Chapter

SOUTH AFRICA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: September 15, 1973.
Exchange Arrangement
CurrencyThe currency of South Africa is the South African rand.
Other legal tenderCertain gold coins, including Krugerrands, are legal tender.
Exchange rate structureUnitary.
Classification
Independently floatingThe exchange rate of the rand is determined in the foreign exchange market. The authorities of South Africa do not maintain margins with respect to exchange transactions, but may execute transactions in the exchange market, which are typically dollar/rand transactions.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketSubject to certain limitations, authorized dealers are permitted to conduct forward exchange operations, including cover for transactions by nonresidents. They are also permitted to provide forward exchange cover in any foreign currency to residents for any firm and ascertained foreign exchange commitments and accruals due to, or by nonresidents arising from, authorized trade and nontrade transactions. Forward exchange contracts may cover the entire period of the outstanding commitments or accruals. Subject to certain limitations, forward exchange cover may also be provided to nonresidents. Gold mining companies and houses may sell forward anticipated receipts of their future gold sales.
Official cover of forward operationsThe South African Reserve Bank (SARB) no longer provides long-term forward cover. The SARB may, however, favorably entertain requests to buy dollars outright forward. The SARB participates only in the short-term (maturities not exceeding 12 months) forward market at its own initiative and on prices quoted in the market by authorized dealers.
Arrangements for Payments and Receipts
Prescription of currency requirementsAll countries outside the CMA constitute the nonresident area. The rand is legal tender in Lesotho and Namibia but not in Swaziland. Settlements by or to residents of the CMA with the nonresident area may be made in rand to and from a nonresident account and in any foreign currency (except the currencies of Lesotho, Namibia, and Swaziland). Lilangeni banknotes issued by Swaziland, loti banknotes issued by Lesotho, and Namibia dollar banknotes issued by Namibia are freely convertible into rand at par, but they are not legal tender in South Africa.
Payment arrangements
Regional arrangementsSouth Africa is part of the CMA. Payments within the CMA are unrestricted.
Administration of controlExchange licensing is the responsibility of the Treasury, which has delegated this authority to the SARB; in turn, the SARB has permitted dealers to deal with most transactions without prior reference to the SARB.
International security restrictions
In accordance with UN sanctionsSouth Africa maintains restrictions on current payments and transfers to Iraq.
Payment arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeResidents of South Africa may purchase, hold, and sell gold coins in South Africa for numismatic purposes and investment, but only monetary authorities, authorized dealers, registered gold producers, and authorized industrial and professional users are allowed to purchase, hold, or sell gold in any form other than jewelry. Gold producers may elect to sell their total output to approved counterparties, provided the SARB has given the necessary exemption from the relevant exchange control regulations. This includes sales to foreign counterparties. The current exchange control regulations pertaining to the repatriation of export proceeds remain applicable to gold exports. The mint strikes gold coins and the Krugerrand, which are legal tender, without a face value, and these are made available in limited numbers to the local market.
Controls on external tradeAll exports of gold must be approved in advance by the SARB. Authorized dealers have been permitted by the SARB to approve exports of jewelry constituting the personal effects of a traveler up to a value of R 50,000 (subject to a written declaration that the jewelry will be brought back to South Africa on the traveler’s return); and for exports of gold jewelry by manufacturing jewelers, subject to a written declaration that the articles are in fully manufactured form and that the gold content of each does not exceed 85% of the selling price to the ultimate consignee. Furthermore, after approval by the SARB, residents are allowed to export currency coins, including certain gold coins, for sale to numismatists.
Controls on exports and imports of banknotes
On exports
Domestic currencyBanknotes up to R 5,000 may be exported, but this amount is not regarded as part of the basic travel allowance. The limitation does not apply to migrant workers returning to neighboring countries, who are permitted to take with them reasonable amounts in banknotes. There are no limitations on the exportation of domestic currency to Lesotho, Namibia, and Swaziland. Foreign visitors leaving South Africa may take with them up to R 5,000 in SARB banknotes.



