Residence or citizenship in exchange
for an economic contribution
April 17th, 2015
Mobility has always been part of mankind. Historically, people believed that the citizenship you are born with is what you have for life, unless you formally emigrate. International investors and business owners are fast realising the benefits that accompany the freedom, mobility and global business access that a second, or even third, passport can offer.
The industry of acquiring a second residence or nationality through Government investor programs has seen significant growth over the past years as more countries are now offering either residence or citizenship in exchange for an economic contribution. Governments are realising the potential foreign investment they can bring into their countries and are introducing these programs in order to attract investment from globally-minded business owners and entrepreneurs in order to boost their economies. The world’s borders are disappearing and global mobility and freedom are key to being part of an integrated world community.
The concept of acquiring a second residence or citizenship by investment is relatively new to South Africa. Globally, however, citizenship by investment is not such a novel concept. Countries such as St Kitts & Nevis launched their investor programs as early as 1984 and have been running successfully since.
The first immigrant investor programs introduced to South Africans were typically residence programs that were primarily based on property purchases in Malta, Mauritius and the Seychelles. Since then, the industry has seen massive expansion with more and more countries offering residence or citizenship in exchange for an economic contribution. Countries such as Portugal, Greece, Cyprus, Hungary, Antigua & Barbuda, the US, the UK and many others fall within this list.
Governments introduced citizenship by investment (CBI) programs in order to attract foreign investment from business owners and international business citizens, and in exchange, offer residence or citizenship and a passport. The focus is not only on accruing financial investment to boost the economy, but also the human capital aspect thereof. Bringing intellectual capital into the market can stimulate the economy and bring other benefits.
Countries offering citizenship by investment, are looking for the entrepreneurial insight that accompany success and this is the calibre of investor they are looking to attract. The kind of investors looking to these programs are typically the business elite; successful entrepreneurs with a global vision. These are business people who are internationally minded, travel widely, and are looking to take their personal and professional lives to new heights.
With this is mind, South Africa may wish to look into offering a similar program. Still recognised as the gateway to Africa, foreign investors are looking for South African residence or citizenship in order to further their business interests not only in South Africa but also as an access point into Africa.
The motivation for businesspeople making the decision to acquire a second residence or passport varies depending on the investor’s personal and professional needs. With these kind of investments, there are many factors involved that will influence their decision. Typically, it depends on the following three factors:
- Freedom of Mobility & Access
Personal and professional freedom and global access are strong influencers for investors and their families. Where they are from and what freedom their current passport can offer plays a big role in the decision process. This relates not only to personal travel and freedom but also resonates on a professional and business level.
Residence programs are typically more affordable whereas accessing full citizenship, EU or other, will typically require a more substantial investment. Investors need to understand their motivation for looking to acquire a second residence or citizenship and make their decision accordingly. Tax, wealth and legacy planning are also very relevant factors. Many families look at acquiring a second passport as a legacy to their children.
- Security and Wealth Protection
This element is not such a strong driver in South Africa as it is in other countries such as Sudan and Syria where political unrest, violence and turmoil can make living conditions difficult and family safety is a real concern. However, as crime statistics become worse, many families are looking at safe environments in which to raise their children. Similarly, wealth protection also plays a role. Investors are looking to diversify their wealth globally in order to leverage greater security.
An investor from Iran or Syria will have different needs to a family from South Africa, as they do not have the same immediate time pressure and safety risks. Also, South Africans are not looking to leave the country, rather an alternative to keep their options open. It is important that prospective investors and their families do their homework before making any commitments. They need to understand both the benefits and drawbacks involved in acquiring a second citizenship or residence. In the work I do with investors and their families, it is important to ensure that they fully understand the requirements and steps involved.
The majority of investors are typically looking towards the EU. Cyprus and Malta, in particular, are very popular as they offer direct citizenship without long waiting or residence periods. Portugal’s Golden Residence Visa, as well as the Hungarian Residence Bond program, have also seen significant interest as they offer investors residence in exchange for a smaller investment (in comparison to Malta or Cyprus) into either property or government bonds.
With a Maltese or Cypriot citizenship, the investor and his/her family have the opportunity to become full EU nationals, and with that come the benefits of being an EU citizen. This means they can live, work or study anywhere in the EU, as well as enjoy the freedom of travel and protection that an EU passport can offer. Greece has also launched a relatively straight forward residence program which requires the investor to purchase a property for EUR 250 000.
As South Africans are building their businesses internationally, having a second residence or citizenship allows them greater mobility and thereby, the opportunity to take their ventures to new heights. If South Africa was to offer such an investor program, the country could attract significant foreign investment which will boost the economy and South Africa’s position and standing as the gateway to Africa. ▲