Time to invest offshore?

Investors often pose the question “when is the right time to take money offshore?” Foremost in their minds is what is the current Rand/Dollar exchange rate is and what happens if the Rand strengthens. Although we cannot predict short-term currency movements, history suggests that over time the Rand will continue to weaken against the major currencies of the world.

In a recent webinar we hosted, Marriott’s Chief Investment Officer, Duggan Matthews presented Marriott’s 5-year exchange rate expectation.

Image supplied by Marriott

In trying to address when the best time to invest offshore is we have tried to address how the currency will impact your investment over a 5-year investment horizon.

What happens if the currency strengthens or weakens

In the recent Budget update, the Finance Minister highlighted the daunting task facing South Africa as a nation as it tries to balance its debt obligations, maintain/increase current spending levels all the while whilst trying to tackle corruption and irregular expenditure.

On the 27th March 2020, Moody’s cut South Africa’s international credit rating from Baa3 to Ba1, which is sub-investment grade and commonly referred to as “junk status”. The harsh effects of the COVID-19 pandemic are likely still to be felt with South Africa expected to record its worst economic performance in recent history.

Is it not time for investors to consider diversifying their investments and seeking investment opportunities in different markets? South Africa represents less than 1% of the global economy. Investing offshore allows investors to spread their investment risk across different economies and regions. It also provides access to industries and companies that may not be available in South Africa.

Perhaps the pertinent question is not when is the right time to be investing offshore but why not.

Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.” Warren Buffett