South African banknotes repatriated from Angola, Botswana, Democratic Republic of Congo, Malawi, Mozambique, Seychelles, Tanzania, Zambia, and Zimbabwe may be remitted upon providing documentary evidence that they were not exported from South Africa in contravention of the exchange control regulations. The consignment of banknotes must be accompanied by the confirmation of the repatriating bank that the banknotes were acquired from bona fide travelers from South Africa in amounts not exceeding R 5,000 per capita.
Foreign currencyResidents and contract workers leaving South Africa for destinations outside the CMA may take out their allowance in foreign banknotes. Foreign visitors leaving South Africa may take with them any amount of foreign banknotes brought into the country or obtained through the disposal of instruments of exchange brought into and converted in South Africa.
On imports
Domestic currencyThe limit on banknotes that may be imported from countries outside the CMA is R 5,000. There are no limitations on the importation of domestic currency from Lesotho, Namibia, and Swaziland.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyNatural persons may hold foreign currency deposits with authorized dealers. The requirement to complete forms A and E in respect of sales and purchases of foreign exchange is R 50,000. The R 750,000 that natural persons may invest abroad may also be held in a domestic currency account.
Held abroadApproval is granted based on the merit of the application, and in most circumstances only if it can be demonstrated that the management of trade receipts and payments can be facilitated. South African natural persons may invest abroad up to an amount of R 750,000 and may retain abroad foreign-earned income. No prior approval is required to open foreign bank accounts for these purposes.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedAuthorized dealers are required to open separate nonresident accounts on behalf of nonresident clients in order to distinguish between normal clearing accounts and foreign exchange trading accounts. The aim of this requirement is to isolate these transactions for monitoring purposes and does not affect the transferability of funds. Foreign currency accounts may be opened for nonresidents and the transferability of the funds is not restricted. The requirement to complete forms A and E for both sales and purchases of foreign exchange is R 50,000.
Domestic currency accountsThese accounts may be credited with all authorized payments by residents, with the proceeds of sales of foreign currency to authorized dealers, and with payments from other nonresident accounts. They may be debited for payments to CMA residents for any purpose (other than loans); for payments to nonresidents for any purpose, by transfer to a local nonresident account or for remittance to any country outside the CMA; for the cost of purchases of any foreign currency; and for payments to account holders residing in South Africa for short periods.
Convertible into foreign currencyYes.
Blocked accountsThese accounts are opened for emigrants from the CMA and are subject to exchange control restrictions. Cash or proceeds from any other South African asset held at the time of departure and subsequently sold must be credited to this type of account. These funds may not be transferred abroad or to another emigrant blocked account in South Africa but must be retained on deposit with an authorized dealer and used within certain limits for the holder’s living expenses while visiting South Africa, for other specified payments to residents, or for investment in any locally quoted securities (such securities may not, however, be exported and sold abroad).
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsPayments are allowed before the date of shipment or dispatch, except for capital goods imports. Authorized dealers may permit, without the SARB’s approval, advance payment of up to 33.3% of the ex-factory cost of capital goods if suppliers require it or if it is normal in the trade concerned.
Documentation requirements for release of foreign exchange for importsImporters are automatically granted foreign exchange to pay for current imports upon presenting to their bank the necessary transport and consignment documents (proof of importation) and an import permit when required.
Import licenses and other nontariff measures
Positive listImports that do not require a permit include all goods from Botswana, Lesotho, Malawi, Namibia, Swaziland, and Zimbabwe that are grown, produced, or manufactured in these countries, with the exception of a limited range of agricultural products from Malawi and Zimbabwe.
Negative listThe negative list includes all used goods, including waste and scrap; fish, crustaceans, and mollusks; dairy products; dried fruit; black tea; certain vegetables and agricultural products; wines; mineral fuels; radioactive chemicals; new pneumatic tires; gold; certain minerals; firearms; gambling machines; ozone-depleting substances; and footwear and footwear components. All importers requiring import permits for trade or manufacturing purposes must be registered with the Sub-directorate of Import and Export Control. The permits are valid for imports from any country.
Licenses with quotasImport quotas apply to certain agricultural and a number of manufactured products, including clothing and textiles imported from Zimbabwe supported with a Quota and Origin Certificate issued by the Ministry of Industry and Commerce of Zimbabwe.
