Annual Report on Exchange Arrangements and Exchange Restrictions 2005


International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of December 31, 2004)

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 the Krugerrand, are legal tender.
Exchange rate structureUnitary.
Independently floatingThe exchange rate of the rand is determined by demand and supply in the foreign exchange market.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketADs are permitted to conduct forward exchange operations, including cover for transactions by nonresidents (although this is subject to certain limitations). 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 from nonresidents arising from authorized trade and nontrade transactions. Forward exchange contracts may cover the entire period of the outstanding commitments or accruals.
Official cover of forward operationsThe South African Reserve Bank (SARB) does not participate in the provision of forward cover. For the purpose of managing domestic money market liquidity, it may conduct short-term foreign exchange swaps with ADs.
Arrangements for Payments and Receipts
Prescription of currency requirementsAll countries outside the CMA constitute the nonresident area. The rand is legal tender in Lesotho, Namibia, and 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.
Controls on the use of domestic currencyThe rand may not be used in any foreign exchange transaction, except as described above.
For current transactions and paymentsYes.
For capital transactions
Transactions in capital and money market instrumentsYes.
Transactions in derivatives and other instrumentsYes.
Credit operationsYes.
Payments arrangements
Regional arrangementsSouth Africa is a member 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 ADs in foreign exchange 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 and on the transfer of funds to the Taliban in accordance with UN Security Council resolutions.
Payments 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, ADs, 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. ADs are permitted by the SARB to approve exports of jewelry constituting the personal effects of a traveler (subject to a written declaration that the jewelry will be brought back to South Africa on the traveler’s return). Exports of gold jewelry by manufacturing jewelers are 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, the Democratic Republic of the Congo, Malawi, Mauritius, Mozambique, Tanzania, Zambia, and Zimbabwe may be remitted upon submission of 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 a traveler.
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 domesticallySubject to approval, natural persons may hold up to the equivalent of R 750,000 in foreign currency deposits with ADs.
Held abroadYes.
Approval requiredApproval 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 held abroadNo.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedADs are required to open separate accounts on behalf of nonresident clients in order to distinguish between normal clearing accounts and foreign exchange trading accounts. This requirement does not affect the transferability of funds.
Approval requiredForeign currency accounts may be opened for nonresidents, and funds in these accounts may be transferred abroad without restriction.
Domestic currency accountsThese accounts may be credited with all authorized payments by residents, with the proceeds of sales of foreign currency to ADs, 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; for transfer to a local nonresident account or for remittance to any country outside the CMA; for payments of 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 AD 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 may not be made before the date of shipment or dispatch without prior SARB approval, except for imports of capital goods. ADs 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 Subdirectorate 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%. A 14% VAT is levied on imports from Botswana, Lesotho, Namibia, and Swaziland.
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 ADs.
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 requirementsADs 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 requirements.All exports over R 50,000 must be supported by a declaration, irrespective of their country of destination.
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 testADs 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 business or holiday are allowed R 160,000 a calendar year for each person 12 years or older, and R 50,000 for each child under 12 years, without any daily limit, irrespective of the country of destination. Corporations qualify for a global travel allowance of R 2 million 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 limitsThe limit on living expenses for a student is R 160,000 a year and R 320,000 if accompanied by a spouse; the student holiday allowance is R 50,000 and up to R 100,000 if accompanied by a spouse. The limit on alimony payment with a court order is R 9,000 a month; and ADs may effect transfers for family maintenance purposes at a rate not exceeding R 9,000 a month a family, provided the proposed beneficiaries are either the father, mother, brother, or sister of the applicant and are in necessitous circumstances. Prior SARB approval is required for amounts exceeding these limits.
Credit card use abroad
Prior approvalApproval is not required with respect to travel expenditures.
Quantitative limitsExpenditure may not exceed 100% of the corresponding allowance.
Other payments
Prior approvalADs may permit remittances of technical service fees, legal fees, and court costs incurred outside the CMA against the production of documentary evidence confirming the amount involved. ADs may grant approval for royalty payments, provided the Department of Trade and Industry has approved the relevant royalty agreement. ADs 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 these funds abroad. Corporate entities are required to remit earnings to South Africa within 30 days of accrual. Entities may retain the proceeds of services rendered for 180 days after accrual in the customer’s foreign currency accounts with ADs.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Sale or issue locally by nonresidentsEffective September 17, 2004, securities issued by foreign companies, governments, and institutions are allowed to be listed on the Bond Exchange South Africa and JSE Securities Exchange South Africa. Previously, the issue of securities by nonresidents required prior exchange control approval, which was not normally granted.
Purchase abroad by residentsPurchases by resident individuals are allowed within the R 750,000 foreign investment limit.
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 regulations governing shares or other securities of a participating nature apply.
Purchase abroad by residentsEffective October 26, 2004, residents are allowed to invest in foreign instruments listed on South African exchanges.
