TRICKS & TRAPS - EXCHANGE CONTROL

A real challenge for lawyers, let alone financial advisors, because the laws, regulations and procedural rules are not fully available to anyone other than the SA Reserve Bank and to a more liberal extent to banks who are authorised dealers in foreign exchange. Fortunately issues affecting investors and travellers are relatively straightforward.

In 1997 the South African government began a program of relaxing exchange controls on local residents. The concept of a "foreign investment allowance" was introduced at a level of R 200 000 per taxpayer over the age of 18 provided he/she had a clean bill of "health" with the SA Revenue Services [SARS]. That allowance was increased each year until February 2006 when it reached R 200 000 per taxpayer.

After a slow start in 1997, South Africans began realising the importance of hard currency investments as a means of risk diversification. For the ordinary man in the street there are effectively no barriers to foreign investment since he is unlikely to have more than R 200 000 available for placement. However, for high net worth individuals, the barriers and limitations remain.