6 Months To Lockdown 2.0: From People To Pensions

6 Months To Lockdown 2.0: From People To Pensions

6 Months To Lockdown 2.0: From People To Pensions

To say that we’ve exceeded our capacity for 2020 lockdown news is a bit of an understatement. The absurdity sprouting from the cumulative disasters which have seized the world in its iron fist in the past few months is utterly exhausting, and yet it does not seem to be exhaustive.

While important debates and interim legislation is tabled and ratified the world over, it seems almost unthinkable that something as pivotal as the treatment of retirement funding and cross-border finance could be legally upended within a mere few months…but this is 2020 after all.

Despotism and the elimination of ‘if’s’

For a country which negotiated things like human rights, land expropriation, protection of personal information and international trade deals such as AGOA over years—and claims that such intensive and extensive debate is a cornerstone of our constitution—we sure have fast-tracked the elimination of financial rights at lightning speed.

While political warriors (a term whose meaning will undoubtedly be widely divergent depending on your ideological stance) like Afriforum, the DA, EFF, ANC, ANCYL, COSATU, FF+, IFP and others have kept themselves busy bickering over ‘important’ matters like Tweets and finger-pointing, certain crucial changes have been actioned which could…nay, will… affect the livelihoods of all South Africans.

Sadly this is in step with the theatrical clowning about of the world’s established and emerging economic powerhouses; the USA, UK, Brazil, Australia, France, India, Turkey, Mexico…all examples of the intellectual regression which has swept through the globe in tune with the virus which has locked us all down.

In a time when the world desperately needs mature, science-based and socially responsible leaders, it seems ‘sagacity’ and ‘leadership’ are two terms which have been rendered mutually exclusive. Whatever binding force which emulsified a term like ‘judicious governance’ into its former noun phrase has not merely eroded, but been eviscerated.

The primary focus of our article today is the sudden seizing of financial borders for South African expats from 1 March 2020, but if this were the only challenge in this minefield of red flags perhaps Rand Rescue will not have had to step in to inform and guide South Africans in their financial affairs. In a perfect world such duty will have been handled by the political leaders and supposed trusty parastatals who claim to hold their citizens’ rights in high regard.

As an independent service provider we’ve never claimed command over South Africans’ personal financial choices, but in lieu of actual political leadership we feel compelled to drive through certain urgent points to those fellow countrymen and women who are living abroad or planning emigration.

Pandora’s economic box…

We’ve covered the primary implications of lockdown on personal, industrial and national purses, so will not go into these matters again. The writing, however, is on all the walls which have isolated us over the past few months and a simple Google search or Facebook scroll will tell you what has been sacrificed and what the future holds (conclusions vary on the extent of our downfall…but no analysis or fiddling with factors and equations has yielded a rosy outcome).

What the nation’s leaders have achieved through their announcement of the 3-year pension lockdown for those exiting SA borders is, however, something which has devastating implications and will also have far-reaching consequences for not only individuals but our nation’s desiccated economy.

One might be tempted to think that the amalgamation of concurrent catastrophes has compounded this decision which was briefly touched on in SONA and the budget speech in March, but on the contrary it’s this socio-political inferno has scorched the plantation of cunning misdirection which our leaders habitually don to obscure the emperor’s nudity.

If there were ever a definitive illustration of the term ‘too good to be true’, it is certainly these two remarkable public addresses touted to a South African populace starved of hope in February and March 2020. The hypnotic dance of President Cyril Ramaphosa and his partner in choreography at the time—Minister of Finance Tito Mboweni—had all but swept the country off its feet. Were it not for an interloping international crisis, we might not have noticed how or freedoms were purloined under the very guise of freedom.

They promised us tax relief, elimination of cross-border financial constraints, investment in things that matter—education, crime prevention, social upliftment and healthcare. But for many of us working in taxation, finance and international legislation this abundance of ‘good news’ triggered a crucial question in our minds which would not relent without answer: “How?”

Even before the R500-billion Covid-19 relief fund, reneging on promises of abandoning corrupt SOE bailouts and the swiftly eroding canyon which has formed between our two government superheroes it was quite clear that these promises had been drawn from a hat. For a country like South Africa, there will never have been a possibility to fund all these magical castles in the sky while simultaneously relieving the financial burden on the citizens who have subsidised government whims all along. But of course, the answer to our question has always been within the gift itself—how does one demolish exchange control without haemorrhaging funds? Well, you simply play around with your wording.

Legislative subterfuge and reverse-osmosis

In Biology the process of osmosis refers to the spontaneous movement of solvent particles through a membrane (usually unidirectional) with particles ‘naturally flowing’ from high concentration to low concentration receiving solution until an equilibrium is established between the two concentrations.

It is an unusual way to describe economic jurisdictions and exchange control, but a rather fitting analogy for what we’re seeing here.

Reverse osmosis (diffusion) is akin to osmosis, but as the name suggests, it is achieved contrary to the spontaneous harmony which guides osmosis. South Africa’s exchange control had always been a hard border which deliberately divided dilution between two solutions. The SARB had allowed for marginal, incremental and restricted outflow from its prime solution (the internal economy). Financial exchange and financial emigration had always been a convoluted and frustrating process, but providers like Rand Rescue could nevertheless facilitate the transfer of financial assets to new jurisdictions by following the methodical processes stipulated by the treasury and revenue service. The rules, although stifling, were nevertheless clear.

