Buying international shares from your laptop in South Africa: How to get started

IF YOU agree with the old investment adage that no-one cares about your money as much as you do, it stands to reason that you will be interested in managing your own share portfolio. You will be cutting out financial intermediaries and services providers that invest on your behalf – which means that you are ultimately responsible for the decisions.

We are increasingly embracing this concept, judging from our enthusiasm for online trading in international securities.

To give you a rough idea of how quickly South Africans are opting for do-it-yourself (DIY) international share investing: Standard Bank Webtrader, which only opened for business towards the end of last year already has more than 600 active investors in its system, it told Biznews this week.

PSG Online, meanwhile, has about 4 000 investors who are trading in international stocks. Other large organisations in the financial services industry – for example Investec – are working on plans to add an international online trading platform to their portfolio of offerings as South African demand for foreign securities seems set to continue to grow.

International share trading is particularly popular right now because the steadily weakening rand has reminded us of the benefits of diversifying our assets beyond our borders in regions with stronger currencies.

There’s another reason DIY international share trading has become popular: exchange control regulations have relaxed considerably. We have much more access to the stocks of large global organisations, the likes of which you don’t get in Africa. Google, Apple and Facebook are prime examples.

So, not only can we diversify currency-wise and geographically with greater ease, we can also add different types of organisations to our portfolios in our efforts to build wealth.

Fatima Essop Mohamed, who heads Standard Bank Webtrader, says the “huge interest” in international share trading is evident from the strong attendance at roadshows to introduce the platform as well as the demand for trading accounts.

But some people have expressed reluctance to start trading because they find it a daunting prospect to work through the South African Reserve Bank (SARB) and South African Revenue Service (SARS) bureaucracies to get an account up-and-running.

Buying international shares: How to get started in South Africa

It is much easier to get through the red-tape than you realise, emphasised Essop Mohamed. “It isn’t a case of queuing at a government office for every transaction. Local banks are set up to assist clients with the necessary approvals either in a branch or through a private banker,” she says.

Here’s what you have to do to comply with exchange controls in order to buy and sell  international shares from an online trading site in South Africa. Mohamed said:

- For the first R1m you invest each year, it is not necessary to request SARS approval. However, you do have to show your bank’s forex department your green bar-coded identity document and give them your tax number and the online platform’s bank account details. You simply ask the forex department to transfer an amount to a maximum of R1m to the online platform’s bank account. Make sure you give an accurate online customer reference number so that your funds can be allocated to your share trading account immediately. This process can be finalised within a day.

- For the next R4m in shares you buy, you will have to request special approval from SARS. For this, speak to your tax consultant if you do not want to liaise directly with SARS – though this is not necessarily as time-consuming as you might think. “We have clients who managed to do all this administration and move their funds to the share trading account in one day,” said Mohamed.

If you would like to invest more than R5m in an international share portfolio in one calendar year, speak to a stockbroker about the possibility of accessing an asset swap facility.

Mohamed notes that South African individuals can also use money that has been deposited into offshore bank accounts using annual allowances over the years if they exhaust their annual R5m limit.

Most new DIY investors are testing international waters with amounts far lower than R5m. And, you can invest an additional R5m every year in terms of the current foreign capital allowances.

The recommendation is to not invest in amounts any lower than $10 000 (R100 000), as the commission – which starts at about US$20 (R220) will eat into your returns. “Even if you are buying penny stocks, in most cases the costs of trading mitigate against investing small sums,” said Mohamed.

PSG Online also suggests a minimum trading value of $10 000 “to keep it efficient”. “This might mean waiting a bit longer before one gets into a trade, but it’s worth doing should one want a good return,” said PSG Online Equity & Derivatives trader Tiaan Heydenrich.

Like Standard Bank, PSG says it helps its clients set up an account as quickly as possible. “We do everything in-house from opening the offshore account and converting currencies to facilitating offshore trading.

“The general time from starting the procedure to trading is generally three to five days. This is just to allow for bank-to-bank transfer delays, currency conversion settlement delays and so forth. We do assist clients with SARB clearance within the group as well,” said Heydenrich.

After your funds have registered in your online trading account, you are ready to start buying securities. You will convert to other currencies during your trades.

Later, when you are ready to cash out of your positions, you can have your funds transferred to an offshore or international bank account. Or, you can convert back into rands and access your money from your South African bank account.

Also on Biznews.com: more about investing in the world’s markets from the South African perspective, plus special reports on global companies and other securities you might want to consider for your portfolio, in our Global Investing section.

Send an email to Jackie Cameron.

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