Tapping into 9% South African savings rates

rentaquote

On holiday in South Africa a few weeks ago, I spotted adverts for instant access savings accounts offering interest rates as high as 9% pa.

I've looked at the terms and conditions for several accounts but it's unclear whether they're open to customers from outside SA, and the email enquiry I sent to one bank - Nedbank - has not received a reply.

Has anyone had experience of opening such an account from the UK and repatriating their investment after closing the account?

I'm aware that the interest will have to be declared on my UK Self Assessment form.  It seems to have different sections for foreign savings income and "remitted" foreign savings income.  Can anyone explain the difference?

Many thanks in advance!

Nebulous2

I don't know about the tax situation, but my first thought is, how much of your money would you lose in currency conversion? 

callum9999

The conversion isn't the biggest issue, it's the stability of the Rand.

Even if you found a way to transfer it back and forth with 0% fees, if you invested £1000 this time last year and earnt 9% interest, you would now have £1002.14 (which would obviously be a loss when factoring in even the lowest FX fees you could find).

Doing this for the 9% interest rate makes absolutely no sense - you would need to be doing it because you're gambling on the Rand becoming stronger relative to the Pound. Something even the "experts" greatly struggle to do consistently (otherwise they'd effectively have unlimited money!), so I'd suggest it's probably not a good idea for the OP to be attempting it.  

poseidon1

Why settle for only 9% from South Africa when Agentina has a deposit interest rate of 133%? ( No, this is not a serious proposal!)

jimjames

rentaquote said:

On holiday in South Africa a few weeks ago, I spotted adverts for instant access savings accounts offering interest rates as high as 9% pa.

If you're prepared to take the sort of risks with putting your money in a foreign currency then why not look at putting your money into a FTSE100 stock with 9-10% dividend yield like Vodafone or L&G? Obviously risks involved but there are also ones with your plan.

Aretnap

In general high interest rates correlate with high inflation, and therefore a currency which is declining compared to (relatively) low inflation countries like the UK. So there is a high chance that whatever you gain from the higher interest rate, you would lose in getting fewer pounds for your Rands when you convert back.

This does not hold true 100% of the time of course, so if you have a strong view about how the Rand will perform over the next year or two then maybe you think it's a gamble worth taking. But recognise that it is a gamble. And as above it's a gamble that professional currency traders struggle to win consistently. And they're basing their trading on a deep analysis of economic performances and monetary policy. Seeing an advert on holiday and saying "OMG 9%!" doesn't feel like a strong basis for trying to do better than them.

Millyonare

Investing / saving / gambling in a semi-failed state with a financial system currently ranked at an "elevated" risk... What could possibly go wrong.