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Millionaires On The Move

ARTICLE BY

  • Tarina Vlok
  • MD
  • Elite Risk Acceptances

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Amid the growing trend of investment migration, understanding the reason behind the decision is key.

“Most South African high-net-worth individuals who opt for investment migration do not have the objective of leaving the country…”

In the post-pandemic era, semigration to the Western Cape has become a notable trend, particularly within the high-net-worth segment. What is interesting is that the growing number of South African expats returning to the country are able to acquire more expensive luxury properties with their earned foreign currency. With semigration driving up prices in the coastal  and winelands regions, many of these returning expats are purchasing more luxurious properties in Johannesburg than in Cape Town, which is supporting the luxury property market growth in Gauteng.

Rise of investment migration

According to the Henley Africa Wealth Report of 2023, there is another emerging trend in the High-Net-Worth (HNW) market in Africa that insurers and brokers should keep an eye on – the notable rise of investment migration.

This is a form of legal migration, which comprises various citizenship and residence opportunities by investment programmes, which allow the wealthy to gain citizenship or residence rights in return for property investment in their host countries.

Although in place for a long time, the trend has grown due to the development of a global economy over the past few decades.

Most South African high-net-worth individuals who opt for investment migration do not have the objective of leaving the country, but rather to obtain better global mobility, improved security, access to better suited education opportunities, and greater business circumstances.

Reasons for investment migration

Slow economic growth, the rising cost of living, political uncertainty, increasing climate emergencies, the energy crisis, and high levels of corruption, all contribute to the growth of the investment migration trend.

Wealthy individuals have several reasons for investing in properties outside the borders of South Africa. Reasons include increased global mobility, improved access to top education, business opportunities, and of course a hedge against economic, social, and energy instability. A portfolio of property, which includes residences and citizenships (or residencies) in other – especially first-world countries – offers high net-worth individuals the opportunity not only to  protect their wealth, but also enjoy greater global mobility with visa-free access to more countries.

Whereas South Africa offers visa-free entry to 47% of the world’s countries, these countries only represent a combined contribution of 15% to the global economy. Imagine having, through your citizenship investment programme, visa-free access to large economies like Hong Kong, Singapore, the United Kingdom, the United States, and Schengen countries. This makes investment migration attractive to wealthy South Africans.

Having access to a wider range of countries enables the wealthy to safeguard against economic and political uncertainties. Investors are therefore looking for ways to ensure steady profits during uncertain times. This can be attained by ensuring visa-free access to large economies.

Where are they heading?

A top destination selected by South African families is Portugal through its Golden Residence Permit Programme.

There is also a trend of inbound investment migration into Africa, with Namibia and Mauritius the top destinations. Namibia is one of the most stable democracies in Africa, with an excellent quality of life and vast business opportunities. With similar culture and close proximity to South Africa, it is a very attractive prospect for investment migration.

Good advice for investment migration

Whether the property overseas is purchased to obtain greater global mobility, or with the objective of emigration, brokers need to advise investors to get appropriate property and contents insurance in the country where they purchase the property. It is also advisable to obtain a broker in the country and region where investment properties are acquired, as they will have better knowledge of the local conditions and business environment.

If a South African non-life insurance policy gives All Risks cover, it must be noted that this cover would likely not respond to loss or damage of any contents of the investment property.

It is also advisable that brokers work with specialised and niche insurance houses who understand the complexity involved in managing assets for families across multiple jurisdictions, given the risks facing this segment.

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