Why invest offshore?

South Africa represents only 0.3 % of global GDP. Offshore investing diversifies your portfolio and protects against local risk and currency volatility

 How can I invest offshore?

Through local feeder funds or Directly using your Foreign Currency Allowance (FCA): all managed via Digiwealth’s fintech.

QUICK COMPARISON

Feature	Local Feeder Fund	Direct Offshore Investing
Money Used	Rands	Foreign (USD, GBP, etc.)
Ease	Very easy	Takes more effort
Control	Limited (fund chooses)	You choose investments
Fees	Higher (extra fund fees)	Lower (just broker fees)
Taxes	Simple (SA taxes)	Complex (SARS reporting)
Good For	Beginners	People okay with extra steps
Allowance Needed	No	Yes (R1m or R11m with SARS)

 

 

What is it Feeder Fund?  

A feeder fund is a South African investment where you use Rands to invest in international markets, like US or European stocks and bonds.

How it works: You pay rands to a South African fund. The fund manager converts your money to foreign currency (like dollars or pounds) and invests it in global assets. They handle all the tricky stuff, so you don’t need to.

Why it’s great for beginners. It’s super simple! You invest locally in rands, and it feels like investing in South Africa, but your money grows in international markets. No need for foreign bank accounts or complicated rules. Great for beginners or smaller investments. Super easy: No foreign accounts or extra paperwork. Perfect for hassle-free investing.

Downside: Funds must be repaid into your South African bank account

 

What is Direct Offshore Investing?

You send your money from South Africa to another country (like the US or UK) using your Foreign Currency Allowance (up to R1 million a year, or R11 million with SARS approval). You can then invest in things like international equities or funds directly, in currencies like US dollars or pounds.

Pros: You have more choices and may pay lower fees. Fund can be repaid onto your foreign bank account and remain offshore. Good for bigger investments (R1 million or more). Lower fees can save you money over time. Profits might be taxed less, especially if the rand weakens.

Cons It takes more effort (e.g., opening a foreign bank account) and involves reporting taxes to SARS.

 

When to Choose Each

Pick a feeder fund if you want something simple, are investing a small amount and are happy for your funds to be repaid into your South African bank account. 

Pick direct offshore if you’re investing a lot, are okay with some paperwork, and want lower fees or better tax benefits over time and want for your funds to be repaid into your offshore bank account. Ie, your funds remain offshore

 

1. KEY DIFFERENCES BETWEEN FEEDER FUND AND INVESTING DIRECTLY OFFSHORE

Aspect	Feeder Fund	Direct Offshore Investing
How You Invest	In ZAR via a local platform (e.g., unit trust). Fund manager swaps to foreign currency using their allowance.	Transfer ZAR abroad and convert to foreign currency (e.g., USD). Use your personal Foreign Currency allowances.
Regulatory Requirements	None for you—no SARS clearance or SARB approval needed. Easy and quick to start.	Up to R1m/year via Single Discretionary Allowance (no clearance). Over R1m (up to R10m/year total) needs SARS tax clearance and SARB approval for Foreign Investment Allowance.
Minimum Investment	Low (often R500–R5,000), making it accessible for beginners.	Higher (typically R50,000+), plus transfer fees.
Currency Exposure & Rand Risk	Synthetic (via asset swap)—you get market returns, but full rand fluctuations baked into the ZAR price daily. Withdrawals in ZAR.	Real foreign currency holdings—rand weakness boosts your returns when converted back, but you control when/if to repatriate. Withdrawals can stay offshore.
Costs/Fees	Higher: 0.8–1.0%+ total expense ratio (includes asset swap costs, dual fund layers, and admin).	Lower: 0.5–0.8% typically (just the offshore fund fee, no swap costs). Saves ~0.1–0.2% annually, compounding over time.
Tax Implications	Capital gains tax (CGT) on full ZAR gains (including currency swings) at sale—up to 18% effective rate. Income/dividends taxed in ZAR terms.	CGT only on foreign currency gains (rand movements excluded if held offshore)—often lower effective tax if rand weakens. Same worldwide income tax rules apply.
Liquidity & Access	High—buy/sell daily in ZAR, but subject to local market hours and potential delays from swap mechanics.	High, but involves forex transfers; you can hold indefinitely offshore without remitting.
Best For	Simplicity, low entry barriers, or if you're in a retirement fund/living annuity (limited to feeders due to regs like Regulation 28, capping offshore at 45%).	Long-term growth, tax efficiency (especially if rand weakens), or higher amounts where costs matter more. Full control over assets.
Risks	Extra layer of counterparty risk (fund manager's swap); less "pure" currency hedge.	Currency volatility directly hits your wallet; more admin hassle upfront.

 

 How much do I need to invest offshore?

You can invest from as little as R 500 per month into our offshore feeder funds. FCA usually requires substantially larger amounts to compensate for the higher fees and administration complexity. We recommend amounts above R 1m

What is the drawback of using an offshore feeder fund?

Even though your money is invested globally, all proceeds of an offshore feeder fund must be repatriated back to a south African bank account

 

What is prescribed investing?

Government rules requiring investors to hold specific assets as a cheap form of funding for the government but results in lower returns and higher risk for investors

 

Do I need investment experience?

No. Digiwealth caters to DIY investing and is suitable for both beginners and experienced investors.

 Do you assist with succession planning?

Yes. Our high-net-worth service includes succession and estate planning for long-term protection.

 

Why is ACE so important to DigiWealth portfolio management

Research shows that most investment success (90%) comes from choosing the right mix of asset types, like equities, bonds, or real estate, rather than picking individual stocks. So, we focus on getting our asset allocations right rather than researching and trying to find undervalued companies. We call this our ACE model (Asset Class Expectations).

We begin our process by reviewing historical data. Then, we apply quantitative methods and proven models—like Markowitz mean-variance optimization and Black-Litterman reverse optimization—to determine the ideal asset allocation for the past 12–18 months.

Next, we compare this to our current asset allocation, which is based on our forward-looking ACE models. Where differences appear, we examine the causes and confirm whether our ACE models remain valid. This is an ongoing, interactive process.

 

Our ACE model rates diverse types of asset classes, like equities or bonds, on a scale from 1 to 5. A score of 1 means we’re optimistic about that investment’s performance over the next 12 to 18 months, while a 5 means we’re less optimistic. Lower scores are better. South Africa is grouped with other Emerging Markets (EM)