Huge increase in demand for second passports

South Africans looking for a bolt hole in case things go pear-shaped in SA are applying in record numbers for foreign passports. Most of these are high net worth individuals looking for a Plan B in case the political or economic future deteriorates, or for ease of foreign travel and doing business abroad.

Not all of these are planning to emigrate, says Amanda Smit, managing partner at Henley & Partners SA, a global citizenship and residence advisory firm. Many would like to keep their South African passports – maintaining a direct link to family and home – while taking advantage of the benefits of living and working abroad.

Benefits and privileges

“South African high net worth individuals (HNWIs) recognise that dual citizenship or residency provides more benefits and privileges for them and their families including ease of travel, security for the future and expansion of business and banking,” says Smit.

She says the number of foreign citizenship inquiries from South Africans shot up 125% in the second half of last year over the same period in 2017.

This translated into a 53% increase in applications for foreign citizenship in the second half of 2018. There was a 364% spike in inquiries in October 2018 over the same month in 2017.

In other words, it appears that South Africa’s human capital is taking the same flight path as its financial capital.

According to data from the UN Conference on Trade and Development (Unctad) for 2017, South Africa was the third biggest exporter of capital as a percentage of GDP in the world. The so-called Ramaphoria effect appears to be doing little to stem an exodus that started under former President Zuma.

Of those inquiring about second passports, 85% were male, and 70% were aged between 45 and 64. Three-quarters of the inquiries came from Gauteng and Western Cape, split almost equally between the two provinces.

Interestingly, only 45% of the inquiries were from whites. Non-whites now make up the majority of high net worth emigres.

The most popular destinations are for European residency programmes such as those offered by Portugal and Greece, as well as citizenship programmes in the Caribbean and the Mediterranean islands of Malta and Cyprus.

While most of the applicants are male, women have been applying in growing numbers over the last two years.

Education, ease of movement

Some of the applicants are parents wanting to give their children the best education abroad, but also for ease of movement: the SA passport has access to only 102 destinations and this number excludes the world biggest economies, such as the US, UK, Europe’s Schengen Area and Canada.

“There is more global mobility than ever before,” says Smit. “There are also more wealthy people as opposed to many years ago when wealth was usually concentrated in a certain portion of society.”

The demand for second passports is not unique to SA. A second passport or permanent overseas residency is now the ultimate luxury item for HNWIs, says CEO of deVere Group, Nigel Green. His company reports a 45% year-on-year jump in inquiries from individuals across the globe who are seeking citizenship or residency outside their country of origin. “Wealthy individuals around the world are now increasingly considering investing in a second citizenship or overseas residency.”

Most HNWIs looking for dual citizenship or residency are coming from India, China, South Africa, the Middle East and Russia, says Green. The reasons include visa-free global travel, political stability, world-class education and healthcare, tax efficiency, and wider business growth opportunities.

Residency as a first step

Most applicants opt for residency in the first instance as it is typically less costly and an easier process to complete – and is a recognised gateway to full citizenship. Plus, some countries like China and India do not recognise dual citizenship, so residency is the only option.

Smit says the countries with the best residence and citizenship programmes are:

• Malta, which gives you the right to live, work and study in any of the 28 European countries and Switzerland, with visa-free travel to 182 countries.
• An Antigua and Barbuda passport provides visa-free access to approximately 150 destinations including the UK, Europe’s Schengen Area, Singapore and Hong Kong.
• Portugal, which allows visa-free travel within the 26 countries of the European Schengen Area, with the eligibility to apply for citizenship after five years as a legal resident while keeping other citizenships.
• Launched in the second half of 2018, the Moldova Citizenship-by-Investment programme offers visa-free access to 121 countries including Russia, Turkey and the Schengen Area. Citizenship is transferable to future generations without restrictions.

Investment-for-residency schemes are typically based on real estate investments and start from around 250 000 euros (about R4 million) in Greece.

“Portugal’s programme is proving to be the best option for many clients as it requires only two weeks a year residency obligation. It gives full residency benefits to live, work, open a business and study there with complete access to travel across Europe’s Schengen Area. Plus, there is the option of obtaining full citizenship after six years if required,” says Green.

“This option is a straight real estate purchase of 500 000 euros (R8 million) into a new build property. There are lower property options available, however, they are only for properties over 30 years old and most investors prefer the newer real estate as they typically provide better investment opportunities and are less hassle to maintain.”

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