Author Topic: The pain of living in a banana republic  (Read 10023 times)

patrickza

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The pain of living in a banana republic
« on: December 10, 2015, 10:41:04 PM »
Up until Wednesday, South Africa's status of a banana republic was unconfirmed. Then on Wednesday night, the president fired the finance minister. Not because he was doing a bad job, but because he was doing his job well. Unfortunately this interfered with the president's girlfriend being able to pilfer money from the state airline, SAA, as well as his massive kickbacks from a monumentally huge deal with Russia for a few nuclear power stations. He's been replaced by someone who is very unknown, except that he once ran a municipality so badly, that his house was burnt down by the community. He's a yes man who will open the tax payers wallet, and hand out cash freely to whomever our president (who's top level of education is grade 4, I kid you not) chooses.

We've all been watching this buffoon for the last while, and the currency has gone from R6.50 to the dollar to R14 to the dollar. Yesterday it went from around R14 to R15.50. The financial sector on the local exchange lost 13% in one day, a bigger one day drop than any day in the 2008 banking crises.

The net effect for me was that I started the year with $500k, during the year I've put away another $60k. The US market has risen by a good amount, so if I was invested there I'd be worth about $600k today. What am I worth now? Well if I had to move my money into dollars today, I'd have just short of $400k. In effect our useless government, led by a painful dictator want to be has managed to remove $200 from my potential net worth.

I also don't really know where to go next. It's hard for us to move more than the current equivalent of $60k a year out of the country. And even if I could, it'll be so hard swallowing the terrible exchange rate, but I also don't want to keep going backwards investment wise.

Any ideas?

MMMaybe

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Re: The pain of living in a banana republic
« Reply #1 on: December 10, 2015, 11:08:33 PM »
I am originally from South Africa and so I understand. I am currently living in the Philippines, which is a corrupt mess of note. So I really get it.

I would suggest to you that you look at getting out of SA if you can. I find it hard to see any kind of future there. Its going to be easier on you if you leave while you are still on the young side. My relatives who are in their late 40's are really stuck now.

Have they tightened up the rules for moving cash out? Back when we left, people would "give" others spending money for their overseas holidays and use their yearly allowance to move their cash out. Could family help you?


alsoknownasDean

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Re: The pain of living in a banana republic
« Reply #2 on: December 11, 2015, 03:38:30 AM »
Are you able to purchase overseas investments, even locally (or even large multinational companies listed in SA)?

I know Vanguard here in Australia have an index fund based on the S&P500, sold on the Australian exchange in $AUD. Is there similar in South Africa?

patrickza

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Re: The pain of living in a banana republic
« Reply #3 on: December 11, 2015, 03:51:40 AM »
The best we can get are the Deutshe bank tracers, but they run a TER of 0.9% or more. The trouble is, it may be too late to move into that, and if we reach big inflation numbers (I was in zimbabwe during hyper inflation times) you're still screwed by the waiting period between cashing out and being able to use the funds.

I'm going to let the dust settle a little. For now I'm hoping the party will recall their leader. They've done it before, but sadly it was with one of their best leaders...

dude

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Re: The pain of living in a banana republic
« Reply #4 on: December 11, 2015, 05:09:43 AM »

 The US market has risen by a good amount,


Not sure where you're getting that information -- the S&P 500 is only up @1.5% YTD.  Better than inflation currently, but it definitely has NOT risen by a "good amount."

That aside, S.A.'s situation sucks.  Here in the good old U.S. of A., we've got a band of bona fide fucking lunatics all vying for the presidential nomination on the GOP side. God help us if one of them should ascend to the Presidency.

mohawkbrah

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Re: The pain of living in a banana republic
« Reply #5 on: December 11, 2015, 10:56:22 AM »
going to be honest don't know what you were thinking holding all of your money in SA equity?. I won't even touch developing countries with my money

Mr. Green

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Re: The pain of living in a banana republic
« Reply #6 on: December 11, 2015, 11:12:25 AM »
going to be honest don't know what you were thinking holding all of your money in SA equity?. I won't even touch developing countries with my money
Sounds like he has problems getting his money out of the country.

