A CRITICAL ANALYSIS OF EXCHANGE CONTROL IN A
SOUTH AFRICAN CONTEXT
By Rushika Valodia
A research report submitted to the Faculty of Commerce, Law and Management,
University of the Witwatersrand, Johannesburg, in partial fulfilment of the requirements
for the degree of Master of Commerce (specialising in Taxation)
Date: 28 March 2019
Student number: 1763763
Supervisor: Roy Blumenthal
ii
ABSTRACT
Since the implementation of exchange control, it continues to play a pivotal role in
South Africa. In South Africa, exchange control has evolved, specifically there has been
a gradual liberalisation in the related rules and regulations.
To this extent, it is crucial to consider the relevance of exchange control in South Africa
and the potential consequences of repealing the regulations, including the implications
on the collection of taxes by the South African Revenue Service (SARS). This research
report seeks to explore this.
While there have been countries that have maintained its exchange control regulations,
there have also been others which have abolished the regulations. The evolution of
South Africa’s exchange control will be compared to Mozambique, Iceland and
Venezuela. These countries have been selected based on their economic climates,
current exchange control limitations and to gauge an understanding of potential
challenges and consequences these countries have experienced and those that South
Africa will likely face as a result of repealing its exchange control regulations.
The South African Reserve Bank (SARB) monitors the imposition of exchange control
as the current regulations have control over South African’s foreign currency reserves,
accruals and the spending thereof1. SARS and SARB jointly ensure that taxpayers are
compliant and that there are no contravention of exchange control regulations2. A key
finding arising from the research is the potential effect that the abolishment of exchange
control will have in South Africa. The risks and rewards associated with abolishing
exchange control regulations has gone unasked and unanswered in academic literature.
Finally, as part of the critical analysis of exchange control in South Africa this research
report aims to provide a recommendation on the continued liberalisation or potential
retraction of exchange control regulations in South Africa, and the mitigations against
adverse effects on the parties to exchange control.
1 SARB, 2016, ‘Exchange control legislation’.
2 National Treasury Republic of South Africa, 2016, ‘Special Voluntary Disclosure Programme in respect of offshore
assets and income’.
iii
Key words
Authorised Dealer, Authorised Dealer Manual, Common Monetary Area, CMA,
Exchange Control, Financial Surveillance Department, FSD, Organisation for Economic
Co-operation and Development, OECD, South African Development Community,
SADC, South African Revenue Service, SARS, South African Reserve Bank, SARB.
iv
DECLARATION
I declare that this research report is my own unaided work. It is submitted for the degree
of Master of Commerce at the University of the Witwatersrand, Johannesburg. It has not
been submitted before for any other degree or examination at any other university.
________________________________
Rushika Valodia
28 March 2019
v
TABLE OF CONTENTS
ABSTRACT .......................................................................................................................................... II
DECLARATION ................................................................................................................................ IV
LIST OF ABBREVIATIONS AND ACRONYMS .............................................................................. 1
CHAPTER 1: INTRODUCTION ........................................................................................................ 2
1.1 EXCHANGE CONTROL RATIONALE ................................................................................................ 2
1.2 PROBLEM STATEMENT ................................................................................................................. 7
1.2.1 THE RESEARCH PROBLEM ............................................................................................................ 7
1.2.2 THE SUB PROBLEM ....................................................................................................................... 8
1.3 RESEARCH METHODOLOGY .......................................................................................................... 9
1.4 CHAPTER OUTLINE ....................................................................................................................... 9
CHAPTER 2: OVERVIEW OF EXCHANGE CONTROL .............................................................. 12
2.1 INTRODUCTION .......................................................................................................................... 12
2.2 EXCHANGE CONTROL RESIDENCE AND THE PRACTICAL IMPLICATIONS ...................................... 12
2.3 TAX AND EXCHANGE CONTROL .................................................................................................. 16
2.3.1 Influential exchange control case law in South Africa ......................................................... 20
2.3.1.1 The Shuttleworth cases ......................................................................................................... 20
2.3.1.2 Oilwell v Protec .................................................................................................................... 21
2.3.1.3 Krok v CSARS ....................................................................................................................... 22
2.4 SUMMARY REMARKS ................................................................................................................. 23
CHAPTER 3: THE EVOLUTION OF EXCHANGE CONTROL ................................................... 25
3.1 INTRODUCTION .......................................................................................................................... 25
3.2 SOUTH AFRICA COMPARED TO THE SADC ................................................................................ 25