On money market instrumentsThe regulations governing shares or other securities of a participating nature apply.
On collective investment securities
Purchase abroad by residentsPurchases 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. With respect to 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, effective February 18, 2004, nonresident wholly owned subsidiaries may borrow locally up to 300% (previously, 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). To finance a foreign direct investment into South Africa, nonresidents are allowed to borrow up to 300% of the rand value of the funds originating from abroad and invested locally. This does not apply to emigrants or to the acquisition of residential properties by nonresidents or affected persons, or any other financial transactions, such as portfolio investments by nonresidents, securities lending, hedging, or repurchase agreements. 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. Effective October 26, 2004, firms may borrow abroad to finance approved offshore investments using their South African balance sheets as collateral.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsGuarantees or sureties for financial loans require approval but not those for trade transactions. Performance bonds may be issued.
Controls on direct investment
Outward direct investmentEffective October 26, 2004, limits on foreign direct investments by South African corporates are abolished. Exchange control approval is required. Requests by corporations 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. Previously, domestic corporations could transfer up to R 2 billion from South Africa for each new and approved investment in Africa, including SADC countries, provided a long-term benefit to South Africa was demonstrated. For investments outside Africa, domestic corporations could transfer up to R 1 billion for each approved new investment abroad, subject to the same criteria. Consideration was also given to requests from domestic corporations to utilize their local cash holdings to finance up to 20% of the excess costs of the new investment when the overall cost of the investment exceeds the respective limits. The remainder was financed through foreign borrowing, the terms of which must be disclosed to the SARB.
The SARB reserves the right to intervene in capital outflows for very large foreign investments in order to manage any potential impact on the foreign exchange market.
With regard to foreign investments authorized before October 26, 2004, corporations may utilize their domestic resources to repay offshore loans raised after February 18, 2004, to finance or partly finance new approved investments. Such transfers are, however, limited to the greater of R 1 billion (or R 2 billion in the case of investments outside Africa) or 20% of the total outstanding loan capital per investment in any given year, provided that, during the first two years of the loan’s term, total funds transferred from South Africa do not exceed R 2 billion for each new investment, or R 1 billion for investments outside Africa.
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 restrictions on the type of investment or how the funds are used. Income earned abroad and own foreign capital introduced into South Africa on or after July 1, 1997, by private individual residents in South Africa may be retransferred abroad, provided the AD concerned is satisfied, by viewing documentary evidence confirming the amounts involved, that the income and/or capital had previously been converted to rand.
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 transactions
By residents to nonresidentsResidents may lend to nonresidents through ADs up to R 30,000 a 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 nonresidentsADs may allow the transfer of monetary gifts, including loans referred to above, within a limit of R 30,000 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 immigrantsADs may provide immigrants with foreign 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 may transfer up to R 1.5 million a family unit or R 750,000 an individual, inclusive of any assets previously transferred abroad. Emigrants are also allowed to transfer abroad funds in excess of the aforementioned limits, subject to a transfer tax of 10% of the amount in excess of the limit. All other assets remain blocked in South Africa. The emigrant may subsequently repatriate the annual income from those blocked assets, but is prohibited from disposing of the assets, either by sale to South African residents or by asset swaps with either a foreign or a South African counterpart. ADs may also authorize the export of household and personal effects, motor vehicles, caravans, trailers, motorcycles, stamps, and coins (excluding coins that are legal tender in South Africa) 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 up to 100% or 300% of rand equivalent to the value of the foreign exchange they brought into South Africa depending on the type of investment.
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, adjusted with specific provisions.
Liquid asset requirementsThe requirement is 5% of total liabilities, adjusted with specific provisions.
Investment regulationsInvestments in immovable property and shares and loans or advances to certain subsidiaries of the bank 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 shareholding is less than 15% of the bank’s issued capital.
Open foreign exchange position limitsThe limit is 10% of net qualifying capital plus reserves, for both resident and nonresident assets and liabilities.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadLong-term insurers, retirement funds, and investment managers registered as institutional investors for exchange control purposes may transfer up to 15% of their total retail assets and, in the case of collective investment management companies, up to 20% of their total retail assets under management, to acquire foreign portfolio investments.
Other controls imposed by securities lawsNo.
Changes During 2004
Capital transactions
Controls on capital and money market instrumentsSeptember 17. Securities issued by foreign companies, institutions, and governments were allowed to be listed on the Bond Exchange South Africa and JSE Securities Exchange South Africa.
October 26. Residents were allowed to invest in foreign instruments listed on South African exchanges.
Controls on credit operationsFebruary 18. The limit on local borrowing by nonresident wholly owned subsidiaries was raised to 300% from 100% of the total shareholders’ investment.
October 26. Firms were permitted to borrow abroad to finance approved offshore investments using their South African balance sheets as collateral.
Controls on direct investmentOctober 26. Limits on foreign direct investments by South African corporates were abolished.

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