Nik Spyratos

Building global wealth from South Africa - The Complete Guide

Table of Contents

AKA "Nik's giant brain dump of everything forex, business and tax"

Operating a business and trying to build wealth from South Africa is not for the feint of heart. Local restrictions can seem daunting enough to make you want to run for the hills (or nearest airport).

However, with the right knowledge, tools, and insights, it's less scary than it seems. That's what I'd like to share with you. This is oriented mostly to knowledge work businesses (e.g. SaaS, startups, any -Tech) as well as individuals looking to hedge themselves against local volatility.

This can take on many levels: from just holding a bit of forex on the side, to being fully incorporated and earning funds from outside of South Africa.

I've gathered this information from years of working remotely, researching my tax obligations and options (and consulting with my accountant!), and from collective knowledge from other developer-entrepreneurs who operate with their own unique structures and problems.

Disclaimer: I am not a financial adviser, lawyer, or qualified professional around these matters. Take this information as a launching point to do your own research and consult with professionals.

Note: I'm not evaluating the role of crypto in this series, as I think that that's a larger and different topic to discuss.

Challenges, restrictions, and desired solutions

Some common South African business challenges, when attempting to operate both locally and globally, are:

Normally, there's not much you can do about all this emigrate. For many South Africans that's not a realistic option, or they'd like to/have to stay for other reasons. I'm in the latter camp.

I choose not to add overall bureaucracy to the above list. In my view South African bureaucracy is often really not as bad as you'd think. It could be better, but it could be much, much worse.

Anyway, how do we solve these issues, or at least mitigate them? Can it be done in such a way that doesn't add a huge admin burden? Perhaps.

Let's tackle the above one by one.

Forex & Investing: don't bet it all on ZAR!

Let's be real, the Rand has been on an ever-worsening decline for a very long time. It would be nice to be able to hold something a bit more stable.

Luckily, there are both some local and global options available for both transacting/saving in foreign currencies and investing in foreign companies.

Transacting & Saving

Most major South African banks these days offer a foreign currency account that you can hold EUR, USD, or GBP in. FNB, Nedbank and Standard Bank come to mind here.

These aren't "native" foreign accounts however - so you can't give a sort code for your account to your UK clients, or have US clients wire money in. They work only via SWIFT and with your local bank account directly.

That being said, some banks also have branches/subsidiaries/etc abroad and offer you accounts in those jurisdictions. For example, FNB Channel Islands, or Investec UK, are available to South African clients. However, these are often only available to high net worth individuals. The rest of us are "stuck" on the localised forex options.

Okay, that's now one step forward: locally holding some forex as a Rand hedge for some stability (or travel funds). You can fund these accounts by doing forex conversions from your Rand-based accounts, or via inbound SWIFT transfers.

Investing locally and abroad

Next up we'll look at some investing locally and abroad, to give you the widest reach of options and strategies.

Investing is another area where options for South Africans have greatly improved over the last few years. The most notable platform for investing, not directly tied to a bank offering, is EasyEquities.

You can invest in local companies and funds, as well as in foreign currencies on foreign companies and funds. They also offer products for investing in alternative asset classes like property and crypto.

Importantly, being a South African platform, they'll also provide you with the correct yearly documents for your tax obligations on your investments. Convenient!

You can sign up to EasyEquities over here (Referral link).

Alternatively, many banks offer investing through their online platforms, but beware of the fees and overall user experience with them - it may be subpar compared to a platform purely focused on investing.

Another good option is Clarity, a new platform by Investec. It's not yet fully launched, but I'd keep an eye on it as the potential better option going forward.

However, what happens with your investments if you decide to emigrate, or want broader offshore access?

As far as I'm aware, if you want to emigrate, I don't believe current platforms in South Africa can handle transferring your ownership under your new tax residency.

To solve that, and for the wider offshore reach, you can use a global investment platform like Interactive Brokers (IBKR). There are also others like eToro.

They largely will have the same features described as with EasyEquities and Clarity, but with a broader focus and thus more options for what to invest in.

Most importantly, IBKR has explicit documentation and steps on how to change your account's legal residency. That way, you can keep your investments intact if you financially emigrate!

There's obviously a lot more to investing in terms of strategy, long-term gains, tax, and various platform and trading fees. I leave that research up to you.

Now, transacting & investing abroad is cool and all, but wouldn't it be cool to also get paid from abroad?

Getting paid from abroad as an individual

Hang on, didn't I already write about this one?

I did indeed! But let's recap before checking out the other post for more info.

For an individual, whether as a de-facto employee or as a freelancer, this process is a fair bit simpler. You can use usual international payment rails like SWIFT, new fintech services like Wise.com, or companies you work with might use global payroll software like Deel or Remote.com.

That being said, this is a subtopic that goes a fair bit deeper when it comes to your employment and tax status. As such I've written a completely separate post about that here: Full guide to working for foreign companies from South Africa

Getting paid from abroad as a business

This is the bread and butter of operating globally to build wealth from South Africa. Some may be fortunate enough to get a high-paying remote job, but others will have to build their own business.

Remember: In South Africa, you can operate a business as an individual without formally registering. This is known as sole proprietorship, and is what most freelancers, contractors and personal service providers would fall under. It's not completely admin-free, but this is the reason I'm going to be using business instead of company below.

There are two aspects to payments as a business: having a bank account to remit funds to, and a method to accept payments from your customers.

