Immigrant investor programs now affords the well-healed the chance to do business abroad, while also calling it home, and South Africa’s wealthy new black elite have front row seats.
With international business ventures, luxury travel, and investment interests all over the world, our black business elites might find a second passport coming in quite handy as many of them have claimed the title of echelons in the complex and dynamic stratification of the country’s social and political hierarchy.
The freedom to travel and do business across borders whilst also being able to call your destination home is a concept that is still relatively new to many. But for those with the budget and the inclination to do so, the process might be as easy as finding out the how to’s, and then getting on with the where to’s next.
In an exclusive with BBQ, residence and citizenship expert Nadia Read elaborates on this high-brow phenomenon that is becoming a popular concept among those esteemed enough to be ranked high-networth individuals and what this might mean for South Africa’s growing black upper class.
“People are fast realising the limitations of having only one citizenship, especially for globally minded South African business owners who are looking to take their businesses to new heights internationally,” Read says.
She explains that the benefits are broad, and that aside from the obvious freedom of travel, access and international mobility, investors are seeing the benefits in other forms. According to her, the belief in investing is to “diversify, diversify and diversify”, and in the same way that investors diversify their assets and investments, South Africans are realising the value in diversifying their citizenship and their access to freedom.
“The motivation lies in creating a stable and secure life, and creating immunity against political and economic risk. This also drives stronger confidence within South Africa, as people now have another option. In countries such as the United States and France for example, the decision to acquire a second passport is largely driven by tax planning.
“For international business owners, the freedom that a second passport offers can transform their businesses and global reach. For the international elite who can afford a second citizenship, the need to provide a legacy for their children and their grandchildren in the form of an EU passport plays a strong role as does the motivation of wealth protection and security,” she says.
Read highlights that the presence of wealth black investors looking for a second residence or citizenship is growing quickly. She says that as the wealthy elite across all races grows more and more, investors are looking for the global mobility and freedom that a second citizenship offers. “South Africa’s black elite have a strong drive for travel and freedom, and as they are moving their businesses to new international heights, the access that a second passport offers has become increasingly appealing. They are looking to create a stable and secure life for themselves and their families and leave a legacy for their children. The drive is both personal and professional,” Read explains.
Read makes reference to the fact that there are currently around 20 countries offering either residence or citizenship programs and that as part of her work, she deals with jurisdictions that have a legal framework that leads to either residence or citizenship in that country. “We have to work closely with our clients to evaluate what their requirements and preferences are in order to work with jurisdictions that meet their needs, not only from a personal point of view but also for their businesses.
“South African investors are looking primarily towards EU countries. In particular, there has been a strong focus on programs such as the Portuguese Golden Residence program, Hungary’s residence bond program, as well as Malta’s CBI program. The investment requirements are usually either in the form of investments into Government bonds or real estate purchases. In some cases straight donations are required and in others, a more flexible combination of options,” she says.
As Read explains, due to the costs of these programs, it limits the market to the upper wealthy in South African society and the business elite. More specifically, she says, it is the globally minded business owners and entrepreneurs that feel the strongest value from acquiring a second citizenship. Prestige and status also play a role. “Amongst the cheapest options are Greece and Hungary starting at €250 000 (about R3,6 million) and nearer to the top we have UK with £1mil (about R18 million), Cyprus and Malta each at around €1 million (R14,22 million) investment. Not for the fainthearted,” says Read.
She further highlights that it is important for prospective investors and their families to do their homework before making any commitments. “They need to understand both the benefits and drawbacks involved in acquiring a second citizenship or residence. There are a couple of crucial steps that I would take into consideration when working with investors, but most importantly this involves firstly that they fully understand the requirement and steps and secondly finding a program that is most suited to their needs,” she explains.
On a more technical note, Read explains that countries that offer these programs typically have a legal framework under which the program operates. The biggest challenge is ensuring transparency, given the nature of the industry, and adhering to strict international due diligence protocols. She says that prospective investors are carefully betted, both locally and internationally and governments such as Malta are very strict with who they will allow on their programs.
Looking at our country’s laws, Read says that South African legislation allows dual citizenship which gives South African investors the freedom to have a second or even third passport. Residence is not affected by this according to her. She does however mention that governments are realising the potential foreign investment can bring into their countries and are introducing these programs in order to attract investment from globally minded business owners and entrepreneurs.
“South Africans are taxed on their worldwide income so investors do need to be aware of the potential tax implications of owning foreign assets. Benefits for businesspeople however include among others the purchasing of property, setting up of companies, travelling and the ability to move more freely, as well as benefits related to tax planning,” she says.
Read once again highlights that the kind of investors looking to these programs are typically the business elite and successful entrepreneurs. “These are business people who are internationally minded, travel abroad, and are looking to take their personal and professional lives to new heights.”