Reserve Bank news
A summary of recent circulars issued by the South African Reserve Bank regarding Exchange Control Relaxations is set out below.
Advance payments
Authorised dealers may now provide foreign exchange in respect of advance payments to cover the cost of permissible imports, other than capital goods, against the presentation of an invoice stating that payment must be made in advance.
Foreign capital allowance for private individuals (natural persons) resident in the RSA
The limit of R2 million per private individual is increased to R4 million.
Foreign direct investments outside the Common Monetary Area by South African companies
The limit of R50 million is increased to R500 million in order to encourage foreign direct investment by local companies.
Passive real estate investments (residential and commercial) are excluded from the R500 million dispensation. In addition, the prohibition on Southern African Development Community loop structures has been abolished. The policy regarding loop structures into the Common Monetary Area, however, remains in place.
In addition to the current annual reporting requirements in respect of all foreign direct investments, companies are now also required to report all future dividends declared by the approved offshore operation(s), the amounts repatriated to South Africa or alternatively, the dividend amounts retained abroad together with an indication of how such funds were utilised offshore.
Emigration allowances
The capital allowance per emigrating family unit is increased from R4 million to R8 million. Similarly, the foreign capital allowance available to a single person is also increased from R2 million to R4 million.
Single discretionary allowance
The limit for a single discretionary allowance of R500 000 is increased to R750 000.
Customer Foreign Currency accounts (C.F.C. accounts) and foreign bank accounts
The 180 day-rule is abolished. South African entities (legal persons) operating C.F.C. accounts are now permitted to retain funds in their C.F.C. accounts without the obligation to convert the funds into Rand. The current repatriation requirement remains in place.
Furthermore, South African companies are now permitted to open and operate foreign bank accounts for the accrual of funds in respect of transactions permissible in terms of the Exchange Control Rulings or a specific Exchange Control authority.
Local financial assistance to affected persons and non-residents
In order to improve access to domestic credit in the financing of bona fide foreign direct investment in South Africa or for domestic working capital requirements, restrictions on the granting of local financial assistance to affected persons have been further liberalised by the abolishment of the 3:1 ratio.
Whilst there would be no restriction on the amount that could be borrowed locally by affected persons and non-residents for use in respect of bona fide foreign direct investments in South Africa, affected persons and non-residents who will use the funds for financial transactions and/or to acquire residential property in South Africa would be restricted to the 1:1 ratio that currently applies to these transactions.
Whilst the 3:1 ratio applicable to local financial assistance in respect of affected persons has been withdrawn, the 1:1 ratio remains applicable for the acquisition of residential properties and any other financial transactions, such as portfolio investments, securities lending, hedging, repurchase agreements, etc. by non-residents and affected persons. Local financial assistance made available to emigrants remains subject to the 1:1 ratio.
For more information, contact Sonja Frank at Exceed, tel. 021 882 8140 or e-mail sonja@exceed.co.za.