3.3 SOUTH AFRICA COMPARED TO ICELAND .................................................................................... 30
3.4 SOUTH AFRICA’S HOLISTIC MOVEMENT IN EXCHANGE CONTROL ............................................... 33
3.5 JOINT TAX AND EXCHANGE CONTROL AMNESTY ........................................................................ 37
3.6 SUMMARY REMARKS ................................................................................................................. 42
CHAPTER 4: INDICATIORS OF THE LIBERALISATION OF EXCHANGE CONTROL IN
SOUTH AFRICA ............................................................................................................................... 43
4.1 INTRODUCTION .......................................................................................................................... 43
4.2 INDICATORS OF LIBERALISATION ............................................................................................... 43
4.3 SUMMARY REMARKS ................................................................................................................. 50
CHAPTER 5: CONSEQUENCES OF ABOLISHING EXCHANGE CONTROL IN SOUTH
AFRICA .............................................................................................................................................. 51
5.1 INTRODUCTION .......................................................................................................................... 51
5.2 ANALYSIS OF REPEALING EXCHANGE CONTROL IN VENEZUELA ............................................... 51
5.3 POTENTIAL CONSIDERATIONS IN SOUTH AFRICA ....................................................................... 55
5.3.1 POTENTIAL RISKS ....................................................................................................................... 57
5.3.2 POTENTIAL REWARDS ................................................................................................................ 64
5.4 SUMMARY REMARKS ................................................................................................................. 71
CHAPTER 6: CONCLUSION ........................................................................................................... 74
vi
6.1 INTRODUCTION .......................................................................................................................... 74
6.2 OVERALL SUMMARY REMARKS AND CONCLUSION ..................................................................... 74
REFERENCES ................................................................................................................................... 77
APPENDICES .................................................................................................................................... 88
APPENDIX ‘A’ ......................................................................................................................................... 88
APPENDIX ‘B’ ......................................................................................................................................... 89
APPENDIX ‘C’ ......................................................................................................................................... 90
1
LIST OF ABBREVIATIONS AND ACRONYMS
BEPS Base Erosion Profit Shifting
CFC Controlled Foreign Companies
CGT Capital Gains Tax
CMA Common Monetary Area
CRS Common Reporting Standards
DTA Double Tax Agreement
DTI Department of Trade and Industry
EOIR Exchange of information on request
FICA Financial Intelligence Centre Act
FSD Financial Surveillance Department
IFWG FinTech Working Group
IMF International Monetary Fund
IN30 Interpretation Note 30 (Issue 3)
ISK Icelandic Króna
JSE Johannesburg Stock Exchange
MCAA Multilateral Competent Authority Agreement
MZN Mozambican metical
NEP No Exchange Provided
OECD Organisation for Economic Co-operation and Development
SADC South African Development Community
SAEFITM Standard for Automatic Exchange of Financial Information in Tax Matters
SARB South African Reserve Bank
SARS South African Revenue Service
SVDP Special Voluntary Disclosure Programme
TAA Tax Administration Act
VAT Value-Added Tax
2
CHAPTER 1: INTRODUCTION
1.1 Exchange control rationale
The Minister of Finance has delegated the Treasury’s powers, duties and functions, in terms
of the foreign exchange regulations, to the governor of the SARB3. Exchange Control
represents exchange operations undertaken by the SARB, specifically the Financial
Surveillance Department (FSD) of the SARB, who delegates authority to the Authorised
Dealers. The FSD’s role is to view contraventions of the exchange control regulations.
Further, to circumvent the conditions specified in two manuals, namely: the Currency and
Exchange Control Manual for Authorised Dealers in Foreign Exchange (Authorised Dealers
Manual) and the Currency and Exchanges Manual for Authorised Dealers in foreign
exchange with limited authority (ADLA Manual).
Any request made to the FSD must be channelled through an Authorised Dealer4. The
Authorised Dealers are not agents of the FSD, however they act on behalf of their customers5.
Under the circumstances that the Authorised Dealer is not authorised to lend currency in
terms of the Authorised Dealers Manual, an official application must be submitted to the
FSD6. The illustration below displays the organisational structure of the exchange control
operations.
3 PKF, 2018, ‘Understanding the history and rationale for exchange control’.
4 SARB, 2018, ‘Currency and Exchanges guidelines for individuals’, p. 3 – 9.
5 PKF, 2018, ‘Understanding the history and rationale for exchange control’.
6 SARB, 2018, ‘Currency and Exchanges Manual for Authorised Dealers’, p. 13.
Treasury
SARB
Authorised
Dealers
FSD
3
The authorities in South Africa were concerned with the diminishment of direct foreign
investment and capital flight outside of the country, therefore measures were sought to
prevent a total economic collapse in South Africa7. In essence exchange control regulations
were implemented in South Africa in order to protect foreign reserves and exchange rate
fluctuations.8 The exchange control regulations were introduced in 19339.
