing in an EB-5 project but one thing it does offer is protection for investor’s hard-earned money. If one were to invest in a project in the US, the money investment would be in US dollars, effectively hedging currency risk. Further, at the end of the investment term, one would be entitled to receive the investment back in US dollars. At that point, it could be reinvested or converted back to South African Rands – most likely at a very favorable exchange rate as the dollar will likely have appreciated further against the Rand.
If the investment is in a strong project, the downsides are minimal. The money would earn a small amount of interest during the term in US dollars – one of the most stable currencies in the world. And, as the US dollar strengthens it could be the best investment to make right now. With the uncertainty surrounding the South African economy and the unpredictable performance of the Rand, we believe that now is the time to invest in the US property market, in the dollar, and EB-5 in particular as recent policy proposals to significantly increase the investment amount have circulated the Capitol.
More than solely protecting wealth, investors will also be able to obtain residency through EB-5, provided the investor funds the investment legally and creates the required jobs. In fact, America may also be a place where such an investor may consider retiring to or setting up a home or business to further enjoy the same rights as any American citizen, aside from voting and working in a government job.
Overall, the program gives one the opportunity to take control of their destiny as the next turn comes. It will open doors and options for them and their family’s future, while at the same time offering a great hedge against the Rand in times of trouble.
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