Schaefer Light

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Re: The pain of living in a banana republic
« Reply #7 on: December 11, 2015, 11:17:16 AM »


That aside, S.A.'s situation sucks.  Here in the good old U.S. of A., we've got a band of bona fide fucking lunatics all vying for the presidential nomination on the GOP side. God help us if one of them should ascend to the Presidency.
I don't think we have to worry about anything like what's going on in South Africa no matter who wins the election next year.  And for the record, I'll gladly vote for anyone not named Hillary next year.

Due South

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Re: The pain of living in a banana republic
« Reply #8 on: December 14, 2015, 08:52:10 AM »
Having taken the the decision to RE mere months ago, with a portfolio almost 100% SA equities you can imagine how I have felt over the last week!!  Interestingly enough my portfolio took a much harder smack during November with commodities hitting fresh lows e.g. AGL, SOL :-( 

I take some comfort in the fact that such a high proportion of earnings of JSE listed companies (somewhere between 60-75%) are earned outside SA.  A fairly high proportion of my dividends are paid in USD/GBP - which provides some short term income/inflation buffer.  The big concern is for the longer term.  Even today's announcement - although well received by markets - suggests ongoing instability which rating agencies and investors will not like. 

I do have a fair pile of cash I had set aside to cover a couple of years' spending - but wonder if this isn't better invested offshore ?  If/when ZAR volatility settles ?

I recall somehow that your long term plans are not to stay in SA?  Guess that makes the decision to take assets offshore more relevant.  I have read that if credit rating downgrade does happen, the huge outflow from SA may force tighter exchange control ?  So maybe sooner rather than later ....?  Tough,tough decisions.

The_path_less_taken

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Re: The pain of living in a banana republic
« Reply #9 on: December 14, 2015, 11:23:53 AM »
Know zip about your laws or the legality of exporting money. If you do decide you've had enough and want to move, there are probably some fringe options worth exploring.

Example....it is the holiday season. People regularly give expensive gifts/gold/etc (ok, not mustacians but those 'other' people out there). So if you were to buy Krugerands or whatever and give them to family out of the country....wouldn't that be legal?

Also....some things can be bought online, so there's a ready source of "yep, spent that" and then sold in an untraceable manner...here it would be online through craigslist or whatever. If it were a pricey enough item: jewelry/art etc. it might be a way to move substantial amounts of money...

Not sure about this one but if you were to suddenly get the urge to attend Yale/Princeton or whatever and pre-paid the $$$$ tuition....I believe most schools would refund the money within the first week/month.

There are "ways" to move money that most governments can't block.

Good luck.

If it's any consolation, you can always comb the internet for news about the current American election in progress: that's got to be good for a belly laugh.


Falconer

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Re: The pain of living in a banana republic
« Reply #10 on: December 15, 2015, 10:17:18 PM »
And here is me thinking about moving to SA to retire. COL is just that much lower. Especially now.

But I feel for you, my inlaws are in the same boat.


CDP45

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Re: The pain of living in a banana republic
« Reply #11 on: December 15, 2015, 10:48:07 PM »
Had a vietnamese buddy would sow wads of $100 in undies when he would travel to there (like 20 years ago). Not sure if you have these in SA, but in America there are now X-ray scanners that would show that. Obviously what you need is access to European or US banking system checking account and credit card.

You can just buy stuff for other people and discount the price for cash/Euros/$$ and hold it...is that why everyone has bars and walls at their homes?

