Six costs, not one
When a South African buys a US share, the money passes through several hands. Each one takes a slice. Understanding all six lets you compare platforms properly instead of being drawn in by whichever number the marketing page chose to highlight.
| Cost | When you pay it | How visible is it? | Does it matter? |
|---|---|---|---|
| Currency conversion spread | Every time you move ZAR to USD | Hidden inside the exchange rate | Very - usually the biggest single cost |
| Brokerage commission | Every buy and every sell | Clearly stated | Moderate - matters most on small trades |
| Platform / custody fee | Monthly or annually | Stated, but easy to forget | Moderate - punishing on small balances |
| Fund TER (if buying ETFs) | Continuously, inside the price | Disclosed but never invoiced | Very - compounds over decades |
| US dividend withholding | Whenever a dividend is paid | Deducted before you see it | Moderate - halved by a W-8BEN |
| SA tax on gains | When you sell, and annually | Your responsibility to declare | Depends on your bracket |
1. The currency conversion spread - the one people miss
To buy a dollar-priced share you need dollars. Someone has to sell them to you, and they do not sell at the mid-market rate you see on Google. They sell at a slightly worse rate and keep the difference.
That difference - the spread - is a real cost, but it never appears as a fee on your statement. It is simply the gap between the rate you got and the rate that existed. Depending on the provider it can range from a fraction of a percent to comfortably over 1%, and it is charged again in reverse if you ever bring the money home.
How to check what you are really being charged
Look up the mid-market USD/ZAR rate at the moment of your conversion, then compare it to the rate you actually received. The percentage difference is your true forex cost. Do this once and you will never again choose a platform on commission alone.
Two practical consequences. First, convert less often rather than more - each round trip is a fresh spread. Second, if you are investing a modest amount monthly, the forex cost alone may be a strong argument for buying a JSE-listed global ETF in rand instead, where no conversion happens at all.
2. Brokerage commission
The fee to execute a trade. Some international brokers charge a flat amount per order, some charge per share, and some advertise zero commission.
Treat zero commission with healthy scepticism. It does not mean free - it means the broker earns elsewhere: on the forex spread, on interest from your uninvested cash balance, on inactivity or withdrawal fees, or by selling order flow. A platform charging a small explicit commission and a tight forex spread can easily be cheaper overall than a "free" one with a wide spread.
Commission matters most when your trades are small. A fixed fee of a few dollars is trivial on a large purchase and brutal on a R500 one. If you invest small amounts regularly, favour platforms with percentage-based or genuinely fractional pricing.
3. Platform and custody fees
Some brokers charge a monthly account fee, an annual custody fee for safekeeping your shares, or an inactivity fee if you go quiet for a period. Individually these look small. On a small balance they are not.
A flat fee of a few dollars a month is a rounding error on R500,000 and a serious drag on R5,000. When comparing platforms, always express fixed fees as a percentage of the balance you will actually hold, not the balance in their example.
4. The fund's TER, if you buy ETFs
If you buy a fund rather than individual shares, the fund manager takes an annual slice called the Total Expense Ratio. You never receive an invoice - it is deducted continuously from the fund's assets, so it shows up as very slightly lower performance.
This is the cost that most deserves your attention, because it recurs every single year and compounds against you. Broad US and global index trackers commonly sit in the low tenths of a percent. Actively managed offshore funds and South African feeder funds frequently charge many times more.
Why a percentage point matters more than it sounds
Costs compound exactly the way returns do, just in the wrong direction. Paying 1.5% a year instead of 0.3% means giving up 1.2% of your balance annually - and giving up all the growth that 1.2% would have earned in every year that followed. Over an investing lifetime, that gap can consume a meaningful fraction of your final outcome. Unlike returns, it is entirely within your control. See how compounding works for the mechanics.
5. US dividend withholding tax
When a US company pays a dividend, the US takes its cut before the money reaches you. The default rate for foreign investors is 30%. South Africa has a tax treaty with the US that reduces this to 15% - but only if you have submitted a W-8BEN form to your broker certifying that you are not a US person.
The form takes about two minutes during account signup. Failing to complete it means handing over double the tax on every dividend, forever, for nothing. It is the single highest-return two minutes in this whole process.
You may be able to claim a foreign tax credit for the withheld amount against your South African liability, which is another reason to keep every dividend statement.
