By: Natasha Archary
The South African Reserve Bank (SARB) cut the repo rate by 25 basis points to 8%. The drop means the prime lending rate will also drop to 11.50%.
Harry Scherzer, CEO of FutureForex joins Refilwe Moloto on Kaya Biz to discuss what this means for people with money offshore.
For the first time since the height of the Covid-19 pandemic, SARB cut the prime lending rate coming as a welcome relief to heavily indebted consumers.
As welcome as the rate cut will be to anyone paying off a home, car, or student loan and to those with credit card or store debt, it has other implications too.
At least some of these implications will impact individuals and businesses moving large sums of money offshore.
“The Dollar is weakening but at the same time, the Rand is also strengthening. The Rand is the top-performing emerging market currency for 2024, which is an amazing situation because of things within our borders.
This includes the GNU coming together, no loadshedding, but on top of that, with the Dollar weakening it also allows for the Rand-to-Dollar strength and we could be seeing a continued downward trajectory in the Rand-Dollar rate, which is positive for the Rand.
South Africans are often over-concentrated with their Rands, and you always have to diversify, so even though the Rand can go either way and I’m quite bullish on the Rand, I think we can do even better.
But, that’s not stopping me from advising people to send money out of the country at this point because we are at a great Rand-Dollar exchange rate, we’re at R17.58 which is extremely strong.
That’s not to say that it’s not going to get stronger, we don’t know what’s going to happen, with the US election in November, there’s plenty of factors out of our control, which could make the Rand go the other way.”
Offshore Investment Demand May Increase
An interest rate cut may spur greater interest in diversifying investments offshore.
With reduced returns on local savings and investments due to lower interest rates, South Africans may look for more attractive returns abroad.
Offshore investments, especially in stable economies with higher interest rates, can provide better yields and offer protection against local economic volatility.
Additionally, offshore markets provide opportunities to invest in a broader range of asset classes, such as stocks, bonds, and property, that may not be as vulnerable to South Africa’s economic cycles.
This diversification can be particularly appealing during periods of lower domestic growth or uncertainty about South Africa’s economic future.
Listen to the conversation on Kaya Biz:
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