Fucked up how evil governments are, but signs of movement and capital restrictions usually don't get better until they get far worse..

patrickza

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Re: The pain of living in a banana republic
« Reply #12 on: December 15, 2015, 11:01:46 PM »
Having taken the the decision to RE mere months ago, with a portfolio almost 100% SA equities you can imagine how I have felt over the last week!!  Interestingly enough my portfolio took a much harder smack during November with commodities hitting fresh lows e.g. AGL, SOL :-( 

I take some comfort in the fact that such a high proportion of earnings of JSE listed companies (somewhere between 60-75%) are earned outside SA.  A fairly high proportion of my dividends are paid in USD/GBP - which provides some short term income/inflation buffer.  The big concern is for the longer term.  Even today's announcement - although well received by markets - suggests ongoing instability which rating agencies and investors will not like. 

I do have a fair pile of cash I had set aside to cover a couple of years' spending - but wonder if this isn't better invested offshore ?  If/when ZAR volatility settles ?

I recall somehow that your long term plans are not to stay in SA?  Guess that makes the decision to take assets offshore more relevant.  I have read that if credit rating downgrade does happen, the huge outflow from SA may force tighter exchange control ?  So maybe sooner rather than later ....?  Tough,tough decisions.
It does suck how vulnerable you are to the decisions of an uneducated fool. I'm not sure if you watched his speech just after he made the decision. Aside from him showing off his stupidity in claiming Africa was the largest continent, and that all other continents could fit inside it, he also made some rash statements which sounded like they came out of Mugabe's mouth. He went on about the colonists, and how he doesn't agree with the law of supply and demand dictating somethings value. It really was scary stuff. You can read more here: http://m.news24.com/Fin24/BizNews/must-read-rian-malan-ad-libbing-zuma-exposes-real-reasons-he-fired-nene-20151211

Fortunately it seems some sanity prevailed, and while we don't know who, someone obviously read him the riot act on Sunday evening evening, because after taunting the media during the day on Sunday, claiming they were working for the enemy, he made a 180 on sunday night and put our previous finance minister back. It hasn't undone the damage though, but has undone about half of it. Of course his party also changed all their statements and support him 100%, so we're in for many more years of his madness.

We're allowed to take around $65 000 a year out of SA. I'll be doing that, every year, until everything I have is out of the control of that lunatic. Let's hope the currency still has value in a few years.

Schaefer Light

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Re: The pain of living in a banana republic
« Reply #13 on: December 18, 2015, 07:13:07 AM »
Here's a good read about what's happening in South Africa that I stumbled upon while looking at The Economist's website.

http://www.economist.com/news/middle-east-and-africa/21684146-two-decades-after-south-africas-transition-non-racial-democracy-its

I think the big mistake was the assumption they made while writing their constitution - that every president was going to be like Nelson Mandela.  Way too much power was given to the executive branch, when there should have been a better system of checks and balances.
« Last Edit: December 18, 2015, 07:25:46 AM by Schaefer Light »

TheFrugalFox

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Re: The pain of living in a banana republic
« Reply #14 on: December 20, 2015, 07:35:52 PM »
In case people might have missed this...

Quote
his stupidity in claiming Africa was the largest continent, and that all other continents could fit inside it

Yes. Our president though Africa was that big ALL the other continents could fit inside it. BTW, our president has three wives. Each one, of course, get all the perks of being married to number one. He has also, recently, publicly declared that he will put his party BEFORE the country. And has spent over R253 000 000 of public money on his personal house.

But for you Patrick, is it not worth thinking about working your last couple of years overseas? You seem well qualified and have lot's of experience so might be worth it. Although I think the country could recover slightly with a leadership change - there are a couple in the ANC which would be far better - we could, of course go the other way and get Julius Malmema. I said to my wife the day that happens we will be putting the house on the market. I have been mulling over options though - no matter what leadership changes we get, I still think this country is in terminal decline, we not a county that'll work it's way out of it. It's all about instant gratification by any means - that's the mind set and I do not see it changing.

BTW, I am sure you are putting together a post about this, it would be interesting to put a figure on how much people leaving has cost SA in tax. When you consider most would be middle to upper incomes, the figure becomes scary WITHOUT even considering that many would be business owners and employ others.