The exchange control regulations are an instrument that was designed to achieve effective
monetary policy, to again protect the foreign reserves and exchange rate in South Africa.10
Exchange control is viewed to be a synonym for exchange restrictions as it is the duty of the
Central Bank to maintain external stability of the national currency11. Exchange control was
viewed to be a form of ‘emergency finance’ in terms of the Emergency Finance Regulations
which was first introduced in South Africa at the outset of World War II in 193912. A
financial emergency is a situation in which a financial crisis may arise, this may be a fiscal
and financial problem for which there is no reasonable prospect of resolution13.
The exchange control regulations were introduced in 193314. In practice, exchange control
poses restrictions on individuals, including taxpayers, and various companies in remitting
funds offshore, whilst also affecting the flow of funds into South Africa. Specifically, in
terms of regulation 10(1)(c) of the South African exchange control regulations:
no person shall, except with permission granted by Treasury and in accordance with such conditions as
the Treasury may impose enter into any transaction whereby capital or any right to capital is directly or
indirectly exported from the Republic.
There was uncertainty around the meaning of ‘capital’ as stated in the regulations, which was
clarified in Oilwell v Protec15.
7 PKF, 2018, ‘Understanding the history and rationale for exchange control’.
8 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 42.
9 PKF, 2018, ‘Understanding the history and rationale for exchange control’.
10 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 42.
11 Einzig, P., 1934, ‘Exchange Control’, p. 9 & 10.
12 Chait, A., 2018, ‘The Exchange Control Regulations in South Africa’.
13 South African Department of Finance, n.d., ‘Policy Framework for municipal borrowing and financial emergencies’, p. 32
14 PKF, 2018, ‘Understanding the history and rationale for exchange control’.
15 (295/10) [2011] ZASCA 29 (18 March 2011)
4
This transfer of funds in and out of South Africa requires any person to obtain approval from
exchange control authorities, collectively referred to Authorised Dealers for purposes of this
research report.16
The current exchange control regulations are issued in terms of the Currency and Exchanges
Act, No 9 of 1933, as amended and promulgated by Government Notices.
Initially, Central Banks directly or indirectly aimed at controlling the exchange rates. The
measures undertaken are collectively known as general monetary policy, bank rate policy,
open market policy and foreign exchange policy. These are viewed to be the normal practices
of a Central Bank. While, in later times other factors influencing exchange control were
explored by the Central Banks, collectively known to be the intervention, exchange
restrictions, gold policy, exchange clearing, import restrictions, encouragement of exports,
barter and embargo on foreign loans.17
During 1960, the Sharpeville shootings caused an increased concern for an economic
recession and capital flight from South Africa. The application of exchange control was more
stringent during apartheid, specifically during 1985. The factors which affected the economy
were disinvestment campaigns, withdrawal of loan funding, international sanctions and trade
boycotts. At this stage, any transfer of funds with the exception of normal trade-related
transactions, required prior approval from the Authorised Dealers.18
The financial rand was an alternative currency which was used in conjunction with the
commercial rand. It was first introduced in the 1960s and later abolished with effect from 13
March 1995. The financial rand was a currency which was available to foreigners (in other
words South African non-residents), which would arise from the sale of their assets and for
purposes of investment into South Africa. Accordingly, the financial rand was only available
for use by foreigners. A characteristic of the financial rand is that it was viewed as a
discounted commercial rand.19
16 Chait, A., 2018,‘The Exchange Control Regulations in South Africa’.
17 Einzig, P., 1934, ‘Exchange Control’, p. 9 & 10.
18 Department of Justice and Constitutional Development, n.d., ‘Final report of the Commission of Inquiry into the Rapid
Depreciation of the Rand and Related Matters’, p. 50.
19 SOHO, 1995, ‘South African abolishes financial Rand’.
5
During 1992, the political affairs in South Africa deteriorated, which caused the financial
rand rate to weaken and gave rise to increased volatility in the financial rand rate.
Consequently, there was greater pressure placed on individuals and companies to withdraw
investments from South Africa. This also caused reluctance in investors to hold on-going
investments in South African companies, such as shareholding.20
Accordingly, new exchange control measures were implemented during December 1992. The
Authorised Dealer Manual must be read in conjunction with the exchange control regulations.
