South Africa: EXCON: Has The President Gone Too Far?

Last Updated: 24 July 2012
Article by Ehrhard Furstenburg

Most Read Contributor in South Africa, September 2018

The recent amendment to Regulation 10 of the Exchange Control Regulations has possibly opened a proverbial constitutional can of worms. The meaning of 'capital' was defined to include registered or unregistered intellectual property. In addition, 'exported from the Republic' is now defined as including 'the cession of, the creation of a hypothetic or other form of security over, or the assignment or transfer of any intellectual property right, to or in favour' of a non-resident. The result, in terms of Regulation 10(1)(c), is that no person may enter into any transaction whereby intellectual property or any right to intellectual property is directly or indirectly exported from South Africa without prior Exchange Control approval.

The Currency and Exchanges Act 9 of 1933 ("the Act") was intended to regulate legal tender, currency, exchanges and banking. Most of the Act has been repealed, except Section 9 which empowers the President to 'make regulations in regard to any matter directly or indirectly relating to or affecting or having any bearing upon currency, banking or exchanges'. The Afrikaans term used in the Regulations for the latter term is 'wisselkoerse', which can be translated as 'currency exchange rates'.

The question now is whether the regulation of intellectual property falls within the ambit of the Act and if not, whether the widening of the ambit by way of a Regulation is both lawful and constitutional. This necessitates revisiting the meaning of 'capital', which according to most tax and intellectual property experts, had been dealt with by the Supreme Court of Appeal in Oilwell v Protec (295/10) [2011] ZASCA 29.

Ambit of exchange control

The purpose of the Act and the Exchange Control Regulations is, inter alia, to regulate South Africa's currency exchange rate, which in turn is, inter alia, affected by the country's balance of payments. Broadly speaking and having regard to the basic principle of supply and demand, the exchange rate is regulated by ensuring the timeous repatriation into South Africa of foreign currency acquired by residents and to prevent the loss of foreign currency resources. To this end, the President is empowered to make regulations in regard to any matter directly or indirectly affecting such currency exchange rates.

Would regulating exchange rates not include any and all transactions, irrespective of whether it relates to 'capital' or not? Put differently, would the relinquishment of something (whether capital or simply an asset) or income from that 'thing' (such as royalties) not result in the loss of foreign currency and affect exchange rates? Our courts were called upon to adjudicate this question in two cases.

The court in Couve v Reddot 2004 (6) SA 425 (W) followed a wide approach in interpreting 'capital'. The court held that 'capital' meant anything with a monetary value and that the words 'directly or indirectly' in relation to 'export' were used by the Legislator to denote the widest possible meaning. The rights in and to patent applications and the right to receive royalties had a monetary value and consequently constituted 'capital'. The indirect effect of the assignment of such rights to a non-resident constituted the export of capital.

However, the Supreme Court of Appeal rejected such a wide interpretation and held in the much debated Oilwell-case that there had to be a difference between 'capital' and 'assets'. It referred to the Afrikaans term of 'kapitaaluitvoer' which means the movement of money offshore, but concluded that intellectual property was territorial and could therefore not be exported based on the fact that patents (the object in dispute in the Couve-case) do not create a right to royalties, but rather that the royalty agreement creates such rights.

Intellectual property is by its very nature territorial incorporeal property granting its owner certain territorial rights thereto. The transfer of ownership takes place by way of assignment, when the rights in and to such intellectual property is transferred. Such 'right' would, in my view, be akin to the property itself. Accordingly, the export of that right resulting in the loss of income associated with such right, would most likely (at least indirectly) affect the South African currency exchange rate. In other words, where a resident relinquishes its right to royalties, it would certainly affect the country's currency exchange rate. On the other hand, a sale of intellectual property would of course lead to foreign currency flowing into South Africa.

The amendment of Regulation 10 bridged the divide created by the Oilwell-case, but it remains to be seen whether our courts will accept the President's view of his role and powers in exchange control. Even if intellectual property falls within the ambit of the Act, certain provisions in the Act would still need to pass the Constitutional test.

Constitutionality of delegated legislative authority

Section 9(3) of the Act provides that the president 'may, by any such regulations, suspend in whole or in part this Act or any other Act of Parliament or any other law relating to or affecting or having any bearing upon currency, banking or exchanges'. This provision in effect empowers the President to override any other act by way of regulation, that is, delegated legislation. However, such Regulation would need to be tabled in Parliament in terms of Regulation 9(4). It is however not clear what the effect of the tabling is.

Prior to South Africa's constitutional dispensation, the validity of some aspects of Section 9 of the Act were indeed considered. In R v Parsotam 1949 (4) SA 315 (N), dealing with the criminal sanctions imposed under Section 9(2), the court ruled that the purpose of that section was to 'empower the Governor-General [President], if he thinks fit, to apply any of those sanctions himself instead of the sanctions being enforced in the normal way by the courts of law.' In S v Bedford 1979 (3) SA 656 (D) the court, in dealing with the declaration of foreign assets by residents in terms of Regulation 7(1), held that residents owning or being entitled to sell foreign assets may become relevant to currency matters over which the Treasury has control. In addition, the court in R v Rathanji and another 1950 (4) SA 170 (N) approved of the President's powers and highlighted that the field covered by currency, banking and exchanges includes the whole of the national economy.

However, although in terms of Section 84(1) of the Constitution of the Republic of South Africa, 1996, the President has the powers entrusted by the Constitution and legislation, he is not empowered to make laws. The legislative authority is vested in Parliament and can only be assigned to another sphere of government (that is, provincial or national) in terms of Section 44(1) of the Constitution. In this regard it is interesting to note the Constitutional Court's ruling in Executive Council, Western Cape Legislature, and Others v President of the Republic of South Africa and Others 1995 (4) SA 877 (CC) where the court held that Constitutional control over delegated legislative authority goes to the root of a democratic order and 'adherence to the prescribed forms and procedures and insistence upon the executive not exceeding its powers are important safeguards in the Constitution.'

The delegated legislative authority of the President in terms of the Act remains a contentious issue which will undoubtedly have to be resolved by the Constitutional Court. Watch this space.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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”

Related Topics
Related Articles
Related Video
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions