JOHANNESBURG – South Africa has proposed sweeping changes to its decades-old rules governing money flows, aiming to strengthen its position as a financial hub for Africa and attract more investor capital.
The Finance Ministry's proposals include increasing discretionary offshore allowances for individuals, regulating crypto assets and easing capital-flow restrictions.
The Johannesburg Stock Exchange estimates the change could attract at least 10 trillion rand ($608 billion) of investment over time.
Vukile Davidson, deputy director-general of fiscal policy at the National Treasury, told Reuters in an interview that most of the changes to the law date back to 1961, with some provisions dating back to 1933.
“At the time, exchange controls were used primarily to deal with a wide range of issues beyond capital flow management,” Davidson said. “It was used to manage the domestic revenue base, manage illicit flows, ensure financial sector stability.”
That blunt instrument is now being replaced with more targeted reforms, he said, signaling South Africa's readiness to modernize and adopt a “positive bias” approach to managing cross-border capital flows.
National Treasury published the draft circular for public comment on April 17.
Domicile for non-Rand funds
A main objective of the overhaul is to address long-standing structural problems that are causing South Africa to lose its financial capital to rival centres.
Under the proposals, asset managers would be allowed for the first time to run non-rand funds – which raise, deploy and report in foreign currencies such as the US dollar – from a South African base. Current rules require such funds to be legally domiciled offshore, even if they are managed locally.
“Mauritius, increasingly Kenya and places like Kigali and Dubai… have been more successful in attracting South African financial firms,” Davidson said.
Samuel Mokorosi, head of deals and originations at the JSE, said rules requiring non-rand funds to be domiciled offshore were costing South Africa jobs and expertise.
The stock exchange, which leads Operation Phumelela – a private sector reform initiative to reform capital markets – welcomed the proposed change.
Bringing crypto into the limelight
The overhaul will formally bring crypto assets into the exchange control framework, treating them as a distinct but regulated form of capital for the first time.
Crypto trading above a set limit will be allowed only through a new class of regulated intermediaries, with mandatory declaration of holdings and significant transactions to the national treasury.
Crypto plays a growing but competitive role in South Africa, where high adoption has made it a tool for trade, remittances and, increasingly, cross-border value transfers outside the traditional banking system.
Exchange control reform is part of a broader reform agenda pursued by the government in recent years, covering energy, logistics, infrastructure, fiscal policy and financial regulation.
Davidson said the timing and pace of the changes are also influenced by geopolitical shifts that are creating opportunities to attract capital inflows to South Africa.
($1 = 16.4660 rand)