The Authorised Dealer Manual comprises of the conditions and permissions which are
applicable to foreign exchange transactions. In terms of exchange control regulation 2(2), the
related exchange may be undertaken by Authorised Dealers on behalf of clients. This
regulation also explains the administrative responsibilities and the reporting requirements as
stipulated by the FSD. Provided that the Authorised Dealer Manuel permits the execution of
certain transactions by the Authorised Dealers then the FSD’s involvement is not required.21
Since then exchange control has evolved in South Africa. Following the democratic elections
in South Africa in 1994, there has been a gradual liberalisation in exchange control practices,
in order to simplify and streamline exchange control regulations22. Furthermore, the
relaxation is shown through its less stringent ways which includes the numerous updates
made to the Currency and Exchange guidelines, and during 2016 the Exchange Control
Rulings were replaced with The Currency and Exchanges Manual for Authorised Dealers23.
It was decided that exchange control should be maintained as it acts as a cushion in the event
of a sudden flight of capital offshore24. As a result of the increased direct foreign investments
made by South African companies, the financial rand rate fell by more than 40 per cent
during 199225.
During 2003 the joint tax and exchange control amnesty was introduced. The introduction
was to place confidence in the South African economy in times of unfavourable international
economic climate. The purpose of the amnesty would allow the regularisation of individual’s
20 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 131.
21 SARB, n.d., ‘Currency and Exchanges documents’.
22 Visser, A., 2017, ‘#Budget2017: Are exchange controls an issue?’.
23 Chait, A., 2018, ‘The Exchange Control Regulations in South Africa’.
24SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 127.
25 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 130.
6
affairs in relation to their foreign assets. The amnesty proved to be necessary as many South
African’s had the desire to repatriate their funds offshore due to international co-operation in
tax compliance. International tax co-operation involves the offering of lower tax rates with an
objective of attracting foreign direct investment.26 International tax co-operation also relates
to the transparency and co-operation relating to tax matters. In this regard, the Organisation
for Economic Co-operation and Development (OECD) provides key indicators and outcomes
of countries which tie in with exchange of information for tax purposes (in other words
exchange of information on request (EOIR)) and an inclusive framework of Base Erosion
Profit Shifting (BEPS).27
Further, South African’s had an interest in repatriating funds to tax havens. Tax havens are
typically offshore countries or jurisdictions that impose a minimal tax liability on foreign
businesses and/or individuals. These individuals are not required to be a tax resident in the
applicable country and the businesses are not required to operate in the country.28
During 2014 and 2015, two cases arose, namely: South African Reserve Bank and Another v
Shuttleworth and Another29, and Shuttleworth v South African Reserve Bank30. These cases
are collectively referred to as the Shuttleworth cases for purposes of this research report. In
the Shuttleworth cases, it was established that Exchange Control is not a tax raising
mechanism, in other words not a form of taxation in terms of the South African Income Tax
Act (Income Tax Act)31. Instead it was regarded as a regulatory mechanism to prevent the
remittance of capital offshore by imposing an exit charge.32
If foreign assets or funds were not declared or accounted for in the taxpayers South African
income tax return, in terms of the Financial Intelligence Centre Act, 38 of 2001 (FICA),
SARS had the power to impose income tax on a calculated amount of foreign-held assets or
funds.33
26 FitzGerald, V., 2012, ‘International Tax Cooperation and Innovative Development Finance’, p. 1.
27 OECD, n.d., ‘International tax co-operation: Key indicators and outcomes’.
28 CFI Education Inc., n.d., ‘What is a tax haven?’.
29 [2015] ZACC 17.
30 (864/2013) [2014] ZASCA 157 (1 October 2014).
31 No. 58 of 1962.
32 Evans, S., 2015, ‘Shuttleworth loses R250m exit charge case in ConCourt’, Mail&Gaurdian.
33 Botha, L., 2017, ‘Tax and Exchange Control Alert: More exchange, less control – further amendments made to the
Currency and Exchanges Manual for Authorised Dealers’, Cliffe Dekker Hofmeyr, p. 4.
7
In later years, electronic foreign exchange (eForex) was introduced and approved by the
SARB. This posed challenges to the ordinary Exchange Control processes, which resulted in
an inclusion of eForex into the normal exchange control rulings and regulations.
