South Africa: Jurisdiction Update: South Africa - Securities & Banking

Last Updated: 4 December 2012
Article by Deborah Carmichael

Most Read Contributor in South Africa, November 2017

South Africa has the largest and most developed economy in sub-Saharan Africa, and boasts well-regulated, sophisticated financial markets and banking systems supported by a progressive common law-based legal system. South Africa's banking and financial services sector was ranked in the top 10 in several key categories, including soundness of banks, regulation of securities exchanges and strength of auditing and reporting standards in the World Economic Forum's 2011/2012 Global Competitiveness Report.


Although the South African Reserve Bank (SARB) and the Financial Services Board (FSB) acting through industry-specific registrars regulate the banking system and non-banking services sector respectively, the regulatory landscape is set to be vastly revised as per a policy document released by the Minister of Finance in February 2011 in which the South African government's vision for the local financial sector is set out. The document places particular emphasis on the maintenance of financial stability, preventing financial crime, strengthening consumer protection and fostering a financial services space that is accessible and affordable. With a view to achieving these objectives, the document proposes the introduction of a twin-peaks model of financial regulation in terms of which the SARB will be responsible for all prudential regulation and supervision ' including the implementation and monitoring of financial legislation and regulations applicable to banks, securities firms and insurance companies to ensure that they are financially sound ' while the FSB will be responsible for market conduct regulation, including championing consumers' rights. This signals a move away from industry-specific regulation to broader, holistic oversight.

Main legislation

Banks Act 1990

Banks in South Africa are licensed in terms of and regulated by the Banks Act No. 94 of 1990. The Banks Act also affects the debt capital market, in that prohibits entities other than registered banks from accepting "deposits" from the general public. As a result of the broad definition of "deposit" in the Banks Act, which extends to cover the issuance of notes and debentures to the general public, the Commercial Paper Regulations to the Banks Act, dated December 14, 1994 and the Securitisation Regulations to the Banks Act, dated January 1, 2008 have been enacted to allow non-bank entities to issue commercial paper and implement securitisation structures.

Securities Services Act 2004

Securities exchanges, central securities depositories, clearing houses and their respective members are currently regulated by the Securities Services Act 2004 (SSA). In response to the global financial crisis and to clarify lingering uncertainties in the SSA, the legislature has drafted the Financial Markets Bill 2012, which is in its final stages. Although similar in many respects to the SSA, the bill seeks to clarify (although admittedly unsatisfactorily) the South African law approach to offering securities as collateral (which has long been a topic of debate), and in response to the call by the G20, provides for measures to regulate the OTC derivatives market (including centralising the clearing of "vanilla" derivatives) and credit default swaps.

The JSE Limited Listings Requirements and JSE Debt Listings Requirements

The JSE Limited (JSE), which ranks among the top 20 exchanges in the world by market capitalisation, is South Africa's only exchange following its merger with the erstwhile Bond Exchange in July 2009. The JSE rules and enforcement procedures are based on global best practice, while its automated trading, settlement, transfer and registration systems are on par with other leading stock exchanges. The JSE also features a futures exchange (SAFEX) and an interest-rate exchange on which corporate bonds, exchange traded funds, warrants, structured notes and similar instruments are listed and traded. With a view to formalising and streamlining the regulation of debt capital markets, the JSE replaced the previous bond exchange listing requirements with the comprehensive JSE Debt Listings Requirements on March 1, 2011, with which all issuers wishing to list debt securities must how comply.

The rules of the JSE allow foreign entities to list commercial paper through so-called inward listings if they, inter alia, comply with the JSE Debt Listings Requirements, dematerialise all scrip in the CSD, and appoint a settlement agent and local transfer secretary. The documentation used and the process followed to access the capital markets in South Africa is broadly similar to that of the euro markets and this makes it relatively easy for offshore parties to enter the South African market.

The Companies Act 2008

The Companies Act 2008, which completely replaced the Companies Act 1973 save for the provisions dealing with the winding up and liquidation of companies, took effect on May 1, 2011 and introduced certain sweeping changes to the South African company-law landscape. These important changes include the eradication of the outdated system of capital maintenance and introduction of a solvency and liquidity standard with which companies have to comply when inter alia granting financial assistance and making distributions to holders of securities, and the replacement of judicial management with a new business rescue regime for companies in financial distress.

Furthermore, because the Companies Act requires private companies to restrict the transferability of their securities while the Listings Requirements require securities to be freely transferable, a company or Issuer SPV wishing to offer securities to the public will now either have to be incorporated as a public company or convert from a private to a public company in terms of the Companies Act. The Companies Act also fleshes out the requirements with which prospectuses must comply, and imposes severe penalties (including the possibility of personal liability of the directors) for contravening these provisions.

Importantly, the two-year grace period contemplated in Schedule 5 to the Companies Act comes to an end on May 1, 2013, from which date any inconsistencies between a company's memorandum of incorporation, its rules and/or a shareholders agreement and the Companies Act, will be declared void.

Important legislative developments:

Financial Services Laws General Amendment Bill 2012

The twin-peaks model discussed above is expected to be ushered in through legislative reforms in 2013. The shift has however been instigated by the Financial Services Laws General Amendment Bill 2012, which has recently been tabled before Parliament. The Bill has been drafted to address gaps in legislation and offset existing systemic risks by aligning financial sector legislation with the Companies Act, giving the Minister of Finance emergency powers to deal with systemic risks to the financial system, and strengthening the SARB's powers to intervene in the event of a banking crisis.