Import taxes and/or tariffsTariff rates range up to 69%. Effective January 4, 1999, a 14% VAT on imports from Botswana, Lesotho, Namibia, and Swaziland was introduced.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsUnless otherwise permitted, all export proceeds must be remitted to South Africa within 30 days of accrual. Exporters may retain export proceeds for 180 days after accrual in customer foreign currency accounts with authorized dealers.
Surrender requirementsUnless otherwise permitted, all export proceeds must be offered for sale within six months of the date of shipment or 30 days of the date of accrual, whichever is sooner. Except for exports made on a cash-on-delivery basis or those for which the full proceeds are received in advance, exporters are permitted to cover forward their export proceeds.
Financing requirementsAuthorized dealers may permit exporters to grant credit for up to 12 months, provided the credit is necessary in that particular trade or needed to protect an existing export market or capture a new one.
Documentation requirementsAll exports over R 50,000 must be supported by a declaration, irrespective of the country of destination of the goods.
Export licenses
Without quotasCertain agricultural and manufactured goods exported outside the SACU require export permits. In addition to an export permit, military equipment, firearms, and ammunition require an export license issued by the Department of Defense.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersMost limits have been removed. Documentary evidence must be produced at the time of applying for foreign currency.
Trade-related payments
Indicative limits/bona fide testAuthorized dealers may permit the transfer of commissions against documentary evidence confirming the amount involved, provided the rate of commission is normal in the particular trade.
Investment-related payments
Prior approvalPrior approval is required for the payment of amortization of loans or depreciation of direct investments.
Payments for travel
Quantitative limitsSouth African residents traveling abroad for either business or holiday had been allowed R 100,000 for each person 12 years and older, and R 30,000 for each child under 12 years, for a calendar year, without any daily limit, irrespective of the country of destination. Effective February 23, 1999, these limits were increased to R 120,000 and R 35,000, respectively, and further, on February 23, 2000, to R 130,000 and R 40,000, respectively. Corporations qualify for a global travel allowance of R 2,000,000 for a calendar year.
Indicative limits/bona fide testExchange allowances in excess of the above limits may be provided with the approval of the SARB.
Personal payments
Quantitative limitsApproval was required for living expenses for students of amounts exceeding R 100,000 a year, or R 200,000 if the student is accompanied by a spouse. On February 23, 1999, these limits were raised to R 120,000 and R 240,000, respectively. On February 23, 2000, the limits were further increased to R 130,000 and R 260,000, respectively. Until February 23, 1999, the student holiday allowance was R 30,000 a year, which was then raised to R 35,000, or R 70,000 if accompanied by a spouse, and further, on February 23, 2000, to R 40,000, or R 80,000 if accompanied by a spouse. Also, prior approval is required for amounts exceeding R 6,000 (previously R 4,000) a month for a receiving family. There are no limits set for alimony payments, but a court order is required. Authorized dealers may effect maintenance transfers at a rate not exceeding R 6,000 for a receiving family unit a month, provided the proposed beneficiaries are either the father, mother, brother, or sister of the applicant and are in necessitous circumstances.
Credit card use abroad
Prior approvalApproval is not required in respect of travel expenditures.
Quantitative limitsExpenditure may not exceed 100% of the corresponding allowance.
Other payments
Prior approvalAuthorized dealers may permit technical service fees, legal fees, and court costs incurred outside the CMA against the production of documentary evidence confirming the amount involved. Authorized dealers may grant approval for royalty payments, provided the Department of Trade and Industry has approved the relevant royalty agreement. Authorized dealers may also permit the remittance of profits and dividends, provided it does not involve excessive use of local credit facilities. Income earned from securities held by nonresidents is freely transferable to their country of residence.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsSouth African residents (private individuals) earning income abroad from any source other than merchandise exports may retain those funds abroad. Corporate entities are required to remit earnings within 30 days of accrual. Entities may retain the proceeds of services rendered for 180 days after accrual in customer foreign currency accounts with authorized dealers.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Sale or issue locally by nonresidentsOnly the issue of securities by nonresidents requires prior exchange control approval, which is not normally granted.
Purchase abroad by residentsSuch purchases by resident individuals are allowed within the R 750,000 foreign investment limit. Resident institutions may acquire investments as part of their approved portfolio investments abroad.
