Are South African emigrants being financially stiffed on the way out?

A 2022 survey found that 25% of registered SA voters were considering emigration. Picture: Pexels/Spencer Davis

A 2022 survey found that 25% of registered SA voters were considering emigration. Picture: Pexels/Spencer Davis

Published Jul 9, 2023


Every year, hundreds of thousands of South Africans emigrate. Some go in pursuit of new career opportunities, while others hope for a safer environment for their children. Still others leave to be closer to children and grandchildren who’ve already left the country or to study at a prestigious university overseas.

While it’s difficult to put an exact number on how many people emigrate every year, it’s worth noting that a 2022 survey found that 25% of registered voters were considering emigration. Data released last year, meanwhile, shows that more than 914 000 people left the country between 2015 and 2020. Barring a few younger people who leave with nothing but the clothes in their suitcases, each one of those people will have gone through a lot of time-consuming financial processes on the way out.

That’s true even if they weren’t among the 40 500 taxpayers who ended their tax residency in the past five years (not a prerequisite for emigration). From selling their family home to wrapping up their local contracts and subscriptions, it can all be incredibly stressful. Unfortunately, those leaving might also know that there’s a good chance they’re being stiffed on the financial hurdle: transferring whatever wealth they’ve accumulated in savings and investments to the country they’re moving to.

“Even people who feel like they’re not leaving with much can end up transferring hundreds of thousands or even millions of rands,” says Harry Scherzer, CEO and founder of independent foreign exchange provider Future Forex. “Unfortunately, most of them aren’t getting a fair deal when they do so.”

While relaxations in exchange controls have made it easier and cheaper to take money out of the country (South Africans can now take R1 million a year out without any approvals and a further R10 million a year out of the country without restrictions), emigrants still have to deal with banking and forex fees.

“All too often, those fees are charged in ways that are untransparent, exorbitant, and inconsistently applied,” says Scherzer. “As a result, emigrating South Africans end up paying much more than they should to transfer money. And with a weak rand, that can seriously impact what they have to start their new lives abroad.”

According to the Future Forex CEO, most banks somewhat overcharge on their fixed transaction fees, but where customers really lose out is on the exchange rate margin. Sometimes referred to as the spread, it’s the difference between a currency’s spot price and what the bank is able to offer. He notes that while there’s nothing untoward about the spread in and of itself, the way it’s applied can lead to problems.

“All forex providers charge a margin, and they have valid reasons for doing so,” he says. “The trouble is that most banks and traditional forex providers aren’t transparent about this cost. That means that customers, many of whom aren’t even aware of the spread in the first place, have no way of knowing whether or not they’re paying a fair price.

“All too often,” he adds, “they’re not. That lack of transparency allows providers to charge exorbitant rates on the spread, with customers paying the price. Depending on which provider they use, a customer could end up paying upwards of R10 000 more than they should on transactions of more than R1 million.”

As Scherzer explains, the more money you’re moving, the bigger the impact will be. That means that the hundreds of dollar millionaires who leave the country every year leave large amounts of money on the table. But it doesn’t have to be that way.

“While ensuring that you get the best possible deal is important for any financial transaction, it’s particularly important for emigrants making foreign exchange transactions,” the Future Forex CEO says. “Starting a new life in a new country is always difficult, but knowing that you’re taking over as much money as possible can make it a lot easier.”

Scherzer therefore recommends that emigrants look for forex providers who not only have the compliance expertise but also provide the lowest transaction fees and are entirely transparent about how they calculate and charge the spread. In doing so, people give themselves the best shot at ensuring their financial emigration experience is as smooth as their physical one.

“You owe it to yourself to ensure that your emigration process is as untraumatic as possible,” he concludes. “Moving your finances offshore plays a significant role in that. After all, the more money you’re able to take over, the smoother your start on the other side will be. The weakness of the rand already makes life difficult, there’s no reason untransparent and exorbitant transaction fees should add to that.”