You might be a South African who wears a Springbok jersey on Bok Fridays, braais in a storm and gets a little teary-eyed whenever you hear Nkosi Sikelel’ iAfrika. You might be hugely optimistic that South Africa has truly turned a corner — encouraged by a stabilising energy supply, signs from the government of national unity and our recent removal from the Financial Action Task Force grey list, which has improved global financial credibility.
However, regarding money and investment decisions, emotion should not be part of the equation. For many South African investors offshore diversification is viewed as a “bet against home”, causing them to stay heavily invested in the local market. That is risky.
As an actuary, I’ve seen how quickly a “home” portfolio can backfire. True financial resilience isn’t about blind loyalty; it’s about acknowledging patriotism and portfolio construction serve two different masters.
At first glance it does look like a good time to go all-in on South Africa. The JSE all-share has just come off a scorching 12-month cycle — up 40% — helped by resources, offshore-earning dual listings such as Naspers and Prosus, and a rebound in banks and property.
But let’s not mistake concentration for diversification. That rebound is narrow in a market that represents less than 1% of global listed assets, which means overreliance on local exposure is still risky.
When South Africa starts to feel better, it’s tempting to believe the rand has also become safer. It hasn’t.
Resources have been the market’s engine, with precious metals outperforming as investors look for inflation cover and geopolitical protection. Because the biggest miners dominate index weightings, their gains have disproportionately boosted headline returns.
Even that “local” performance is partly imported. Dual-listed giants that earn most of their money offshore have added a strong global tailwind to the JSE, meaning investors have been riding international tech and consumer cycles through local tickers, while the domestic economy remains under strain.
When South Africa starts to feel better, it’s tempting to believe the rand has also become safer. It hasn’t. Even in a boom, the JSE can’t give you meaningful exposure to many of the industries that drive global earnings — technology, healthcare, renewable energy, semiconductors and consumer platforms. South Africa simply doesn’t have enough of them listed here. You are in effect betting on a market tied to commodities and a handful of financials.
The rand doesn’t need a crisis to erode wealth. It only needs to weaken at the wrong time for you — when paying for your child’s overseas studies, medical expenses or any future cost tied to the dollar, euro or pound. Ask yourself: if the rand halved against those currencies over the next decade, how would that affect your financial plans?
Investing offshore isn’t about faith — or flight. It’s insurance against risks you can’t diversify away locally: political, regulatory and currency risk. It’s also about optionality: giving yourself flexibility to make choices no matter local conditions.
How you go about it is important. Whether it’s a direct offshore platform, a foreign exchange-traded fund or a local feeder fund, each has implications for tax reporting, liquidity and estate planning. If you have a sound structure it should survive policy changes, currency dips, energy crises and, hopefully, cushion you against geopolitical events. That’s why your setup matters as much as the exposure.
If you have a sound structure it should survive policy changes, currency dips, energy crises and, hopefully, cushion you against geopolitical events. That’s why your setup matters as much as the exposure.
Done properly, offshore diversification is less about chasing products and more about executing the move cleanly, which requires transparent pricing, tight paperwork and a hands-on approach.
A sensible offshore allocation doesn’t mean abandoning South Africa. It acknowledges that a brighter local outlook doesn’t automatically erase volatility or structural risk, which is why even if you believe in the country’s recovery you should also prepare for turbulence.
Portfolio strategy is a risk management exercise. History shows portfolios built with spread exposure before turbulence usually cope better than those adjusted in the middle of it.
The bottom line? Hope for more Bok (or Bafana) wins and cheer every sign of recovery, but don’t bank on it. Keep your investments diversified enough to survive those days when optimism alone won’t cut it.
• Scherzer is CEO of Future Forex.
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