CDP45

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Re: The pain of living in a banana republic
« Reply #15 on: December 22, 2015, 11:06:49 AM »
I don't know how this works on a small scale, but there is a accounting/economic method called transfer pricing. Basically it's when a company has operations in 2 countries, but adjusts prices internally when a division in one country imports an item from the other country.

Funny that the wikipedia article references Africa: https://en.wikipedia.org/wiki/Transfer_mispricing

You really don't need the middle tax-haven country. You could set up a corporation and banking in your country of choice, and then sell your services as a consultant to your SA company. I'm not sure what the import taxes are on intellectual property or services, but your SA company should always be operating at breakeven or loss.

There's got to be a ton of ideas out there, interesting topic!

Kris

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Re: The pain of living in a banana republic
« Reply #16 on: December 22, 2015, 12:11:54 PM »
Up until Wednesday, South Africa's status of a banana republic was unconfirmed. Then on Wednesday night, the president fired the finance minister. Not because he was doing a bad job, but because he was doing his job well. Unfortunately this interfered with the president's girlfriend being able to pilfer money from the state airline, SAA, as well as his massive kickbacks from a monumentally huge deal with Russia for a few nuclear power stations. He's been replaced by someone who is very unknown, except that he once ran a municipality so badly, that his house was burnt down by the community. He's a yes man who will open the tax payers wallet, and hand out cash freely to whomever our president (who's top level of education is grade 4, I kid you not) chooses.

We've all been watching this buffoon for the last while, and the currency has gone from R6.50 to the dollar to R14 to the dollar. Yesterday it went from around R14 to R15.50. The financial sector on the local exchange lost 13% in one day, a bigger one day drop than any day in the 2008 banking crises.

The net effect for me was that I started the year with $500k, during the year I've put away another $60k. The US market has risen by a good amount, so if I was invested there I'd be worth about $600k today. What am I worth now? Well if I had to move my money into dollars today, I'd have just short of $400k. In effect our useless government, led by a painful dictator want to be has managed to remove $200 from my potential net worth.

I also don't really know where to go next. It's hard for us to move more than the current equivalent of $60k a year out of the country. And even if I could, it'll be so hard swallowing the terrible exchange rate, but I also don't want to keep going backwards investment wise.

Any ideas?

I just have a question of clarification... I know Jacob Zuma has no formal expducation, but how is it that his education level is determined (by you? Someone else?) to be fourth-grade?

FenderBender

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Re: The pain of living in a banana republic
« Reply #17 on: December 23, 2015, 09:29:50 AM »
just love it when white south africans move to the US and identify as African American on gov't docs.  lol.


Mr.Tako

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Re: The pain of living in a banana republic
« Reply #18 on: December 23, 2015, 10:51:17 AM »
I used to have a boss from South Africa - His solution was to get out and start earning his money in dollars.  He still had family and property there, but he swore he would never go back.  He ended up being pretty successful in the States, so I doubt he cares about his investments in South Africa.

MMMaybe

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Re: The pain of living in a banana republic
« Reply #19 on: December 23, 2015, 07:00:54 PM »
just love it when white south africans move to the US and identify as African American on gov't docs.  lol.

Well technically that is what we are.  In fact, we are African because we were actually born in Africa and many have deep ancestral roots in Africa. In a multi-racial, multicultural continent like Africa, there are people of all skin tones.

I suppose if you would like to discriminate on the basis of skin colour, the new title could be White African-American... What should we be known as?


swissgva

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Re: The pain of living in a banana republic
« Reply #20 on: December 23, 2015, 07:22:40 PM »
You can easily open a bank account at Swissquote remotely from South Africa and start moving money there.  You'll have access to virtually any funds / stock in the worlds. Also remember that on top of your R1m yearly allowance to transfer money, you can transfer ancon krill R4m https://www.bidvestbank.co.za/personal-banking/forex-services/exchange-control-services/exchange-control-for-south-african-residents.aspx

k290

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Re: The pain of living in a banana republic
« Reply #21 on: December 24, 2015, 12:04:03 AM »
You can easily open a bank account at Swissquote remotely from South Africa and start moving money there.  You'll have access to virtually any funds / stock in the worlds. Also remember that on top of your R1m yearly allowance to transfer money, you can transfer ancon krill R4m https://www.bidvestbank.co.za/personal-banking/forex-services/exchange-control-services/exchange-control-for-south-african-residents.aspx

Accounts like that exist in South Africa, where rands can get denominated in a foreign currency before investment. So you could achieve the same thing from a local South African online trading platform instead of going through the rig-moral of using something like Swissquote, which has no real advantage over local options. Unless there is something I'm missing here.