Currently, uncertainty exists relating to the tax and Exchange Control implications arising
from Cryptocurrency transactions, such as Bitcoin34. This virtual currency has been defined
by the European Central Bank as follows:
a digital representation of value that is neither issued by a Central Bank or a public authority, nor
necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of
payment and can be transferred, stored or traded electronically.35
A Position Paper on Virtual Currencies was issued by the SARB stating that cryptocurrencies
are:
a digital representation of value that can be digitally traded and functions as a medium of exchange, a
unit of account and/or a store of value, but does not have legal tender status [underlining added for
emphasis].36
Therefore, in itself, cryptocurrencies are not subject to regulation by the SARB. Careful
consideration should still be made by South Africans when dealing in cryptocurrencies. The
SARB has indicated that it intends on releasing a new position paper on the approach to
cryptocurrencies.37
Accordingly, South Africa continues to apply exchange control regulations and requires the
prior approval from Authorised Dealers to remit funds offshore.
1.2 Problem statement
1.2.1 The research problem
The main research problem is a critical analysis of exchange control in a South African
context. This involves understanding its history (in other words the reason it was initially
implemented), its evolution since this and as a result, the liberalisation of regulations over
34 Gad, R. et al., 2018, ‘The tax and exchange control implications of cryptocurrency transactions’.
35 European Union, 2016, ‘Opinion of the European Union of 12 October 2016 on a proposal for a directive of the European
Parliament and of the Council amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the
purposes of money laundering or terrorist financing and amending Directive 2009/101/EC’.
36 SARB, 2014, ‘Position Paper on Virtual Currencies’.
37 Gad, R. et al., 2018, ‘The tax and exchange control implications of cryptocurrency transactions’.
8
time. The aim is to conclude on the role of exchange control in South Africa, the continued
relevance of exchange control in South Africa and the consequences that may arise post
abolishment of the same regulations.
The authors aim is to contribute to global knowledge, by compiling exchange control
considerations in association with practical implications and taxation matters, specifically in a
South African context.
1.2.2 The sub problem
This research report aims to analyse the exchange control regulations in South Africa and in
order to address the main research problem, specified above, the sub-questions set out below
will be addressed as part of this research report.
i. The implications exchange control has had on taxpayers and the SARS.
Following this, the potential consequences that may arise from repealing the
exchange control regulations in South Africa, for example, the extent of tax
collection by the SARS.
ii. The current exchange control regulations in South Africa compared to
Mozambique and Iceland. The purpose is to gauge an understanding of the scope
of Exchange Control’s movement in South Africa compared to these
jurisdictions. As a result, the implications of exchange control in these
jurisdictions compared to South Africa and its progress will be considered.
iii. Since Exchange Control was brought into effect, its rationale, change and
evolution to date will be analysed. In assessing the aforementioned, the change in
the exchange control policy, all indicators of South Africa repealing exchange
control, and its gradual liberation will be reflected upon. In addition, the
implications this liberalisation has had on the South African tax base, if any, will
be accessed.
iv. The potential consequences of repealing exchange control in South Africa will be
discussed by understanding the consequences another jurisdiction has faced,
9
namely: Venezuela. This will be applied to a South African context, in discussing
the effect on foreign direct investment, expansion of South African companies on
a global basis and tax matters.
v. Finally, the reasons South Africa should or should not abolish the exchange
control regulations will be explored. Accordingly, addressing the prevalence of
exchange control in South Africa will be considered.
1.3 Research methodology
The research method adopted is of a qualitative, interpretive nature, bases on a detailed
interpretation and analysis of amongst other things, case law.
An extensive literature review and analysis will be undertaken that includes numerous
sources, namely: books, cases, electronic databases, electronic resources – internet, journals,
magazine articles, publications, and statutes.
1.4 Chapter outline
The purpose and overview of each of the Chapters going forward in this research report is
presented below.
Chapter 1: Introduction
Chapter 1 provides an overview of exchange control and its history which includes what
exchange control is, the structure of exchange control reporting, when and why it was
introduced, its purpose and what it was designed to prevent. In a South African context, the
structure of exchange control and its evolution since it came into effect has been provided.
This chapter also explains the research problem and the sub-problems which sets out the
premise for the research report.
Chapter 2: Overview of exchange control
Chapter 2 of this report provides a brief overview is provided of exchange control residence
and the practical implications of being an exchange control resident. It also presents a general
overview of the tax-related matters which are considered as part of exchange control in South
10
Africa. It addresses South Africa’s tax collection by the SARS, which also considers the
multiple parties; namely: the SARS, the SARB and a taxpayer. Furthermore within a South
African context, it is considered whether exchange control acts a tax or regulatory
mechanism, as discussed in the Shuttleworth cases. The impact and outcomes of other
influential case law in the exchange control and tax space will be considered, namely: Oilwell
v Protec [2011] and Krok v CSARS [2015]. Accordingly, these cases support the view that
exchange control and tax are interlinked.