6. South African tax on your gains
Owning shares offshore does not move you outside SARS's reach. South African tax residents are taxed on worldwide income and gains. When you sell, capital gains tax applies, calculated in rand using the exchange rates at purchase and at sale - which means currency movement affects your tax bill, not just your return. Foreign dividends are also taxable here, with credit generally available for tax already withheld abroad.
None of this is a reason to avoid offshore investing. It is a reason to keep clean records from your very first trade. We cover the detail in how investment tax works in South Africa.
Putting it together: a worked comparison
Consider someone investing R2,000 a month into global markets. The illustration below is simplified and uses assumed figures, but it shows where the money goes.
| Cost element | JSE-listed global ETF | Direct offshore broker |
|---|---|---|
| Currency conversion | None | Charged on every monthly transfer |
| Trading cost | Local brokerage, often percentage-based | Flat or per-share fee - proportionally heavy at R2,000 |
| Ongoing platform fee | Often small or none | May apply monthly regardless of balance |
| Fund TER | Low, for a broad index tracker | Low if buying US-listed index ETFs; none if buying single shares |
| Tax wrapper available | Can sit in a TFSA - growth and dividends tax-free | No TFSA option |
| Practical verdict | At R2,000 a month, the local ETF route usually wins on cost. The offshore broker earns its keep at larger amounts, or when you specifically want to own individual US companies. | |
Five ways to pay less
- Convert currency less often. Batch a few months of contributions into one conversion rather than paying a spread twelve times a year - while still investing regularly enough to stay consistent.
- Submit your W-8BEN immediately. Halves your dividend tax for two minutes of effort.
- Use your tax-free allowance first. A global ETF inside a TFSA removes SA tax on growth and dividends entirely.
- Compare TERs before you compare commissions. The annual fee will outweigh the trading fee many times over across a long holding period.
- Trade less. Every round trip pays commission, spread and potentially tax. Buying and holding is not only a strategy - it is a cost-reduction technique. Our list of common beginner mistakes covers why overtrading hurts.
The bottom line
You cannot control what the market returns. You can control almost exactly what you pay to participate in it. Work out your total annual cost as a single percentage - forex, brokerage, platform and TER combined - and use that one number to compare your options. Anything under about half a percent a year for broad global exposure is doing well. Anything over two percent deserves a hard look at what you are getting for it.
Keep an eye on the whole picture
EZvest gives you one place to track what you hold, follow the news moving global markets, and work through the Learning Hub lessons on fees, funds and compounding. FinBot can break down any charge or term you run into - as an educational tool, with your decisions staying entirely yours.
Frequently asked questions
What is the biggest hidden cost of buying US shares from South Africa?
The currency conversion spread. Converting rand to dollars typically costs somewhere between a fraction of a percent and well over 1% of the amount, depending on the provider, and it is charged inside the exchange rate rather than as a visible line item. On a large transfer this usually dwarfs the trading commission.
Are zero-commission brokers actually free?
No. A broker charging no commission still earns from the forex spread, from interest on uninvested cash, from custody or inactivity fees, or from routing your order flow. Zero commission means the cost has moved somewhere less visible, not that it has disappeared.
How much tax is withheld on US dividends?
The default US withholding rate is 30%. Completing a W-8BEN form claims the South Africa treaty rate of 15%, which is deducted at source before the dividend reaches you. You may be able to claim a foreign tax credit against your SA liability, so keep the records.
Is a JSE-listed global ETF cheaper than an offshore broker?
For small, regular amounts, usually yes. You avoid currency conversion entirely, pay ordinary local brokerage, and the ETF's annual fee is often a fraction of a percent. Direct offshore investing becomes more cost-competitive at larger amounts where fixed costs are spread thinner.
Do costs really matter that much over the long term?
Yes, more than almost anything else you control. A one percentage point annual difference in total costs compounds into a very large gap over twenty or thirty years, and unlike returns, costs are guaranteed. Reducing them is the closest thing to a free improvement in your results.
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Launch EZvest - it's free to start ->Educational content only. This article is general information, not financial advice. Fee ranges are illustrative and vary widely between providers and over time - always confirm current pricing directly with the platform before opening an account. Consult a licensed financial professional before making decisions. How we research and review these guides.