In 2024 South Africa was the largest economy in Africa with a GDP of over USD 400 billion. It furthermore has the most diversified and industrialized economy in Africa.
South Africa has a highly regulated exchange control regime, the primary aim of which is to monitor capital flows and prevent the unauthorised export of capital, which the regime also applies to the local branches of foreign companies. Specific rules apply to different inbound and outbound commercial transactions (ranging from notifications, special applications and partial and blanket prohibitions for certain arrangements).
1. Legal framework
1.1. What laws and regulations govern exchange control regime in your jurisdiction?
Exchange control is broadly regulated by the Currency and Exchanges Act, 9 of 1933 (Act) and the Exchange Control Regulations, 1961 (Regulations) which must be read with the Currency and Exchanges Manual for Authorised Dealers (AD Manual). There are also Orders and Rules that have been issued under the Act.
The AD Manual contains the permissions and exemptions that apply to certain transactions. In some instances, the permissions and exemptions are subject to certain conditions. The Regulations have been relaxed over time, mainly through the addition of these exemptions and permissions, which are first published in circulars and then incorporated into the AD Manual.
1.2. Which bilateral and multilateral exchange control instruments have an effect in your jurisdiction? How is regulatory cooperation and consolidated supervision ensured?
The Multilateral Monetary Agreement establishes the Common Monetary Area, comprising South Africa, Lesotho, Namibia and Eswatini (formerly Swaziland). All four countries are members to this. In terms of this instrument, exchange control rules do not apply to transactions between residents of these countries (i.e. the movement of funds between these countries), subject to very few exceptions. The Agreement provides the basis for regulatory cooperation and consolidated supervision between parties thereto.
Although not binding on South Africa, the OECD Code of Liberalisation of Capital Movements is being used as a reference for the modernisation and continued relaxation of South Africa’s exchange control rules. South Africa’s National Treasury (Ministry of Finance) has previously indicated its intention for the Regulations to be replaced by a capital flows management framework, although this is yet to materialise.
1.3. What are the current priorities of regulators and how do they work with the banking industry?
The regulator and enforcer of South Africa’s exchange control regime is the Financial Surveillance Department of the South African Reserve Bank (FinSurv). Banks, referred to as authorised dealers in the exchange control context, are empowered in terms of the AD Manual to permit and authorise transactions falling within certain parameters. For example, in the context of outbound foreign direct investments (FDIs), South African resident companies can invest up to R5 billion per calendar year subject only to authorised dealer approval. For calendar year investments exceeding the R5 billion threshold, prior FinSurv approval is required. Any application for FinSurv approval must be submitted to FinSurv through an authorised dealer on behalf of its client.
Although the priority seems to be a policy of continued relaxation, it appears that there has been stricter enforcement since South Africa was grey listed by the FATF, especially where an alleged contravention has occurred.
2. Exchange control regime
2.1. Can a subsidiary or affiliate repatriate money to a non-resident parent company?
Yes, subject to meeting the requirements applicable to the distribution in question. I.e., different requirements apply depending on whether the payment relates to dividends, interest, royalties and so forth.
2.2. Is there limitation of transfer of foreign currency to procure goods or payment for services to non-resident person?
Yes. The rules regarding payment for goods and services to non-residents are different for SA resident companies and SA individuals. Where a limitation applies to a particular payment/transaction, it can only be relaxed for particular transaction(s) subject to prior FinSurv approval.
2.3. Can a subsidiary easily make payments for intra-group transactions?
Yes, but depending on the type of transaction. For ordinary day-to-day transactions payment is usually quite simple.
2.4. Are there rules against intercompany netting off?
Yes. This is prohibited unless there is prior FinSurv approval, although this is seldom (if ever) granted.
2.5. Are permits required to transfer money to a third party or non-resident entity for procurement of goods or services?
No.
2.6. What requirements or documentation must be in place before banks authorize requests for international transfers?
It depends on the type of transaction. For example, outbound interest payments under a loan can only be made if the loan has been approved by an authorised dealer or FinSurv, as required.
2.7. Have there been recent directives issued by your Central Bank on Exchange Control?
Yes. As noted above, FinSurv annually issues circulars announcing changes to the exchange control rules. 15 circulars were issued in 2024, eight in 2023 and 22 in 2022.
3. Exchange control contraventions
Enforcement
3.1. Which entities are responsible for enforcing the relevant laws and regulations? What powers do they have?
FinSurv is responsible for enforcement. FinSurv has extremely broad powers, most significant of which are to issue blocking orders and forfeiture orders. The full extent of their powers is set out in the Act, Regulations and the AD Manual. This is in addition to the power to refuse approval for certain transactions where requested.
Sanctions
3.2. What sanctions are applicable in the event of a violation of the exchange control regime?
Where a penalty is deemed to be the appropriate sanction, this will usually vary between 10% and 40% of the value of the so-called unauthorised asset (asset held in contravention of the rules). These would usually apply where a person voluntarily declares and regularises a contravention with FinSurv (through its authorised dealer).
4. Trends and forecasts
4.1. How would you describe the current exchange control regime and trends in your jurisdiction? Are there any plans for further developments in the next 12 months, including proposals for legislative reforms?
As stated above, the prevailing trend is for FinSurv to continue relaxing the rules and for the Regulations to ultimately be replaced with the capital flow management framework. Further relaxations are anticipated this year, some of which will likely be announced in the Minister of Finance’s budget.
4.2. Does your jurisdiction regulate cryptocurrencies? Are there any legislative developments with regard to cryptocurrencies or financial technologies in general?
Yes. Exchange control rules currently only allow for the transfer of funds abroad to purchase crypto assets by individuals using their annual allowances. A South African resident may not transfer a crypto asset abroad or externalise a right to capital using a crypto asset bought in South Africa.
The Intergovernmental Fintech Working Group was established a few years ago to, amongst other things, research and propose possible legislative changes considering Fintech and crypto asset development. Some proposals have been adopted.
Following recent legislative changes, crypto assets and investment into crypto assets is now regulated under the Financial Advisory and Intermediary Services Act, 37 of 2002. Entities wishing to offer crypto asset-related services are required to register as crypto asset service providers (CASPs).