Chapter 3: The evolution of exchange control
Chapter 3 analyses the chosen jurisdictions exchange control regulation and compares this to
the South African regulation. The jurisdictions for consideration include Mozambique and
Iceland. Mozambique is a part of the Southern African Development Community (SADC),
which lead to this being chosen. The access to information and the extent of information
available also played a role in the selection Mozambique, as opposed to another SADC
country. Further, Iceland, a European country, is in the process of liberalising capital
controls, which lead to the selection of this comparative jurisdiction. The Bahamas is also in
the process of liberalising exchange control regulations, however this research report has
been limited to analysing one other jurisdiction, namely: Iceland. This chapter aims to
identify differences between South Africa and the respective jurisdictions, the scope of its
movement compared to that of South Africa and assessing South Africa’s exchange control.
The joint tax and exchange control amnesty is also considered in the evolution of exchange
control.
Chapter 4: Indicators of the liberalisation of exchange control in South Africa
Chapter 4 provides further analysis of the indicators of South Africa doing away with
exchange control, the gradual liberation and progression of the exchange control policy. This
includes exploring SARB’s indicators of the ‘fairness’ of enforcing exchange control in
today’s time and the practice of Authorised Dealers. For example, the name change from
exchange control department to FSD which is indicative of SARB’s relaxing intention38.
38 Bridge, N., 2010, ‘SARB Exchange control changes name’.
11
Chapter 5: Consequences of abolishing exchange control in South Africa
Chapter 5 sets out the consequences of doing away with exchange control, specifically
considering foreign direct investment, offshore expansion by South African companies, the
cost to the country, economic and tax matters. Venezuela has been selected as a jurisdiction
which has repealed portion of its exchange control regulations. The reasons that brought
about the repeal will be discussed and the consequences thereof will be addressed. Further,
reasons why South Africa should or should not abolish the regulations will be explored.
Accordingly, the aforementioned addresses the prevalence of exchange control in South
Africa.
Chapter 6: Conclusion
Chapter 6 is the final chapter which sets out the conclusion or resolution of the research
problem which is drawn from the analysis in the preceding chapters. Maintaining focus on
the relevance of exchange control in South Africa and the potential consequences of
retracting the regulations. Further, recommendations will be provided on the timing, process
and mitigation of adverse effects in abolishing exchange control in South Africa.
12
CHAPTER 2: OVERVIEW OF EXCHANGE CONTROL
2.1 Introduction
This chapter explores exchange control residency and its applicability in South Africa. It also
addresses some of the practical considerations of establishing exchange control residence in
South Africa and the related supporting document which is typically required by Authorised
Dealers in providing exchange control approval.
Further, in this chapter more focus is placed on considering exchange control in the South
African tax region. This takes into account the viewpoint of the SARS, a taxpayer and the
SARB. A further review of influential case law in South Africa has been conducted and the
precedence these cases have set in the exchange control environment is discussed.
2.2 Exchange control residence and the practical implications
A non-resident is defined by the exchange control regulations as a person whose normal place
of residence, domicile or registration is outside of the Common Monetary Area (CMA) being
South Africa, Lesotho, Namibia, and Eswatini. An exchange control resident is a person who
has taken up permanent residence, domicile or has been registered in South Africa. A non-
resident who is also temporarily resident in South Africa is a foreign national for exchange
control purposes.
Until such time that the SARB provides an official emigration approval, an individual will
sustain his/her title of a South Africa resident for exchange control purposes. This will imply
that until a declaration has been submitted to SARS ceasing an individual’s South African
residency, that individual will continue to be regarded as a South African exchange control
resident during the year of assessment in question. Hence, we can conclude within a South
African context that numerous actions are required as part of the emigration process,
specifically to successfully initiate and achieve emigration. This entails both tax and
exchange control considerations, in conjunction both of which attribute to the emigration
process.39
39 La Grange, H., 2017, ‘Relocating from South Africa’.
13
The author’s view is submitted for the remainder of Chapter 2.2, based on exposure to
exchange control in practice and communications with Authorised Dealers, with focus on the
practical implications of the exchange control process.
Upon residing in South Africa, a foreign national is required to declare in writing to an
Authorised Dealer, as proof of the foreign assets which are held by the same foreign national.
