Exchange controls notice halted
National Treasury, the SA Reserve Bank (Sarb) and the Financial Sector Conduct Authority (FSCA) are in effect withdrawing a circular on exchange controls, which broadened how much South Africans could invest offshore.
In a joint statement released yesterday, they said they were reviewing the circular to provide clarification on the reclassification of inward-listed instruments.
“[They] intend to review Exchange Control Circular 15/2020 issued by the Sarb, following the announcement by the minister of finance in the Medium-Term Budget Policy Statement (MTBPS) Speech on 28 October 2020,” it stated.
They say the review is “limited to providing clarification on the scope of changes to the announcement related to the reclassification of inward-listed instruments”.
This move follows much debate about the significance of their efforts to relax exchange controls, by allowing locally listed firms to treat their offshore assets as domestic assets, as long as the firms’ assets can be traded on a local exchange and traded in rands.
This relaxation, however, created some confusion around whether Regulation 28 of the Pension Funds Act, which caps investment in foreign assets at 30%, would still be in effect.
Asset managers were divided on the importance of the relaxation, with some saying it was a radical move on the part of the country’s finance authorities, while others downplayed its significance.
The authorities have now acknowledged this confusion, hence their review of the relaxation.
“This follows enquiries by various stakeholders having different interpretations on the extent that the circular affects the foreign investment limits applicable to institutional investors, inter alia, retirement funds, collective investment schemes and insurers.”
In the statement, it says the MTBPS announcement aims to create an enabling environment that makes it easier for foreign investors to invest in SA and support the country’s growth as an investment and financial hub for Africa.
It said the circular issued on 29 October, 2020, dealing with the reclassification of inward-listed instruments was “suspended with immediate effect, to reduce the scope for ambiguity”.