HERMAN BEZUIDENHOUT | Beware, ‘offshore’ is no tropical holiday island paradise

In boardrooms across South Africa, one phrase keeps surfacing: “We need to go offshore.”

Sometimes it’s said with excitement about global growth. But just as often, it’s said with a sigh, driven by frustration about the local economy, politics or uncertainty about the future.

Let’s be clear: expanding internationally can be a smart, strategic move. But “South Africa is a mess” is not a business strategy. It’s a sentiment. And sentiment is a dangerous foundation on which to build cross-border structures.

I’ve seen a growing number of companies exploring such jurisdictions as Mauritius, the UAE, the UK or Europe as part of their growth plans. In the right circumstances, offshore structures absolutely make sense. They can help facilitate foreign investment, house global intellectual property, centralise treasury functions or serve as a base for non-South African operations.

But many offshore structures are being considered for the wrong reasons and without a full understanding of the cost, complexity and scrutiny that come with them.

South Africa, despite its well-known challenges, still has a sophisticated financial system

Structure must follow strategy, not fear. Before setting up an offshore company, directors should be able to answer one simple question: what specific commercial problem does this offshore structure solve that cannot be solved from South Africa?

If the honest answer is vague, “diversification”, “flexibility”, or “just in case”, then it’s time to slow down.

South Africa, despite its well-known challenges, still has a sophisticated financial system, globally connected banks, strong professional services and deep experience in international trade. From a regulatory perspective, there are actually very few South African Reserve Bank restrictions that prevent companies from trading globally, investing offshore within approved frameworks or servicing foreign clients.

In other words, most companies can pursue meaningful international growth directly from South Africa and at significantly lower cost and complexity than running a multi-jurisdictional structure.

Remember, offshore is not an escape from governance — it adds more of it. There’s a lingering perception that moving part of a business offshore somehow reduces red tape. The reality is often the opposite.

There’s a lingering perception that moving part of a business offshore somehow reduces red tape. The reality is often the opposite.

Jurisdictions such as Mauritius are no longer “light touch”. They require real economic substance: local directors, documented board decisions, proper operational presence and clear alignment between stated business activities and actual transactions. Banks in these jurisdictions conduct deep due diligence and ongoing monitoring.

At the same time, South African authorities have increased their scrutiny of offshore structures. The South African Revenue Service applies controlled-foreign-company rules, transfer pricing requirements, and anti-avoidance provisions with growing sophistication. Management and effective control are closely examined. Passive income structures receive particular attention.

Add to this the Bank’s reporting requirements for foreign direct investments and offshore assets, and it becomes clear that offshore does not mean “less oversight”. It means oversight from multiple regulators, in multiple countries, at the same time.

And then there is the cost. Setting up an offshore company is the easy part. Running it properly is where the real cost lies: corporate services providers, directors’ fees, audits, tax compliance, legal advice and banking compliance reviews. These are recurring costs, not one-off expenses.

For a business with limited international turnover, these overheads can quickly outweigh any perceived benefit. An offshore structure that was meant to support growth can become a drag on profitability and management time.

South African companies should absolutely think globally.

So when does offshore make sense? When it is clearly linked to commercial reality. For example, where a business has substantial non-South African revenue, foreign investors who require a neutral jurisdiction, or genuine operational activity in multiple regions. It makes sense when there is scale, complexity, and a clear long-term strategy that justifies the additional governance.

What it should not be is a reaction to headlines, political anxiety, or braai-side conversations about “getting money out”.

South African companies should absolutely think globally. They should diversify markets, earn foreign revenue and build international resilience. But many can do that very effectively from a South African base, using existing regulatory frameworks and well-structured cross-border solutions.

Going offshore is not a shortcut. It is a strategic tool — powerful when used for the right job, and expensive when used for the wrong one.

The real question is not “how quickly can we set up offshore?”, it is “what are we trying to achieve — and is offshore genuinely the best way to achieve it?”

If that question is answered honestly and rigorously, fewer companies will move offshore out of fear, and more will expand globally from a position of strength.

Business Times