In the instance that the foreign national owns foreign assets, they are required to provide an
undertaking that they will not dispose of those foreign assets to a third party who is a South
African exchange control resident. The foreign nationals will also be required to provide an
undertaking that they have not applied for similar facilities, to dispose of foreign assets,
through another Authorised Dealer. After making the declaration and undertakings, a foreign
national may conduct his/her affairs on the basis set out below.
i. The ability for a foreign national to dispose of foreign assets without interference
from SARB’s FSD.
ii. A foreign national may utilise the banking services in South Africa as an
exchange control resident.
iii. A foreign national may hold non-resident rand accounts or foreign currency
accounts with an Authorised Dealer.
iv. A foreign national may re-transfer capital offshore, provided that he/she can
substantiate the original introduction of such funds into South Africa. This may
be done by providing proof or supporting documentation.
v. A foreign national may transfer lump sum amounts and monthly pensions
offshore, provided that related supporting documents are provided to an
Authorised Dealer prior to the transfer of any such funds.
Based on practice, it is the understanding that the SARB is considering changing its position
relating to individuals who have permanent residence in South Africa or individuals who
have been present in South Africa for more than a specified period of time, to which the exact
14
period of time has not been communicated yet. It is understood that SARB intends to treat
permanent residents or those present for more than a specified period of time in South Africa
as South African exchange control resident even if they do not consider themselves domiciled
in South Africa. In terms of the effective date of these proposed new rules, it is undetermined,
however it is advised that a circular will be issued by SARB, to which Authorised Dealers
will be obliged to comply with.
South African exchange control residents are subject to certain restrictions on foreign
exchange transactions, some of which are set out below, this is not a conclusive list.
i. An annual discretionary allowance has been allocated to each South African
exchange control resident, amounting to ZAR1 million.
ii. An annual foreign capital allowance has been allocated to each South African
exchange control resident, amounting to ZAR10 million. This can be approved
and utilised through an Authorised Dealer, without the intervention of the SARB
and its approval.
iii. A South African exchange control resident must provide the Authorised Dealer
with a South Africa Tax Clearance Certificate, when attempting to attain the
foreign capital allowance and utilising the benefit of the ZAR10 million
allowance.
iv. South African residents are not permitted to participate in offshore structures.
Specifically, structures which re-invest funds into South Africa by acquiring
shares, loan accounts or some other interest in a South African asset or resident
company. These types of structures are typically referred to as loop structures.
Upon placing more focus on a company perspective relating to exchange control, there are
supporting documents which are required to be submitted to an Authorised Dealer prior to
remitting funds from South Africa. The information that is required by an Authorised Dealer
from an exchange control perspective, relating to an agreement that has been concluded
between companies, such as a management fees agreement between two group companies,
has been set out below.
15
i. Related party agreements require prior approval from SARB.
ii. The application should include a background explanation of the South African
company’s nature of business and this company’s related shareholding it has in
other companies.
iii. In terms of the concluded agreement, the management fees must be charged at
arm’s length and must be market related. If the fees are percentage-based, then
the fees charged must be regarded as ‘normal’ for the trade concerned. Should
this not be the case, a supporting motivation must be attached to the application
submitted to the Authorised Dealer.
iv. A detailed description is to be provided relating to the exact services which are to
be rendered relating to the management fees. It should be explained what the
benefits will be, arising from the services rendered by the said party.
v. All parties relevant to the agreement should be specified and incorporated into the
relative agreement, by providing full details such as name, company registration
number and location.
vi. The Authorised Dealers require a full business motivation of the rationale behind
the management fees, such as the assistance with increased turnover of the
company and improving business efficiencies. This is required as a
recommendation to the application, which will be provided to the SARB.
vii. The rationale is provided to the Authorised Dealers regarding the reason behind
the signed agreements being concluded by the specified companies, however if
applicable, if the payment is being made by a different company within the group
then the reason behind this must be substantiated. The agreement should be
signed between parties making the payment and the one receiving the payment.
As advised by the Authorised Dealer, tax efficiencies from an exchange control
perspective will not suffice as a motivation and will not be considered.
16
viii. All agreements are to be provided to the Authorised Dealers, the copies of all
management fees / consultancy fees / assignment fees will be reviewed.
ix. Confirmation must be provided to the Authorised Dealer that the invoices will
provide a full description and/or breakdown of the exact services being invoiced.
The requests which are made by South African residents in order to make royalty and/or
management fee payments to offshore related parties, these requests should be made to the
FSD for its consideration. A related party is defined as a party to a transaction that has a
direct or indirect interest in the other party and has the ability to control the other party or
exercise significant influence over the other party in making financial and operating
decisions. Alternatively, both parties are under common control. In terms of the Authorised
Dealer Manual, this includes transactions between parties that belong to the same group of
companies such as parent, subsidiary, fellow subsidiary and/or an associate company.