Bank accounts

Obtaining a bank account can be fairly straightforward, albeit with a bit more documentation. For recommendations and comparisons of business bank accounts, I'd highly recommend the following article by Gareth Dwyer over at Ritza.co: Comparing Business Bank Accounts in South Africa

Accepting payments

Accepting payments is where the majority of the complexity lies. The regulatory environment for businesses is a bit stricter here.

Most notably, due to South Africa's exchange controls (thank the reserve bank for this), it's very difficult to operate globally from a currency point of view.

The main issue for a long time has been that there's very few methods to charge customers directly in a foreign currency like dollars or pounds.

Why is that important? At its core, the issue is about perception and market access moreso than the benefits of getting paid in a stronger currency.

Globally, nobody knows or cares what a Rand is. From an international buyer perspective, seeing an unknown currency can also give the impression that you only support your local market.

This is especially important for digital businesses that are not restricted by geography. Software, online products, anything like that.

So, what are our options? Fortunately in 2024 we have quite a few:

Easiest: Using a Merchant of Record

Up until very recently, the (arguably only realistic) way to sell in e.g. USD would be to sign up with an MoR like LemonSqueezy.

A merchant of record acts in a legal sense as the real business interacting with your customer, where you are merely a supplier of goods for that customer. This way, the MoR handles sales tax (i.e. VAT) and other obligations for you, in exchange for taking a much higher percentage of your sales compared to a payment provider like Stripe. I've seen anecdotes of fees as high as 15%, compared to the average payment provider fee of around 3%.

Some argue that using an MoR is unnecessary - the tax authorities over in Tuvalu aren't going to chase you down because you sold a $15 ebook once and didn't pay them sales tax. There's plenty of debate around this online, but it's out of scope for this post. I'll put some links down at the bottom if you're curious though.

In an environment like ours, there wasn't much of a choice for a long time around using an MoR or not, if you didn't want to incorporate abroad (with all the hassle that that entails).

Hardest: Incorporating abroad

Now, this isn't the hardest one to start, but depending on your current situation and the final ownership structure, it can be one of the hardest to maintain.

There are plenty of services out there to make incorporating abroad very simple, such as Stripe Atlas, IncorpUK, and others for other countries.

Simple enough, right? Pay some money, file some paperwork, get a foreign bank account, and you're off to the races!

The catch, as with many things, is not in the upfront cost & effort, but the long-term maintenance.

Owning an amount of shares (usually >=25%) of a company abroad usually places you under a new set of tax obligations. These are known as Controlled Foreign Company (CFC) or Ultimate Beneficial Owner (UBO) laws.

This means that while your company is abroad, and most of its work is done by you in your home country, then you or the company may be required to file additional tax paperwork for the company or your income from it.

This is intended largely to prevent people from incorporating abroad and using that to not pay taxes locally.

In addition to that, the company itself is subject to its country's taxes and laws, so you'll need to handle yearly filings for it. Not always the most difficult thing. However when dealing with your own and another country's laws, especially if you're not physically present in the other country, things can become complicated really quickly.

That might then lead you to engaging with accountants and other services in that country to keep your company in good standing, on top of your own local tax and filing obligations.

If you're just starting out with building a business, this can be quite a lot of admin work and money to sink into just keeping your company in existence, let alone the work of actually running a business.

Newest: Using a local payment gateway with currency conversion

Finally, in 2024 the local payments space has finally opened up to allowing the use of foreign currencies! To a degree, that is.

At the time of writing this, there are two South African providers that offer this: Payfast and Peach Payments. Others I hear are also working on their version of this, so it's an arms race now! For the future I'm very hopeful that the Stripe-owned Paystack will also finally come into the fold here.

Right now, the one I'd recommend using is Payfast with their Multi-Currency Pricing feature.

How it works is that at checkout, customers can select which currency they'd like to pay in. The Rand-converted amount is then displayed alongside. They are then charged the exact forex amount in ZAR, and your Payfast account receives that ZAR.

This solves the perception issue for international buyers, while also adhering to South Africa's currency restrictions. Right now, it's the best local solution. The only real downside is that you'll still be settling out money into ZAR, but that might not be the worst thing in the world if you're actually spending that money locally.

What about Peach? Their feature... exists.

Listen, Peach has gone to great lengths to improve their product and branding, and I know some great developers there. What I'm about to say is not to bash them or be overly negative. However, the execution of their multicurrency payments is really inconvenient for solo or small businesses.

Drawing from their posts on multicurrency here and here, as well as my direct attempt to sign up to use that feature, it has the following restrictions:

In short, using Peach for multicurrency is way more admin than Payfast or an MoR, so right now I wouldn't bother.

Tax

Alrighty, we now have a better idea of how to transact, save, invest, and get paid locally and abroad as an individual and as a business.

If you're doing all of these things, you're quite the busy bee making honey! Unfortunately, the grizzly bear of SARS gets really hungry when you do many honey-making activities...

I don't have too much to say here, as tax is its own huge and complex arena of knowledge that I cannot adequately cover in some articles. You should really consult with tax practitioners and accountants to best handle your finances and tax.

The highlight reel of what I think is important for tax is as follows:

Putting it all together / TL;DR

Phew, we made it to the end! This took about a month and a half on and off to put everything I know down in writing.

Let's recap everything:

Further Reading

South Africa

To MoR or not MoR?

Tax