South Africa: Part 2.2 - Foreign Investment - Exchange Control In South Africa

Last Updated: 9 April 1996
The Exchange Control Regulations are based on measures that came into effect in 1961. The regulations are administered by the central bank (Reserve Bank of South Africa), assisted by the commercial banks, which are appointed to serve as authorised dealers in foreign exchange. These exchange control measures were introduced to stem the out-flow of capital from South Africa and to ensure a measure of stability in currency markets.

Measures were introduced during 1995 to reduce the controls applicable to non-residents, and there are indications that further reductions will follow. The Government has affirmed a policy of eliminating exchange controls, certainly as regards non-residents, as soon as economic conditions permit. Exchange controls affecting residents will remain for longer, but already steps are being taken to provide some relaxation for resident businesses, and further liberalisation is expected.

2.2.1. Exchange Rates

Political disturbances in 1961 resulted in large capital outflows from South Africa. Before that time, South African securities quoted on foreign stock exchanges stood virtually at par with the South African share prices, but with the decline of confidence in the rand on foreign markets, a price differential developed. This inevitably gave rise to profit-taking by non-residents who were in a position to buy shares cheaply abroad, send the shares to South Africa for sale and export the proceeds at the expense of the country's reserves.

This facility was withdrawn, and the proceeds from sales of South African securities by non-residents became credited to "blocked" accounts. Blocked rands could be used to purchase in South Africa any shares quoted on overseas markets, the shares being exportable for sale abroad at the price that non-resident investors would be prepared to pay.

The "blocked rand" evolved into the "securities rand" and became officially traded on The Johannesburg Stock Exchange and elsewhere. In 1979 the name was changed to "financial rand" and non-residents were able to use the financial rand to invest in certain other assets as well as unlisted securities.

During 1983, the two-tier system of exchange rates was replaced by a single system. However, because of continued political unrest and a deterioration in South Africa's economy, the authorities reintroduced the two-tier system on 1 September 1985 and simultaneously effected a freeze, known as the "foreign debt standstill" on repayments of foreign liabilities existing at 28 August 1985.

Early in 1995 the financial rand was abolished, and the rand is again a single currency quoted with a single rate against other currencies.

2.2.2. Application of Exchange Control


Non-residents are those persons who are not resident in South Africa and are not emigrants from South Africa. Generally, there are no restrictions on inward or outward transfers of funds of which non-residents are the sole beneficial owners. If a non-resident grants a loan to a South African resident, the South African debtor is required to obtain approval from the exchange control authorities, to ensure that the rate of interest charged on the loan is reasonable.

Capital invested in South Africa can be remitted, as can income flowing to non-residents, like dividends, interest, royalties and directors' fees. Dividends must be declared from revenue profits. Directors' fees are limited, to avoid the disguised payment out of capital. The same applies to management and other fees. Royalty agreements require the approval of the exchange control authorities.


South African residents are entitled to foreign exchange facilities to meet their business or personal travel needs subject to certain limits.


Emigrants who permanently relinquish their South African residency are entitled to the following facilities:

 -    cash per family unit                    R200 000
 -    unmarried persons                       R100 000
 -    motor vehicles:                         R 75 000
 -    household and personal effects:         R 75 000

Excess South African capital remains blocked, but the income may be remitted overseas (up to R300 000 a year). Blocked funds of up to R30 000 a year may be used by emigrant families on South African visits.


First-time immigrants can bring unlimited funds into South Africa provided that the funds are brought into the country within three years of immigration. They are entitled to retain their foreign assets indefinitely, but any income accruing on their foreign assets must be brought into South Africa.

2.2.3. Distributions to Non-Residents from Local Estates

Cash bequests from the estates of persons who were permanently resident in South Africa at the time of their death to beneficiaries who are permanently resident outside the Common Monetary Union may be remitted up to a limit of R100 000 for each beneficiary. The exchange control authorities may permit bequests exceeding that limit to be transferred in stages. Items of a purely personal nature bequeathed to non-resident beneficiaries may be exported, but the total value of jewellery may not exceed R20 000 for each beneficiary.