Regulations to the Banks Act

In January 2008, the SARB made clear its intention to implement the new global Basel III regulatory standard in accordance with the prescribed timeframes. The Minister of Finance has initiated the phasing in of the liquid-asset and capital adequacy requirements set out in Basel III, and has released draft regulations (the latest dated August 17, 2012) which facilitate the implementation of the accord and replace regulations adopted on December 15, 2011 in terms of which the Basel 2.5 framework was implemented. It is envisaged that the new regulations will take effect on January 1, 2013.

After concern on the part of South African banks that they would not meet the liquid-asset criteria set out in Basel III due to the conventional local practice of using long-term financing as collateral, the SARB has undertaken, in the form of Guidance Note 5/2012 published on May 10, 2012 (the guidance note), to make a committed liquidity facility available to assist banks in meeting the liquidity coverage ratio prescribed in Basel III.

The SARB will provide such a facility for an amount up to 40 percent of a bank's net cash outflows under stressed scenarios, meaning that the facility may serve as a substitute for Level 2 assets. The SARB will provide the facility against the furnishment of acceptable collateral, which may comprise (i) marketable debt securities with a minimum credit rating of A- on a domestic rating scale (equivalent to BBB- on an international scale) by an eligible external credit rating institution, (ii) equities listed on the JSE's main exchange and included in the Top 40 Index, or (iii) notes of self-securitised pools of high-quality loans, which are ring-fenced in an appropriate structure and that carry a minimum rating of A- on a domestic rating scale.

Credit Rating Services Bill 2011

The legislature is also in the process of adopting the Credit Rating Services Bill 2012, which gives effect to the G20 recommendations on the regulation and registration of credit rating agencies. The CRS Bill requires any person or entity that performs data and information analysis, approvals, issues or reviews credit ratings in South Africa, publishes a credit rating in South Africa, or issues credit ratings that are published in South Africa to register as a credit rating agency.

Tax legislation

South African tax law has undergone several significant changes of late. In addition to amendments to the Income Tax Act, 1962 concerning interest withholding taxes, the Tax Administration Act 2011 enacted on July 4, 2012 has overhauled the entire tax administration system by consolidating the administrative elements relating to tax into a single piece of legislation. The TAA streamlines the tax collection process, and affords the South African Revenue Services greater powers to protect the interests of the fiscus. Taxpayers are now also permitted to use a single account for administering tax, which makes it easier to allocate tax credits across tax categories and allows taxpayers to reconcile and track the movements of their tax account.

With effect from April 1, 2012, Secondary Tax on Companies, a tax imposed on companies at a rate of 10 percent of the dividend declared, has been replaced with dividends tax imposed on shareholders at a rate of 15 percent. Dividends tax is a withholding tax, meaning that the tax will be withheld and paid on behalf of the shareholder receiving the dividend to SARS by the company paying the dividend. DT will constitute a tax credit for foreign shareholders in that shareholder's jurisdiction. Although non-residents are generally exempt from tax in South Africa on South African sourced interest, with effect from January 1, 2013, a withholding tax of 15 percent will be levied on interest received by or accrued to a non-resident that is not controlled by a South African resident. Tax withheld will generally constitute a tax credit for such a non-resident in its respective jurisdiction. Furthermore, certain types of interest, including interest received by a non-resident in respect of a listed debt instrument, are exempt from this withholding tax.

The fiscus has also indicated in the 2012 Budget Speech that the inclusion of financial derivatives in the base of Securities Transfer Tax, which is a single tax in respect of any transfer of listed or unlisted securities, is being considered. The basis upon which such tax will be calculated for derivatives is presently unclear. The fiscus also highlighted a proposal to abolish the current exemption for brokers from securities transfer tax (levied at 0.25 percent), meaning that transactions for the broker's benefit may be taxed in the future, albeit at a lower rate.

Exchange control

Exchange control in South Africa is regulated by the SARB's Financial Surveillance Department. The FSD applies a system of exchange control designed to prevent the unauthorised transfer of currency abroad and to ensure the repatriation into the South African banking system of currency acquired by South African residents. Policymakers have embarked on a process of exchange control liberalisation over the years to encourage foreign direct investments such that non-resident investors may, subject to certain administrative requirements, freely invest in South Africa and repatriate the returns.

Residents over the age of 18 are permitted to transfer up to ZAR4 million abroad per year for investment purposes, subject to certain conditions. The FSB has recently announced that residents may use their further ZAR1 million single discretionary allowance for investment purposes without having to obtain a tax clearance certificate. Investments made by companies that do not exceed ZAR500 million per applicant company per year are no longer subject to approval from the FSD.

Closing thoughts

Recent legislative and market developments in South Africa are born out of South Africa's continuing efforts to facilitate and encourage investment and trade in accordance with international best practice. An awareness of these developments and an understanding of the relevant legislation should help to facilitate a broader range of transactions in an environment that enjoys clear regulation underpinned by legal certainty.

Previously published by Thomson Reuters Acceulus on November 20, 2012.

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”

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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

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