Edit: What I do see as an advantage is that you may be able to get a SwissQuote credit card linked to the account.This might allow you to essentially spend any money you earn there without repatriating it properly. Thus keeping the local taxman away from your money (illegal)
« Last Edit: December 24, 2015, 12:08:43 AM by k290 »

Schaefer Light

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Re: The pain of living in a banana republic
« Reply #22 on: December 24, 2015, 08:37:37 AM »
just love it when white south africans move to the US and identify as African American on gov't docs.  lol.
Well technically that is what we are.  In fact, we are African because we were actually born in Africa and many have deep ancestral roots in Africa. In a multi-racial, multicultural continent like Africa, there are people of all skin tones.
You're more African than 99.9% of the blacks in the US.

FenderBender

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Re: The pain of living in a banana republic
« Reply #23 on: December 27, 2015, 10:21:50 AM »
just love it when white south africans move to the US and identify as African American on gov't docs.  lol.

Well technically that is what we are.

i completely agree.  i doubt the average american ever thought a white africa american was possible so just funny to me.   most likely, too, lots of gov't employees that are reacting to checks of forms never thought any white people could accurately check africa american. 

Kalergie

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Re: The pain of living in a banana republic
« Reply #24 on: January 10, 2016, 06:41:20 AM »
I live in the Middle East and have a lot of co-workers, neighbors and friends from SA here. Their opinion is quite negative with regards to ever going back home and most of them are very sad about that. It's really interesting though looking at the buying power South African expats have when they send money home to their families. Problem is, most of my SA friends love to party, BBQ all the time and thus spend all their money. It appears, none of them think long term.

But as for SA itself, my guess is it's too early to "give up" on your country. Work a good portion of your career abroad earning good currency, save as much as possible, invest in a balanced portfolio (no home bias at all) and when you have enough, see what's the situation back home. If it is positive, move to SA, get a kickass place in a gated community and live the life! But I'm an optimist....

 

Falconer

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Re: The pain of living in a banana republic
« Reply #25 on: January 12, 2016, 06:55:13 PM »
I live in the Middle East and have a lot of co-workers, neighbors and friends from SA here. Their opinion is quite negative with regards to ever going back home and most of them are very sad about that. It's really interesting though looking at the buying power South African expats have when they send money home to their families. Problem is, most of my SA friends love to party, BBQ all the time and thus spend all their money. It appears, none of them think long term.

But as for SA itself, my guess is it's too early to "give up" on your country. Work a good portion of your career abroad earning good currency, save as much as possible, invest in a balanced portfolio (no home bias at all) and when you have enough, see what's the situation back home. If it is positive, move to SA, get a kickass place in a gated community and live the life! But I'm an optimist....

Not hard to guess where you work. Your advide to SAFAs sounds about right. Its what I am doing myself, and I am not even from SA, but my SO is and we would love to move back. No matter what though I will never buy any property in SA. Renting is cheap and easy.

Kalergie

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Re: The pain of living in a banana republic
« Reply #26 on: January 13, 2016, 07:16:22 AM »
Falconer: it is hard to look at property prices in SA without getting house horny though. :) for the price of a decent villa here in Dubai you can get a freaking mansion on the beach in SA. This is what devaluation of currency does to you. My fear is just that I couldn't easily pack my bags and get out in case shit hits the fan. That's why renting would be my preferred option...

 

Wow, a phone plan for fifteen bucks!