Keep USD income in USD or convert to Rands?

[ros_b]

I'm due to receive some income in USD from an overseas job. I'm trying to decide which account to get it paid to. Options:

1. Have them pay it into my FNB Global account. This will incur SWIFT commission of 0.54% of the amount. I would then do a transfer of the money out into my US online Stockbroking account for investing in cheap US ETFs. This transfer out would again incur SWIFT commission of 0.52%, plus a flat fee of R105. So that's 1.06% plus R105 down the drain.

2. Have them pay it to a South African money exchange service (I use Incompass) which charges no fees. I then have 30 days to convert it to Rands (they offer slightly better rates than the bank, and no fees) which they transfer to my normal FNB Cheque account via EFT (no fees, since it's local to local). I then invest the money locally.

3. Have them pay it into my FNB Global account, but just leave it in there (thus incurring incoming SWIFT commission but no outgoing fees) in the hope that the Rand will weaken.

With the orange facist in charge in the US, plus their stock market at alltime highs, is it a good idea to be investing there at the moment? The SA market is surely ripe for some improvement, given its flat performance over the past 2 years or so? On the other hand, the Rand is fairly strong at the moment, so should I keep the money in USD, banking on a weaker Rand in the near future?

 

[Mike Hoxbig]

Wait for the rand to plunge after the SONA and imminent cabinet reshuffle, then convert to rands...

 

[P924]

Don't put it all in the same basket.

 

[cyberbob1979]

I'm all for leaving your currency off shore - it has buying power that stays high vs the sunken Rand will do in the same period. Plus if you emigrate then you already have a cash stash of real currency

 

[cerebus]

Bitcoins

 

[gimpex]

Depends on the amount and the period you are looking at , there will be different answers.

Remember that usd interest rate is close to 0% where as here you can still get 6 or 7% .

If u dont need that money over a long period , like basically never , it might make sense to just leave it there and wait for eventual ZAR depreciation- but in the short term its a gamble

 

[ros_b]

I'm all for leaving your currency off shore - it has buying power that stays high vs the sunken Rand will do in the same period. Plus if you emigrate then you already have a cash stash of real currency

I just did a quick calc, and if I'd converted all of my US$ income from last year into Rands when I received it, and put it into a Money Market account earning 6.75%, I'd have done better (by about 7.5%) than the current value, in Rands, of my US$ ETFs - and those ETFs have flown (they've done just over 7% in 4 months). Just shows that you can't predict what the Rand will do.

Is it worth having a cash stash that's not working for me? I'm not planning on emigrating, but I travel a lot. But I can't transact with the money that's in the Global Account without moving it to my transactional account, ie, converting it to Rands. Then I'd have to convert it back to US$ for travel - seems silly.

 

[Tomtomtom]

I'm due to receive some income in USD from an overseas job. I'm trying to decide which account to get it paid to. Options:

1. Have them pay it into my FNB Global account. This will incur SWIFT commission of 0.54% of the amount. I would then do a transfer of the money out into my US online Stockbroking account for investing in cheap US ETFs. This transfer out would again incur SWIFT commission of 0.52%, plus a flat fee of R105. So that's 1.06% plus R105 down the drain.

You should get some proper advice before you do this. Exchange control regulations that say any foreign currency you come by has to be offered to an authorized dealer, within 30 days, to be exchanged for Rands. I think there's an exception for currency going into a CFC account (which your Global account may be if it's their Business one) -- but you may find there's complications around SWIFTing it out again to a stockbroker, or worse-case scenario, the old information-sharing puts you in the Financial Surveillance Department's spotlight a few years down the line. CFC accounts were originally intended for e.g. shipping companies to offset imports against exports and hedge their currency exposure -- not for ordinary residents as a conduit for savings.

Unless you've done the paperwork already and have Reserve Bank clearance? I'd be interested to know.

That said, these regulations are draconian, archaic, and will hopefully be repealed within a few years, especially if they become unenforceable due to everyone's having ignored them.

As for 1.06% down the drain -- consider that a bargain compared to doing USD->ZAR->USD and paying the spread twice.

