Businesses
This week in Johannesburg a decision has been made by the National Treasury to reduce the controls of foreign exchange – South African companies can finally increase the amount of capital kept in offshore accounts and can welcome the idea of investing in areas that are not directly in their business arena. In a nutshell, companies are being given the freedom to explore the international market and move more money into offshore accounts and investment areas so long as they do not exceed 20% of their capital into the international world – why you may ask – well in my view the answer is simple it would have a huge repercussion on the South African economy if companies moved their full exposure abroad. In addition to this, it has been said that, without any mention of South African Reserve Bank permission, companies can utilise the forward market for hedging 75% of their exposure.
According to Razia Khan – the head of Africa Research at Standard Bank – this is a major step forward for South Africa as, based on what was seen in 2009, the inflows of offshore investment into RSA has the potential of increase the Rand gains against the Dollar. Some may say woo hoo to this news!!! Another yay factor is that SA opting for calming down or the relaxation of exchange controls aids in the avoidance of “taxing inflows into the bond market” (Macanda, 2011). Great idea, since the government has insufficient funds to intervene the foreign exchange market if needed!
So although this decision may impact negatively on the Rand in the interim, the long-term benefits seem to outweigh these costs.
Citizens
Not only does the National Treasury decision making influence businesses, but its helping the little old citizens of the country too – now citizens private investments have been bumped up to allow a R5 million investments abroad annually! You as an individual can go ahead with your international investment so long as you adhere to the central banks “strict criteria” (Khan, as cited in Macanda, 2011) for disclosure. Also Khan mentioned that the National Treasury has now eradicated all limits that were previously placed on alimony, travel and wedding payments. Money transfers have officially been made slightly easier!
Now we await more details – to be released in November – watch this space………
Reference
Macanda, P. Sharenet: Your key to investing. S. Africa further relaxes exchange controls. Accessed on 28 October 2011. Retrieved from:
