Realities of Retiring to South Africa
South Africa conjures up many images in one’s mind – from roaming herds of elephant, to exotic cultures, music and a vibrant lifestyle. The country’s profile has also recently been raised by its hosting of the 2010 FIFA Soccer World Cup, and it is increasingly a destination for retirees seeking a stress-free lifestyle in the sun.
South Africa provides affordable luxury for would-be retirees too. Beautiful homes are available for almost any Western budget, having household staff is the norm even in modest households, and enjoying access to world-class dining and sports opportunities is available for everyone who chooses to live in South Africa.
This rich and exotic country is located at the southern tip of Africa bordered by Namibia, Botswana, Zimbabwe, Mozambique, Swaziland and Lesotho. The country is large and temperatures and climatic conditions vary, but in general the climate is pleasantly warm.
Summer lasts from October to February, with sunny days that may include brief, heavy showers in the afternoons (known as the rainy season). Fall is between February and April and is a little cooler than summer, while winter (May to July) has sunny days and relatively cold nights.
The current exchange rate between the US Dollar and the South African Rand is 1:7 meaning that you will get more for your money in South Africa; though there is less difference between the cost of living in certain South African cities and similar cities in Europe and the US – so you have to be careful about choosing where exactly you set up home if you’re on a tight budget.
Food in South Africa is slightly cheaper than in America, but this depends on your choice of whether to eat locally produced food (which is of exceptional quality) or imported items. A modest budget would need to include rent – ranging from US$500 to US$650 per month – and food, ranging from US$250 to US$360 per month. So, on a budget of just US$2,000 per month it would be perfectly possible for a couple to rent a very decent apartment or house, eat well, pay for utilities, cable TV, heating costs (where required), sports and holiday expenses, restaurant meals, newspapers, and car maintenance and insurance for one vehicle.
With many things to attract people of all ages and nationalities to relocate to live in South Africa, there are also a number of things that retirees in particular should take into account when considering this particular nation. These include residency requirements, health care, opportunities for income generation and investment opportunities, and overall lifestyle.
In the case of residency, South Africa is one of the more open retirement options. South Africa welcomes retirees, providing a ‘Retired Person’s Residence Permit’ on a temporary or permanent basis – provided that certain financial criteria are satisfied. Potential retirees must provide proof of lifelong pension or other form of income. Immigration takes the form of either a temporary or a permanent residence permit.
Temporary permits are granted for four years, and are renewable indefinitely for four-year periods as long as the criteria for their having been granted remains valid; while permanent permits afford permanent residents the same rights and privileges as those with South African citizenship, with a few key exceptions, most notably the right to vote.
In both cases, South African Retired Persons Permits are based upon financial criteria and unlike a South African Work Permit, no prior job offer is required before an application can be made, meaning that unlike temporary South African visit visas, retired people are permitted to work if they wish, though applicants wishing to work will need to submit an employment contract and demonstrate that no South African citizen or resident is available for the position in question.
While the term “retired person” is used, no age restriction is applied for immigration under the type of visas described. There is no specified amount that a retired person must bring to South Africa when immigrating either. The immigration criteria for retired permits is based on available income and capital – this income and capital can be from anywhere in the world and there is no obligation for these funds to be brought into South Africa.
Applicants must be able to provide evidence of either:
- A pension, retirement account or irrevocable annuity which has a value of at least R20,000 per month. This requirement applies to each person making an application; or
- A combination of assets which equates to a minimum of R20,000 per month for each person applying; or
- Net asset value totaling not less than R7.5 million and proof of payment of R75,000 as a non-refundable sum to the Director General of Home Affairs.
In terms of health care, the public health sector is responsible for delivering free health services to 80% of the population, meaning that this sector has shifted to primary health care and tends to be overworked and under-funded. Private medical care is therefore a must – but that being said, South Africa operates an excellent private hospital network equipped with the latest technology and top rated staff, and costs of medical insurance and treatment are among the lowest around.
The private sector also caters to foreigners who want reasonably priced but world-class quality medical services, and who are willing to travel to South Africa to get them. Quality retirement villages and frail care are also available at affordable rates.
Many retirees to South Africa consider additional opportunities for income generation, particularly via the thriving hospitality industry as well as through investing in property for example. Note: there is no restriction on foreigners buying property in South Africa. The process is also not difficult to follow – though you should use a reputable lawyer if you are going to buy directly from the seller.
Real estate agents charge fees equivalent to 6% of the selling price, but this is paid by the seller – you as a buyer are responsible for covering legal fees and taxes. The South African real estate market is growing fast, by up to 25% in some parts of the country. However, while the country has weathered the global financial crisis well as a result of its minerals based economy, residential property prices are now falling in many locations, making it a buyers’ market.
In addition, with a variety of locations and climates to choose from South Africa offers properties to suit every taste, and most are larger and of a higher standard than those found in more traditional retirement locations around the world. Today’s overseas property investors will find many political and economic advantages to investing in South Africa. Investment in commercial property has achieved substantial growth in past years and looks set to continue for example.
South Africa has favorable tax laws for retirement pension schemes that are based abroad. In general overseas pensions are not liable to tax in South Africa. In addition, through double taxation agreements, while residing in South Africa the same pension may also not be taxed in your home country – though restrictions to this may apply and you should take professional advice from your accountant or financial adviser.
South Africa offers an exceptional lifestyle at reasonable cost. Opportunities to explore the country and its neighbors, learn about exotic cultures and wildlife and sample the local cuisine and wines abound. However, no discussion of the country would be complete without an assessment of its safety and security.
For historical reasons the country has a large sector of the population that are underprivileged. While the government is making great strides in addressing issues of poverty and economic development, there continues to be concern about these matters, which manifest themselves in the country’s alarmingly high crime statistics. As a result of the need to create jobs and provide education and healthcare it is quite understandably the government’s priority to focus on local economic empowerment. Therefore, while some other destinations may focus on the attraction of retirees and of offering opportunities specifically for them, this is not the case in South Africa – and indeed there can be some resentment of foreigners perceived to be coming in and taking opportunities from locals.
That being said many people live a very happy, relaxed, and wonderful life in South Africa without concern about such issues. It is a beautiful country full of opportunity. But as with any retirement decision I would suggest that anyone considering retiring to South Africa spends time there first at various times of the year to decide in which part of the country the climate best suits, and where the best opportunities for your particular situation are.
Also, it is always a good idea not only to talk to locals but to other retirees and expatriates to find out their experiences, and their opinions about where the country is heading. You will likely find the expatriates more positive than the locals!
If you do decide to move, take sound advice about your legal, property and financial decisions. South Africa has high quality legal and real estate services, and associations and professional institutions regulating their activities which will be able to guide you.
In conclusion, South Africa is a stunning destination, be it for a holiday or for a lifestyle change, so do consider including it in your list of retirement location choices.