As for USD currency as an investment: it isn't really. Maybe some cash dollars in the mattress to quell the prepper instinct, but then gold would be even better imo. USD in a local bank account seems like an opportunity cost to me unless you're a shipping company.

As for a USD-denominated ETFs held offshore: that's a good idea, especially if your current offshore holding is <20%.

 

[Purply]

From my understanding Teh Trump is planning on devaluing the dollar so that the USA can be more competetive

 

[Dubai]

I'm due to receive some income in USD from an overseas job. I'm trying to decide which account to get it paid to. Options:

1. Have them pay it into my FNB Global account. This will incur SWIFT commission of 0.54% of the amount. I would then do a transfer of the money out into my US online Stockbroking account for investing in cheap US ETFs. This transfer out would again incur SWIFT commission of 0.52%, plus a flat fee of R105. So that's 1.06% plus R105 down the drain.

2. Have them pay it to a South African money exchange service (I use Incompass) which charges no fees. I then have 30 days to convert it to Rands (they offer slightly better rates than the bank, and no fees) which they transfer to my normal FNB Cheque account via EFT (no fees, since it's local to local). I then invest the money locally.

3. Have them pay it into my FNB Global account, but just leave it in there (thus incurring incoming SWIFT commission but no outgoing fees) in the hope that the Rand will weaken.

With the orange facist in charge in the US, plus their stock market at alltime highs, is it a good idea to be investing there at the moment? The SA market is surely ripe for some improvement, given its flat performance over the past 2 years or so? On the other hand, the Rand is fairly strong at the moment, so should I keep the money in USD, banking on a weaker Rand in the near future?

Please explain option 2 money exchange service
Who are they
I'm interested in using them please advice

 

[ros_b]

You should get some proper advice before you do this. Exchange control regulations that say any foreign currency you come by has to be offered to an authorized dealer, within 30 days, to be exchanged for Rands.

Really? As I understand it (and as per the Reserve Bank's website), you get a single discretionary allowance of R1 million per year which "may be used for any legal purpose abroad (including for investment purposes)". Furthermore: "(i) A tax-payer in good standing and over the age of 18 years, can invest up to R10 million in his/her name outside the Common Monetary Area (CMA-Lesotho, Swaziland and Namibia), per calendar year. A Tax Clearance Certificate (in respect of foreign investments) must be obtained. These funds may not be reinvested into the CMA countries thereby creating a loop structure or be re-introduced as a loan to a CMA resident. (ii) In addition, up to R1 million, within the single discretionary allowance facility, can be transferred abroad, without the requirement to obtain a Tax Clearance Certificate"

So I'm completely legal, as far as I can tell (it isn't anywhere close to R1 million per year!) The income that I receive into the USD FNB Global Account is fully declared on my tax form, and anything I earn on the US investment will also be fully declared on my tax form.

As for 1.06% down the drain -- consider that a bargain compared to doing USD->ZAR->USD and paying the spread twice.

Sure, but the fact is that I do live in SA, so if I'm going to live on the money sometime in the future (like, at retirement), it needs to be in Rands. And if I'm going to travel on the money, I don't have any way to access it directly from the Global Account. I can't get it *out* of the FNB Global account other than transferring it to my Rand-demoninated cheque account, since I don't know of any way that I, as a South Africa resident, can open a transactional account in the USA.

 

[Idiosyncratic]

From my understanding Teh Trump is planning on devaluing the dollar so that the USA can be more competetive

Really? That's interesting... You have a link for us to read more?

 

[ros_b]

Please explain option 2 money exchange service
Who are they

Incompass Financial Solutions - http://www.incompass.co.za/
I've been using them for a few years and have always had excellent service.

 

[Purply]

Really? That's interesting... You have a link for us to read more?

http://www.sharenet.co.za/news/Trum...ollar_policy/a9bdef1273aca9a8776135c7c8154bb4

Guess you need to read between the lines

 

[Tomtomtom]

Really? As I understand it (and as per the Reserve Bank's website), you get a single discretionary allowance of R1 million per year which "may be used for any legal purpose abroad (including for investment purposes)".