Sale or issue abroad by residentsApproval is required. Servicing should be undertaken from foreign sources if the funds are employed abroad, or from domestic sources if the funds were transferred to South Africa.
Bonds or other debt securitiesThe same regulations apply as for shares or other securities of a participating nature.
On money market instrumentsThe same regulations apply as for shares or other securities of a participating nature.
On collective investment securities
Purchase abroad by residentsSuch purchases by resident individuals are allowed within the R 750,000 foreign investment limit.
Controls on derivatives and other instruments
Purchase locally by nonresidentsNonresidents may freely purchase derivative instruments, options, and futures on the local formal market (SAFEX), but over-the-counter transactions require prior approval.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Controls on credit operations
Commercial credits
By residents to nonresidentsExport credits may be granted for up to six months. Banks may in certain circumstances allow a further extension of six months. Longer-term credit requires exchange control approval. In respect of services, payment has to be received under the terms of the contract between the parties within a reasonable period after rendering the service.
Financial credits
By residents to nonresidentsFinancial credits, such as loans, may not be extended without prior approval. However, nonresident wholly owned subsidiaries may borrow locally up to 100% of the total shareholders’ investment (i.e., the paid-up equity capital; preference shares; undistributed profits; shareholders’ loans from abroad; and, in certain instances, the hard core of shareholders’ trade credit). The ability to borrow locally, which is generally granted, increases with the size of local participation by a set formula.
To residents from nonresidentsPrior approval, which is generally granted, is required to ensure that the repayment and servicing of loans do not disrupt the balance of payments and that the level of interest rates paid is reasonable in terms of prevailing international rates. Firms are allowed to borrow abroad using their South African balance sheet as collateral in cases where the investment required exceeds the R 50 million limit (R 250 million in respect of SADC). Ten percent of the borrowing from abroad may be used for outward direct investments.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsGuarantees or sureties for financial loans require approval but not for trade transactions. Performance bonds may be issued.
Controls on direct investment
Outward direct investmentExchange control approval is required. Requests by companies are considered in light of national interest, such as the benefit to South Africa’s international reserves by, for example, generating exports of goods and services. Companies may be allowed to transfer up to R 50 million to finance approved investments abroad; and up to R 250 million in SADC countries other than Namibia, Swaziland, and Lesotho, where funds already flow freely. Ten percent of the borrowing from abroad may be used to finance outward direct investments.



Individuals over 18 years of age may invest up to R 750,000 overseas or in a foreign currency account in South Africa, provided they obtain a tax clearance certificate from the South African Revenue Service. There are no limits on the type of investment and no requirement to advise the authorities of how the funds are used. Income earned abroad and capital introduced into the Republic on or after July 1, 1997 by private individual residents in South Africa may be retransferred abroad, provided the authorized dealer concerned is satisfied that the income and/or capital had previously been converted to rand, by viewing documentary evidence confirming the amounts involved.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase abroad by residentsSuch purchases by resident individuals are allowed within the R 750,000 foreign investment limit. Other purchases require prior exchange control approval.
Controls on personal capital movements
Loans
By residents to nonresidentsAuthorized dealers may allow the transfer of loans within a limit of R 20,000 an applicant during a calendar year. Larger loans by residents to nonresidents are generally not permitted.
To residents from nonresidentsPrior approval, which is generally granted, is required to ensure that the repayment and servicing of the loan do not disrupt the balance of payments and that the level of interest paid is reasonable in terms of prevailing international rates.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsAuthorized dealers may allow the transfer of monetary gifts, including loans referred to above, within a limit of R 20,000 an applicant during a calendar year. Cash bequests and the cash proceeds of legacies and distributions from estates may be remitted abroad.
Settlement of debts abroad by immigrantsAuthorized dealers may provide immigrants with exchange to repay loans received in their previous country of domicile for the specific purpose of financing their relocation to South Africa, provided documentary evidence of the debt is available and the immigrant is not in possession of foreign currency to repay the debt.
