Cape Town - Foreign exchange control rules will be simplified with individuals being allowed to receive a single R5 million foreign investment allowance per year, the National Treasury said.
This follows announcements made by the Minister of Finance Pravin Gordhan in his Medium Term Budget Policy Statement on Tuesday on investment and prudential regulatory changes, which are aimed at improving investment into South Africa.
The annual R4 million foreign investment allowance for individuals and the R1 million current single discretionary allowance would now be consolidated into a single annual R5 million foreign-investment allowance.
Other current limits applicable to individuals such as alimony, wedding and travel allowances, would fall away.
Further, in a bid to eliminate the bias against residents compared to non-residents, the Reserve Bank would also consider investments by residents and estates, for applications in excess of the R5 million allowance, subject to strict criteria related to appropriate disclosure requirements on foreign assets and income, tax compliance and market conditions.
In an attempt to lower trade barriers companies would be allowed to buy forward cover of up to 75% of their budgeted import commitments or export accruals of the coming financial year, without having to make an application to the Reserve Bank.
"Advance payments for capital goods will now be allowed for up to 50% of ex-factory cost of goods to be imported from the current 33.3%.
"Furthermore, authorised dealers will be allowed to extend previously approved guarantees. Regulations to enable more modern cross-border payments will also be implemented, for example on internet payments," said the National Treasury
Businesses would also be able to top up capital in their offshore business from South Africa and criteria would also be relaxed for corporates wishing to invest outside their current line of business.
"Transactions which result in loop structures not exceeding a threshold of 20% equity, and/or voting rights whichever is higher, in the foreign target entity, will be processed by authorised dealers without the need for prior approvals," said the National Treasury.
On Tuesday, Gordhan proposed that all inward listed shares on the JSE be classified as "domestic" and that ownership restrictions on international participation in foreign exchange bureaus be removed.
These and other investment and prudential reforms are aimed at promoting investment into South Africa by encouraging capital markets development, enabling more competition and reducing the cost of doing business.
Gordhan noted that the Reserve Bank, the Financial Services Board ("FSB") and the Johannesburg Stock Exchange (JSE) would provide more details after his announcement.
The Reserve Bank and the JSE have already published their first set of details, but will be publishing more details in the next month, the National Treasury said.
