How to make the most of SARB’s relaxed exchange control regulations

With the personal allowance set to increase from R4 million to 10 million per individual, you will now be able to send up to R11 million abroad to any account you like (when you take into account the R1 million discretionary allowance). If you are married to a South African citizen, this amount increases to R22 million per year if you take into account the combined personal and discretionary allowances of you and your spouse.

This news was released alongside a list of other positive exchange control threshold changes:

• The corporate investment limit that authorised dealers can process has been increased from R500 million to R1 billion per year.
• Dispensation of credit card usage will be extended to corporations; currently this is only available for individuals.
• The annual R1 million individual single discretionary allowance subcategories have been scrapped, allowing for the discretionary use of all funds in this category. Offshore purchases are considered imports and will not be included in your yearly discretionary allowance. This means that the online purchase of, for example, an iPad, won’t count against your R1 million allowance.

What these changes mean for you

Until recently, the SARB’s stranglehold on money movement out of South Africa made it difficult to invest large amounts of money abroad. Previously, the per-person allowance amount was increased to R4 million per year, allowing a transfer of up to R8 million if your spouse was also a registered taxpayer and South African citizen (R10 million if you took both parties' R1 million discretionary allowances into account).

Although a fair amount of money, the steady fall of the Rand along with the rising costs of property and other investments abroad meant that the allowance sometimes fell short of what was needed to make a meaningful investment within the European Union.

This latest move by the SARB to increase the annual allowance has created a golden opportunity for individual foreign investment. With a R1 million discretionary allowance that has no restrictions and a R10 million investment allowance, a single person can quite comfortably make a sizeable investment abroad.

What these changes mean for South Africa

One reason for the drastic relaxation of the exchange control regulations is to incentivise local companies to expand internationally, particularly into Africa. However, at its core, what the decision really reflects is the South African Reserve Bank's (SARB) decision to modernise capital flow management in a bid to attract more foreign investment.

Some people may believe that the SARB made a bad decision to relax exchange control thresholds, and that it may increase the possibility of a run on the banks by the country’s wealthiest. However, a more practical perspective may be to take a step back and allow commerce to find its natural flow. This could well be the best way to boost investor confidence and pull South Africa out of its current nosedive.

By relaxing controls and allowing foreign investors to move money in and out of the country without the fear of being trapped in a bad financial situation, we are opening our doors to long-term capital investment. This can only be a good thing.  

The challenge of reporting and how we can help

Despite the SARB relaxing its capital flow restrictions (in fact, it has removed capital control measures on non-residents altogether in a bid to attract inward investment), it has tightened financial surveillance in an attempt to counter money laundering and the funding of terrorism. This means an increased emphasis on reporting and the associated bureaucracy - a frustrating process for many as the complexity involved in securing both allowances makes the exercise long-winded and often plagued by red tape.

Our forex department operates in this niche. Our goal is to make the process easier by removing the daunting prospect of dealing with governmental red tape, inefficiency and bureaucracy. We do this by managing all reporting and surveillance requirements, and accelerating the process through which your money enters and leaves the country. In all cases, we uphold the strictest compliance standards and conform to all SARB regulations.

We can also tailor our approach to your needs, helping you open your own offshore account or, alternatively, holding your currency in our London-based client settlement account if you need time to make an investment decision.

As an added bonus, you can also fix your exchange rate when you send your funds and, when you are ready to buy, simply instruct us to transfer your funds to any onward bank of your choice.  

If you are interested in investing your money abroad, contact our forex team on +27 (0) 21 657 2153 or email us at forex@sableinternational.com. You can also email me personally on andrew.rissik@sableinternational.com.