In science there is, of course, the nature of osmosis and diffusion cannot be inherently positive or negative—they are merely processes which achieve spontaneous or artificial outcomes necessary for a particular goal. And the goals are usually aimed at finding solutions to problems (such as energy conservation or water purification).

Good fences make good neighbours…

The thing about hard barriers such as walls or fences is that there will invariably be a section which allows for thoroughfare, even for abstract barriers such as financial regulation.

While the membrane in reverse osmosis is a tool used to facilitate directional control, South Africa has redefined its purpose in economic terms to serve as strategic hoodwink. It is a cunning ‘border replacement’ which allows for effortless complaisance and compliance. A psychological cantrip which benefits the government in every way:

Step 1: mitigate pushback and criticism to regulation by offering citizens the illusion of freedom – demolish Jericho’s walls, eliminate the narrative which leads to critique and rewrite the rules elsewhere

Step 2: replace the rigid border with its focused and bottle-necked monetary pipeline with a singular, unobtrusive membrane

Step 3: sit back while the system you have put in place enforces your ideals without the need for cumbersome administration and expense.

The fourth industrial revolution has been furtively lapped by a mass psychological revolution we’d not seen the likes of in human history. In an era where leadership is defined by juvenile mudslinging it is not surprising that politicians the world over have caught on to less enervating methods of crowd control. Logic has made way for spectacle, and borders have been replaced with impenetrable latent domes.

The focal point: goodbye pensions

The biggest laugh is perhaps the Treasury’s assertion that they’d engaged with stakeholders and the public before approving the 2020 Draft Taxation Laws Amendment Bill. It is one of the swiftest ‘public’ engagements we’ve seen in South Africa’s history.

The Draft Taxation Laws Amendment Bill was ‘announced’ without much clarification on 31 July 2020. A smartly chosen date given that it was at the equidistant of SA’s level 3 lockdown:

ISPs were no longer compelled to offer zero-rated/free and prioritised access to information. For South Africans in financial distress, who have had to limit data and airtime costs this meant a throttling of access to online services.

Ensure that you have buy-in and support from international groups who are prone to garrotting you—clemency and financial support from world banks, foreign governments and international monetary funds should not be wasted. Carpe Diem!

Permits and licences for an entire country who were barred access to motor vehicle licencing and home affairs services (as the e-portals had counterintuitively also been disabled due to lockdown) were told their licences, permits and documentation would remain, for the most part, valid until 31 July 2020 only – expediting a mass confluence of millions of citizens to depots which would hold them up in queues for days. Timing one’s fatal stab right is easy when one controls the priorities of those you wish to control and exploit the weaknesses you have created.

Governmental services were (and still are) functioning on skeleton staff and with automated out-of-office notifications. Sun Tzu will nod in agreement at this tactic; set a deadline and capitalise on circumstances beyond your control to justify the game of broken telephone.

Utilise the sociopolitical climate to engage one’s customary and habitual foes in other matters; a task which is usually rather difficult, but with 2020 has provided a treasure trove of scandal and dissent which was ripe for the picking.

Appease the troublemakers by bowing to their egos; factions like the EFF have been unbothered by the new regulation as they mistakenly believe that this regulation will harm their own primary opposition.

Keep everyone entertained: the Roman tactical trademark which just keeps on giving to those in power. It’s easy when the world has spontaneously morphed into a grand Coliseum.

Be charitable in ways which underscore a certain empathy and moral code but ensure that these philanthropy is manageable and risk-free. One can rebuke rotten apples in your own camp publicly, hold back other decisive proclamations and release these in step with the ‘bad news’ (such as taking a stance on farm murders and finally ruling that land expropriation without compensation will have limited impact on the demographic you want to placate).

A year ago these points will have seemed like crazy rants spewed by an armed madman living in a bunker and fashioning his own tinfoil attire…but we have to ask ourselves whether the absurdity of it all is still a premise for labelling such ideas illogical and farfetched.

Last chance to save your savings

In a mere 6 months South Africans who want to emigrate will no longer be allowed to take their retirement savings with them. The very rules and tests which have always been used to determine tax residency and obligation have been torched in the dumpster fire which is this mad year. In fact, the amendments clearly state that the Treasury no longer cares whether you’re a tax resident elsewhere—your hard-earned retirement savings is theirs to milk for three years. And we’ve yet to see what foreign jurisdictions will think of this.

If the SA government requires ‘established 3 years foreign tax residency’ before releasing retirement funds, the implication is that one will need to immediately establish tax residency offshore if you want to move your money within 3 actual calendar years.

What this means is that one cannot rely on stipulations of Double Taxation, or operate across borders for these three years of waiting. If you cannot rightfully prove that you have been a tax resident of a foreign jurisdiction for three years, then your retirement savings will be held back even longer.

Add to this the inference that government wants pension administrators to invest in government initiatives (an undertaking smartly euphemised by redefining ‘prescribed assets’ to ‘regulated incentivisation of government investment’), the DA pushing for loans against pensions and the overall depreciation of South African investment assets and industries, and it’s hard to find a silver lining.

Contact Rand Rescue today!

Whether you’re considering relocation in future, are in the process or have been living abroad without formally emigrating; the time to get your money out is now. Financial emigration can be a lengthy process, and with the deadline now looming any inaction will see your savings hijacked and captured for a state which no longer serves you.

Leave your details below and let’s discuss your options. Rand Rescue is 100% compliant with SARS and SARB regulation and authorised to assist you with your cross-border financial transfers, foreign exchange and taxation.

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