2.2.4. Borrowing Restrictions for Foreign-Owned Businesses

There is a restriction on the local borrowings of business entities that are 25% or more owned or controlled by non-residents. The purpose of this restriction is to ensure adequate capitalization of foreign investments. Local borrowings include overdrafts, local discounting, financial leasing of capital equipment, mortgage bonds, preference shares and debentures not subscribed for by equity shareholders, and local shareholders' loans in excess proportion to foreign shareholders' loans. Excluded from the restriction is normal commercial credit for the sale of goods and services rendered.

The level of local borrowing is limited to a percentage of the "total effective capital". The percentage may be simply represented as 5 000 divided by the percentage of non-resident participation. Thus, the maximum local borrowing if non-resident participation is 75% will be 5 000 divided by 75, or 66.67% of effective capital and, if non-resident participation is 25%, the maximum local borrowing will be 5 000 divided by 25, or 200% of effective capital. "Effective capital" is basically the net worth of the company, together with shareholders' loans (which are regarded as investment funds because of their permanence) and "hard core" trade credit extended to the company by non-resident shareholders. Local shareholders' loans that are proportionately in excess of foreign shareholders' loans are excluded from effective capital.

Although these local borrowing restrictions are for the most part strictly applied, the authorities adopt a more flexible approach for businesses that are established in decentralisation areas or that have a substantial import substitution or export potential.

2.2.5. Dividends and Branch Profits

All applications for remittances of profits or dividends by entities that are 25% or more controlled by non-residents must be referred to the central bank for approval if any local borrowing facilities are available. (Whether the facilities are used is immaterial. The mere existence of an arrangement requires an application.) If the entity's borrowings are within the formula referred to in 2.2.4, there is no difficulty in obtaining authorization to remit the dividends and profits to which a non-resident is entitled.

Profits or income earned prior to 1 January 1984 and dividends based thereon are not eligible for transfer to non-residents or emigrants without express Reserve Bank consent. Furthermore any dividends paid out of profits after 1 January 1994 cannot include any profits of a capital nature.

2.2.6. Management Fees

Payments of management fees by a South African company to a foreign affiliate are subject to approval by the exchange control authorities. It must be demonstrated that the services in question are necessary and cannot be as readily obtained in South Africa. The exchange control authorities will seldom approve the payment of management fees by a wholly owned South African subsidiary to its foreign parent, since it is considered that in these circumstances the payment of fees rather than dividends could be a mechanism for avoiding normal tax and the secondary tax on companies.

2.2.7. Royalty Payments

All agreements relating to payments for the right to use know-how, patents, trademarks, copyrights or other similar property are subject to approval by the exchange control authorities. The industrial development branch of the Department of Trade and Industry acts in an advisory capacity to the central bank in connection with royalties that involve the local manufacture of goods. A distinction is made between consumer goods, in the production of which South Africa is basically self-sufficient, and capital goods, for which foreign technology is needed. For consumer goods, a royalty of up to 4% of the factory selling price is regarded as acceptable. For intermediate and finished capital goods, a royalty of up to 6% may be considered. However, if the agreement does not provide for underlying know how, but deals exclusively or mainly with the use of patents or trademarks, the authorities will seldom approve a royalty of more than 0.5% of turnover.

2.2.8. Temporary Residents

Temporary residents who come to South Africa on secondment or on a contract basis may make regular transfers of funds abroad from their local earnings. On completion of their secondment or contract, they will be allowed to transfer abroad their savings from local earnings.

Temporary residents who elect to stay on in South Africa become subject to the same requirements that apply to immigrants, effective as of the date of their arrival in South Africa.

For further information please contact: 

Werksmans Attorneys 

Werksmans Chambers, 22 Girton Road, Parktown, Johannesburg 2193 
P.O. Box 927, Johannesburg 2000 South Africa

Enquiries:        Mr Charles Butler
Telephone         27 (011) 488-0000
Telefax           27 (011) 484-3100/3200
E-Mail Address

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.