South African investors looking to emigrate to the U.S. can breathe a sigh of relief as the United States Congress extended the EB-5 Immigrant Investor Program, without reform, to December 8, 2017.
Industry insiders were expecting changes on 30th September 2017, with the most significant change being an increase of the minimum investment amount required – potentially to over $1 million.
“This is a welcome extension, especially for South African investors, as an increase in the investment amount will limit the number of families able to invest through the program,” said Marc J. Sharpe, Partner & Managing Director of LCR Capital, a specialist EB-5 provider in South Africa.
“An increase to $1 million would exceed South Africans’ annual foreign investment allowance, making it harder to invest the funds offshore in the timelines required by the USCIS,” said Mr. Sharpe.
“We believe change is coming soon for the EB-5 program,” said Mr. Sharpe.
“Congress is working on an EB-5 reform bill and changes to the program could come at any time. The most anticipated expected change is an increase in the minimum investment amount, which has not changed since the inception of the program in the early 1990s. We don’t know what this increase will be, but rumours suggest the new minimum investment amount will be on or around USD$1 million.”
South African investors considering this emigration route are encouraged to explore their options as soon as possible. “We anticipate that investors who have already filed their applications will not be affected by the changes made by Congress,” said Mr. Sharpe.
Bearing in mind that it currently takes around two years from the start of the process to receiving a conditional green card, investors who apply now would typically only move in 2019. “This is a ‘plan-ahead’ visa and emigration option,” said Mr. Sharpe. “You can’t apply today and hop on a plane tomorrow to take up permanent residence in the USA. Our investors are reporting an increasingly pessimistic view for South Africa post-2019, and we’re seeing a steady increase in demand as each month goes by,” said Mr. Sharpe.
History of EB-5 in South Africa
The EB-5 Immigrant Investor Program was launched by the American government in 1990 to stimulate the U.S. economy by incentivizing foreign investments into the country that focus on job creation. It has proved to be an exceptionally successful program, bringing billions of dollars into the country and creating thousands of jobs – while at the same time offering green cards to qualifying investors, via a lawful immigration process.
The program was relatively unknown in South Africa until 2016. This was in part due to South Africa’s restrictive foreign investment allowance prior to 2015, which was limited at R4 million per year. When this increased to R10 million per year in 2015, the EB-5 program became a possibility for many South Africans, and LCR Capital decided to set up a local presence in Cape Town. Their first offering to South Africans was an investment opportunity in the globally recognized Dunkin Donuts franchise. LCR’s Dunkin Donuts project was extremely popular and was fully funded within months. LCR’s current investment offering is in the Surf Club Four Seasons, which has been highly acclaimed within the EB-5 industry for its high levels of job-creation and conservative capital structure.
“Investors should note that if Congress makes changes to the program on or before December 2017, LCR may not have an immediate availability of projects designed for the new investment levels and program requirements,” said Mr. Sharpe. “Designing an EB-5 offering takes time, so even if you are able to afford the higher investment levels you may have to wait a substantial amount of time before a new compliant project comes to market.”