Yes, but this is a separate regulation. My understanding is that the allowances you mention apply only at the point you want to sell Rands specifically. But if you have earned something other than Rands, you are obliged to "offer" them for exchange.

See section 6 starting on page 9: https://www.resbank.co.za/Regulatio...uments/Exchange Control Regulations, 1961.pdf

Or 3.8.3(f) page 18:
https://www.resbank.co.za/Regulatio... and Exchanges Guidelines for Individuals.pdf

The combination of rules implies the absurd situation that you can be entitled to invest USD you earned, but still have to turn it into ZAR first, even only for 5 seconds. It makes sense from a surveillance point-of-view, because the Reserve Bank gets to see the flows, but it's obviously a massive money-changing cost.

It may be that they routinely grant exemptions, but I think you should at least contact the FNB forex people to get some advice.

 

[Oopsie]

SARB has to keep tab on amounts leaving and entering SA for obvious reasons. In my case, it takes days and some begging to transfer R40k to Portugal every 3 months.

 

[AchmatK]

Yes, but this is a separate regulation. My understanding is that the allowances you mention apply only at the point you want to sell Rands specifically. But if you have earned something other than Rands, you are obliged to "offer" them for exchange.

See section 6 starting on page 9: https://www.resbank.co.za/Regulatio...uments/Exchange Control Regulations, 1961.pdf

Or 3.8.3(f) page 18:
https://www.resbank.co.za/Regulatio... and Exchanges Guidelines for Individuals.pdf

The combination of rules implies the absurd situation that you can be entitled to invest USD you earned, but still have to turn it into ZAR first, even only for 5 seconds. It makes sense from a surveillance point-of-view, because the Reserve Bank gets to see the flows, but it's obviously a massive money-changing cost.

It may be that they routinely grant exemptions, but I think you should at least contact the FNB forex people to get some advice.

This.

We have accounts in the UK, Switzerland and US and any funds received into these accounts must be repatriated back to SA before sending it back out.

We have a relationship with Investec who does an asset swap from CHE/GBP/USD ->ZAR->USD for us and then leaves it offshore in dollar denominated ETFs. They only charge commission on one conversion and the transactions are all electronic.

 

[Nefertiti]

Is it worth having a cash stash that's not working for me? I'm not planning on emigrating, but I travel a lot. But I can't transact with the money that's in the Global Account without moving it to my transactional account, ie, converting it to Rands. Then I'd have to convert it back to US$ for travel - seems silly.

I wont be able to check now, but if you have a cash passport you can deposit money from your global account directly into the cash passport so no conversion. I think. Please correct me if Im wrong.

 

[ros_b]

My understanding is that the allowances you mention apply only at the point you want to sell Rands specifically. But if you have earned something other than Rands, you are obliged to "offer" them for exchange.

Gosh, I did not know this, and certainly no-one at my local FNB's forex desk told me anything of the sort when I was discussing my options and opening my Global Account with them. In fact, looking at their Forex Pricing Guide, it specifically says "With Global Accounts via Online Banking, you can keep earnings from abroad in foreign currency by having them paid into your Global Account"

The combination of rules implies the absurd situation that you can be entitled to invest USD you earned, but still have to turn it into ZAR first, even only for 5 seconds. It makes sense from a surveillance point-of-view, because the Reserve Bank gets to see the flows, but it's obviously a massive money-changing cost.

But the Reserve Bank can see the flows because the money is coming into my FICA-registered account in South Africa, and is declared on my tax return.

It may be that they routinely grant exemptions, but I think you should at least contact the FNB forex people to get some advice.

Yes, I will do so. Thank you for the advice.

 

[ros_b]

I wont be able to check now, but if you have a cash passport you can deposit money from your global account directly into the cash passport so no conversion. I think. Please correct me if Im wrong.

I did read in FNB's Forex pricing guide that you can "transfer your savings from your Global Account to your Multi-currency Cash Passport before you travel". So yes, this appears to be an option, but I'm not sure what the fees are for doing this transfer. And I've never been mad about the Cash Passport option because it looks expensive. But certainly cheaper than converting USD into ZAR and then converting again when withdrawing cash or spending abroad. I'll look into it further.