Transfer of assets
Transfer abroad by emigrantsEmigrants are limited to a onetime total of R 400,000 a family or R 200,000 an individual, but this must include any previous investments overseas. All other assets remain blocked in South Africa. The emigrant is subsequently able to repatriate the annual income from those blocked assets, but is prohibited from exiting the assets, either by sale to South African residents or by asset swaps with either a foreign or South African counterpart. Authorized dealers may also authorize the export of any household and personal effects, motor vehicles, caravans, trailers, motorcycles, stamps, and coins (excluding coins that are legal tender in the Republic) for a family unit or single person emigrating, within the overall insured value of R 1 million.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadAll borrowing abroad by residents requires exchange control approval. Banks may contract short-term working capital loans and short-term trade finance, but all medium-term and long-term commitments require exchange control approval.
Maintenance of accounts abroadBanks may open nostro accounts at their discretion.
Lending to nonresidents (financial or commercial credits)Banks may lend up to R 20,000, provided that the total credit made available to an individual from any source does not exceed this amount. Exchange control approval is required for facilities exceeding this amount. Foreign investors are allowed to borrow domestically an amount of rand equal to the value of the foreign exchange they brought into South Africa.
Lending locally in foreign exchangeYes.
Purchase of locally issued securities denominated in foreign exchangeThere are no securities denominated in foreign exchange in South Africa.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsReserve requirements on all deposit accounts held by residents or nonresidents and denominated in either rand or foreign exchange are 2.5% of total deposit liabilities, reduced with specific items.
Liquid asset requirementsThe requirement is 5% of adjusted total liabilities.
Investment regulationsInvestment in immovable property and shares and loans or advances to certain subsidiaries are limited to 100% of capital plus reserves.
Abroad by banksPrior approval of the Registrar of Banks and Exchange Control is required.
In banks by nonresidentsNo approval is required if the investment is less than 15% of the bank’s issued capital.
Open foreign exchange position limitsThe limit is 15% of net qualifying capital plus reserves.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidents and on portfolio invested abroadYes.
Limits (max.) on portfolio invested abroadOn outward portfolio investment, the exchange control authority may authorize up to 15% of total assets for each qualifying institution (i.e., insurance companies, pension funds, and fund managers) to be invested abroad by way of an asset swap. Subject to the overall limit of 15% of total assets, long-term insurers and pension funds were eligible to apply for authorization to avail themselves of foreign currency transfers of up to 10% (before February 23, 2000, 5%) of the net inflow of funds for the calendar year 1999, inclusive of SADC countries.
Other controls imposed by securities lawsNo.
Changes During 1999
Imports and import paymentsJanuary 4. A 14% VAT on imports from Botswana, Lesotho, Namibia, and Swaziland was introduced.
Payments for invisible transactions and current transfersFebruary 23. The limit on allowances for living expenses of students abroad was increased to R 120,000 a year, and if the student is accompanied by a spouse to R 240,000 a year. The student holiday allowance was increased to R 35,000, and if the student is accompanied by a spouse, to R 70,000. The limit on travel allowances was set at R 120,000 an adult, and R 35,000 a child under 12 a calendar year.
Capital transactions
Provisions specific to institutional investorsFebruary 23. On outward portfolio investment, the exchange control authority may authorize up to 15% of total South African assets for each qualifying institution to be invested abroad by way of an asset swap. Subject to the overall limit of 15% of total South African assets, long-term insurers, pension funds, and unit trusts through unit trust management companies were eligible to apply for authorization to avail themselves of foreign currency transfers of up to 5% of the net inflow of funds for the calendar year 1998, and an additional 10% in securities listed on stock exchanges in SADC countries.
Changes During 2000
Payments for invisible transactions and current transfersFebruary 23. The limit on allowances for living expenses of students abroad were increased to R 130,000 a year (R 260,000 if accompanied by the spouse). The student holiday allowance was raised to R 40,000 (R 80,000 if accompanied by the spouse).



February 23. The limits for travel were increased to R 130,000 for an adult and R 40,000 for a child under 12.
Capital transactions
Provisions specific to institutional investorsFebruary 23. The limit on outward portfolio investment was changed to 15% and based on all assets, from solely South African assets. Unit trust management companies no longer qualify for this treatment. Foreign currency transfers are allowed up to 10% of the net inflow of funds (previously 5%), inclusive of SADC countries.

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