Offering citizenship for economic growth - CNBC Africa

Offering citizenship for economic growth

Southern Africa

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South African citizenship does not provide enough benefits to foreign investors. PHOTO: Easy Travel

 “We see it much more as a win-win formula between global leaders who are coming from emerging markets, and between countries that are in need of foreign financing. It is a formula that allows those people to extend their reach by having a second residence of citizenship, and it is allowing countries to finance themselves at much lower cost, and to create jobs thanks to those investments,” Armand Arton, CEO and president of Arton Capital told CNBC Africa.

Countries such as Cyprus and Spain have found ways of attracting by offering citizenship in exchange for substantial investment into various sectors. Spain in particular has a legislation that gives automatic residency to foreign individuals who spend more than 500,000 euros on a property.

Arton explained that while South Africa is a growing economy, and continues to maintain relative economic and political stability, South African citizenship does not provide enough benefits to foreign investors.

South Africa’s new immigration laws, which have received harsh criticism, have also sparked fears that they could impede on easier business and job-seeking relations with the country.


(WATCH VIDEO: S.Africa's immigration laws met with criticism and confusion)

According to Arton, wealthier investors would rather vie for European citizenship, which allows them to travel within 130 to 140 visa-free countries.

Various countries have nevertheless implemented programmes to attract foreign investment using citizenship have proved successful.

“These programmes started about 30 years ago. Canada was the first country that introduced the immigrant investor programme. That was in the years when Hong Kong was about to be returned to China, and a great deal of Hong Kong businessmen invested in the Canadian economies,” Arton explaind.

“Since [then], Canada has been the leader in attracting 10,000 investors every year, which represents more than 50,000 jobs and two billion dollars in foreign investment only in Canada.”

Arton added that roughly 15 countries have imitated these programmes mainly in the US and Europe in the last 10 years, and other countries continue to open their doors to foreign investment to support real estate purchases and investment in government bonds.

This particular type of foreign investment is also an increasingly cheaper means for economies to fund themselves.

(READ MORE: S.Africa top investment destination in Africa but Nigeria close behind)

Potential for abuse of the programme is however possible in the form of tax evasion. Arton however explained that a thorough due diligence process is conducted on all individuals applying for a second residence and citizenship. 

“People have to have a very clear source of funds and no criminal record in order to be accepted in any of the jurisdictions. However, saving tax is not on the top of the list of what we call push factors,” Arton explained.

“Mainly 85 per cent of the clients are investing from China or the Middle East, where taxes are not a big issue. They’re doing it in terms of stability to having access to more countries, and to be able to send their children for better education to become global citizens. Tax is at the bottom of their priorities.”