Specialists in EB-5 Investments

LCR predicts new emigration record in 2018/2019

According to reports*, 2015 was the year of highest emigration from South Africa since 2000. A quarter of emigrants who’ve left South Africa since 2000, did so in 2015. In 2014, the proportion was 11% and in 2013 it was 9%.

These numbers show a dramatic increase in emigration in 2015; a trend we expect to continue. LCR has experienced unprecedented interest in emigration to the U.S. since 2016, and other foreign visa providers in South Africa have reported similar increases. Given that it usually takes people around two years to go from making arrangements to leave to actually leaving, we expect to only see the full emigration impact in 2018/2019.

What’s driving emigration?

It’s the usual reasons, including the pursuit of economic opportunities abroad, access to better education for your kids, and getting away from violent crime. But we’re also seeing an increase in deep-seated pessimism about the future in South Africa.

As almost every government department and state-owned entity has been dragged into the mire of corruption, people are questioning the competence of those appointed, and their ability to keep providing basic services such as water, electricity, policing, etc. South Africans already know what an electricity crisis is like, and residents of the Western Cape are currently living with a severe water crisis. As people lose confidence in government’s ability to provide even the most basic services, they start to look for other options, particularly for their children.

 

It’s getting more expensive to leave

Another driving factor is the ever-increasing cost of leaving. If you’d applied for an EB-5 Visa to the United States under the U.S. government’s Immigrant Investor Program in 2015, you would have needed around R5,740,000 to invest. Today, that figure is around R7,000,00, thanks to the ongoing depreciation of the Rand.

As the situation in South Africa deteriorates, so too does the currency. This means your exit plan only becomes more expensive the longer you wait.

 

Changes at Congress

For those considering the EB-5 visa, there’s another factor to consider: the United States Congress is expected to revise the EB-5 program on or before December 2017. Industry insiders expect them to increase the minimum investment amount required from $500k to at least $800k, or more likely closer to $1m.

Those who apply before December are unlikely to be affected by any changes made, but once the minimum investment amount is increased, this program will become unaffordable for many South Africans; and certainly a lot more difficult for everyone due to exchange control regulations.

 

Timeline of deterioration

Given all that’s happened since 2015, the 25% of emigrants* who left the country that year are probably feeling pretty happy with their decision. Let’s look at a brief timeline of what’s happened since 2015 to see what else is driving the increased interest in emigration we’re seeing currently.

*According to reports, 25.7% of emigrants who have left SA since 2000 did so in 2015.

 

2015

  • “Nenegate”: The surprise firing of Finance Minister Nhlanhla Nene shocks South Africans and causes the Rand to plummet. As the first sign of things to come, South Africans are rattled by the suddenness of this decision and its impact on the economy and currency. It is a reminder of how quickly things can deteriorate.

2016

  • Economic decline. 2016 is a bad year for the JSE and the economy as a whole. South Africans measuring their wealth in dollar terms feel significantly poorer as the rand goes from an average of 11.48 to the dollar in 2015 to 15.81 in 2016.
  • Public Protector Thuli Madonsela releases her state of capture report in November. The overwhelming evidence of government corruption shocks South Africans. With the report released and Madonsela’s recommendation for a judicial commission of enquiry into state capture, there is hope those involved will be held to account. This hope quickly fades after the appointment of a new public protector, Busisiwe Mkhwebane, as it becomes clear that her loyalties lie with the president.
  • The #FeesMustFall movement turns violent and destructive. The cost of property damage is estimated to be around R1-billion, and a number of people are injured in the protests. Students and academics become fearful on campuses across the country. As a result, LCR has seen an increasing number of parents looking for overseas university options for their children as campuses became more unstable. Many South Africans were left wondering what impact this movement would have on the quality of university education in South Africa in years to come. Will a university degree end up being as meaningless as a matric certificate?

2017

  • March: Cabinet reshuffle. Pravin Gordhan is fired as finance minister, and Malusi Gigaba is appointed his successor. Consensus is that president Zuma and his allies now have what they want: unfettered access to the national treasury.
  • April: S&P downgrades South Africa’s credit rating to junk status. Fitch ratings follows a few days later.
  • May: GuptaLeaks. Thousands of incriminating Gupta emails are released.
  • June: Respected business journalists, Peter Bruce and Tim Cohen, are assaulted for publishing negative articles about the Guptas. The threat to media freedom is a red flag to many.
  • August: Zuma faces his 6th no confidence vote – South Africans are cautiously optimistic because for the first time the vote is to take place via secret ballot. It is a crushing blow when the motion fails yet again, despite anonymous voting.
  • September: UK Public Relations firm Bell Pottinger is expelled from UK industry body due to its role in promoting the corrupt Gupta agenda in South Africa. The business ultimately collapses. While this is a win for South Africans, it also highlights the fact that no one in South Africa has been held to account.
  • September: KPMG’s role in facilitating the corrupt Gupta agenda is revealed. Executives are fired and the firm bleeds clients. Again, no one in government is held to account, but this is no longer surprising.
  • October: President Zuma undertakes another surprise cabinet reshuffle and Minister of State Security David Mahlobo is appointed Minister of Energy. This appointment looks set to secure Zuma’s long awaited nuclear deal, which will set the country back an estimated R3trillian and set South Africa on an economic path it may never recover from.
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