Gordhan announces relaxing of exchange controls

Tuesday, October 27, 2009

Cape Town - The Minister of Finance, Pravin Gordhan, has announced the further relaxation of exchange controls in a bid to reduce the cost of doing business in the country and attract more foreign investment.

Presenting his Medium Term Budget Policy Statement in Parliament today, Gordhan said the foreign capital allowance for residents, which was last adjusted in 2006, would be increased from R2 million to R4 million, while the single discretionary allowance will be increased from R500 000 to R750 000.

To improve access to domestic credit in the financing of local foreign direct investment, restrictions on the granting of local financial assistance to affected persons have been further liberalised with the doing away of the 3:1 ratio.

Among a number of proposed reforms to reduce red tape on business transactions, is a plan to allow South African companies to invest in Southern African Development Community (SADC) member states through offshore intermediaries.

Other proposals, which the Reserve Bank will soon provide more details on, include increasing the current R50 million limit for company applications to undertake outward investment, to R500 million.

The Reserve Bank would also consider removing the 180-day rule requiring companies to convert their foreign exchange into rand. However SA companies will still be required to repatriate export proceeds to South Africa.

There was also a proposal to do away with the R250 000 limit on advance payments for imports and another to allow SA companies to open foreign bank accounts for permissible purposes without prior approval, subject to reporting obligations.

Also being considered was a plan to replace the current paper-based monitoring system for exports - through Form F178 - with a more efficient electronic system.