Exchange and bank charges could nibble away your R400 000 foreign currency allowance unless you establish up front what you will be paying and take steps to minimise the costs where possible.
If you are still undecided about where to invest your foreign allowance but as a first step want to transfer it out of rands to a more stable currency, you can make use of a local (onshore) or foreign (offshore) account at one of the local banks.
You must also decide whether you want to hold a current/call account, where you will receive little or no interest but will be able to use a cheque book and make ATM withdrawals outside South Africa, or a deposit/fixed term account, on which you have to give notice of withdrawal, but will at least earn some interest.
Not all the local banks offer all of these options.
The first point at which you will have to pay is in the banks' profit margin on the difference between the buy and sell rate quoted for currency conversion.
Usually, for amounts above R50 000, you will not receive the exchange rate quoted in the newspapers, but a market-related rate which is quoted on the spot by a currency dealer.
This rate may be better or worse than the rate quoted in the press. Normally it is a little more favourable, but it may be worse if the market is moving very quickly, and the currency dealer is trying to anticipate how rates will move, quoting you a rate worse than the average exchange rate for that day.
You will not usually be charged for opening a foreign currency bank account, bank spokesmen say, but you will pay for ad hoc withdrawals, often at quite punitive rates to deter you from using your foreign currency account for speculative purposes.
You will also be charged for the type of instrument you use to transfer your money out of your account to whatever investment vehicle you finally settle upon. The charges vary according to whether you decide to use a telegraphic transfer (TT), which is an electronic method, or an old-fashioned bankers' cheque.
Finally, if you are earning interest on the account, the banks may also take a percentage there.
The interest paid will relate to the currency you are holding. If you hold dollars, your interest rate will be related to the US interest rate paid on government bonds quoted in the London Interbank market for deposits. If you are holding pounds sterling, it will be linked to UK government rates.
For the purposes of your foreign currency allowance, the local banks tend to offer only the five major international currencies - US dollars, UK pounds, Deutschemark, Swiss francs and Japanese yen. Other currencies may be available on request.
The banks reflected here are the biggest local banks. Several foreign banks have offices in South Africa, but you may have to phone around as some, like Citibank and Chase Manhattan, said they only deal with businesses, not private clients.
STANDARD BANK
Offshore Accounts
(in Isle of Man or Jersey)
If you invest an amount less than the equivalent of #2 500 (about R21 000 when #1 = R8,40) in a call account in a currency other than pounds or US dollars, there is no initial or annual charge, but there is a quarterly maintenance fee of #50 (R420).
No interest is payable on the account.
If you invest an amount equivalent to more than #2 500 in a call account in a currency other than pounds or dollars, there is no initial or annual charge, and interest is payable at the official rate prevailing in the country of the currency of your choice.
For call accounts in pounds or dollars, the minimum balances are #1 000 or #2 500.
The pound and dollar call accounts can be operated as current accounts, in which case a cheque book is available at a fee.
Standard Bank Offshore also offers a Visa debit card for current accounts, which have no annual fee, but there is a flat #2 withdrawal charge from any Visa-linked ATM or merchant any where in the world.
Fixed-term deposit accounts are available in all major currencies with a minimum balance of #10 000 or the currency equivalent.
To transfer funds out of the deposit account within Britain costs #12,50 for a bankers' cheque and #25 for a telegraphic transfer.
To transfer funds from the pound sterling account to a destination other than Britain costs #20 for a bankers' cheque and #35 for a telegraphic transfer.
Onshore Accounts
(in South Africa)
Fixed-term deposit accounts with a minimum investment period of 30 days and a maximum of six months are offered
There are no charges on opening and closing the account but a fee of R50 a transaction is payable in the currency in which the account is held.
There is no charge for converting rands to foreign currency, but if you subsequently wish to transfer your foreign currency to another investment, Standard Bank will charge its normal transfer commission fee of 0,3 percent.
FIRST NATIONAL BANK
Onshore Accounts
FNB offers a call account with withdrawal charges at R100 a withdrawal, to deter you from using the account for speculative purposes. There is no charge for opening an account, but there is a fee to convert rands into another currency. This fee is 0,3 percent of the amount in rands, with a minimum charge of R50 and no maximum. There are no ongoing charges.
If you wish to convert your foreign currency back into rands, there is again a currency conversion fee of 0,3 percent.
To transfer the funds abroad there is a flat fee of R50 for a telegraphic transfer or bankers' draft, but no further conversion fee. If you wish to transfer, for example, dollars to a pounds sterling investment, the transfer will necessitate two transactions at R50 each.
Interest is paid on the account at the prevailing official rates of the currency in which your account is held.
NEDBANK
Offshore Accounts
Nedbank offers both a current and a deposit offshore account. The initial transfer of funds costs R75 plus VAT. There is an ongoing quarterly charge on the current account of US$15 (R75,60 with $1 = R5,04) or #10, but no ongoing charge for holding a demand or fixed-term deposit account.
The minimum periods for holding a fixed-term deposit are one, two, three, six and 12 months.
On all accounts, interest is payable on a sliding scale for amounts above certain minimums and is related to the official rates in the country of the currency held.
To transfer your foreign currency out of the account to a third party, a bankers' cheque or a telegraphic transfer costs a flat fee of $50 or #30.
ABSA BANK
Onshore Accounts
Absa's four banks - Allied Bank, United Bank, Trust Bank and Volkskas Bank - offer onshore foreign currency accounts in the form of call, notice and fixed deposit accounts.
Call accounts - interest is paid on a sliding scale depending on the Libid (London Inter-Bank Bid Rate) less one percent for amounts between $1 100 and $11 000, Libid less 0,875 percent for amounts of $11 001 to $22 000 and Libid less 0,75 percent for amounts of more than $22 001.
Notice Accounts - interest is paid at Libid less 0,625 percent, regardless of the amount invested.
Fixed Deposit Accounts - interest is paid at Libid less 0,5 percent, regardless of the amount invested.
On call accounts, a fee of R50 a withdrawal is levied.
Telegraphic transfers from any of these accounts cost 0,35 percent of the amount transferred or a minimum of R30, up to a maximum amount of R250.