2.3 Tax and exchange control
The concept of exchange control was challenged when applying the Constitution as it is
thought to be an infringement of human rights. Exchange Control was inherently known as
discrimination in nature and beneficial to the rich, however in terms of the Constitution, all
individuals were deemed to be equal in a non-discriminatory society. In this regard, it was
established that once all taxes are paid by individuals, it is argued that all their commitments
have been fulfilled and he/she should have the right to transfer money or repatriate their
funds as and when they desire.40 This view is further explained as part of the Shuttleworth
case analysis below. Under the circumstances that exchange control was not affected in South
Africa, individuals and/or companies would more likely than not exploited the government
and taxation in South Africa.41
40 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 157.
41 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 150.
17
The tax collected by the SARS from taxpayers were in actual fact used to fund the initial
capital outlay for the SARB to operate. Therefore, the taxpayer’s money was vital for
furtherance of SARB’s services.42
As an alternative to exchange control, the tightening of fiscal policy was a strategy used to
prevent capital inflows to South Africa. During the national budget in March 1997, the
business cycle was struggling, therefore it was challenging to further decrease the budget
deficit. In addition, the restriction of the fiscal policy caused the domestic rates to decrease
and the budget deficits to also decline. A downside to adapting the fiscal policy was that it
was time-intensive to implement changes to taxes. As a result, this was not a sustainable tool
in resolving the fleeting inflows of capital into South Africa.43 The movement of funds
overseas continues to be a favourable thought in the minds of individuals and/or companies
due to the crime, political uncertainties, the currency weakness and high tax rates in South
Africa.44
With effect from 1 July 1997, taxpayers over 18 years of age were permitted to invest a
maximum of ZAR200,000 offshore, provided that the taxpayer was classified to be in good
standing with SARS45. In order to be regarded as compliant with the National Treasury, a
Good Standing Tax Clearance Certificate must be obtained to be viewed as tax compliant.46
With effect during 1998, provided the taxpayer was regarded to be in good standing, these
individuals were permitted to invest in foreign assets valued at a maximum of ZAR400,000.
The budget speech during February 1999, increased this maximum to ZAR500,000 and
further to ZAR750,000 during the February 2000 budget. Since the permission came into
effect from 1 July 1997 to 1 February 1998, these taxpayers, in other words private investors,
repatriated capital amounting to ZAR793 million. This is considered a low amount, therefore
the lack of reaction from individuals allowed the South African authorities to lift the
restrictions and allowed the free outflows of capital from South Africa to offshore
jurisdictions subject to certain restrictions. 47
42 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 92.
43 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 173.
44 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 156.
45 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 177 - 178.
46 SARS, n.d., ‘frequently asked questions’.
47 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 177 - 178.
18
A downside of holding foreign currency deposits and/or investments through a South African
bank was the related bank charges for this particular service. This further decreased the
likelihood of individuals making foreign investments, coupled with the related South African
taxation imposed on this income earned from the investment. If SARS was of the idea that
the intention of the taxpayer was to obtain capital gains, the depreciation in the rand
compared to foreign currencies which resulted in capital gains, this is then subject to Capital
Gain Tax in South Africa, in terms of the Eighth Schedule to the Income Tax Act. The
portion subject to capital gains is the amount by which the investment increased (in other
words the appreciation in the investment), in other the words the difference between the
amount the investment was sold for less the initial cost of the investment. 48
Since 1994, South Africa expanded its Double Tax Agreement (DTA) network, which
allowed for better exchange of information internationally49. As such, this assisted in
liberalising exchange control measures as information was easily exchangeable and
transparent between South Africa and numerous other countries.
In Article 6 of Multilateral Convention on Mutual Administrative Assistance in Tax Matters,
the automatic exchange of information is allowed. Included in this convention is the
Multilateral Competent Authority Agreement (MCAA) is a framework which discusses the
automatic exchange of information. In this regard, this complies with the Standard for
Automatic Exchange of Financial Information in Tax Matters (SAEFITM). In considering
exchange control in South Africa, this displays the readily available information as a result of
these agreements which are standardised and efficient. Accordingly, there is little need for
several bilateral agreements. The MCAA may be tailored such that the signatories have
control over the exchange relationship, to which they both agree on what is permitted in this
regard. This exchange of information allows for confidentiality and data protection. 50
South African taxpayers were concerned that they would face large sums of tax penalties.
This would have taken place should SARS have discovered that the respective taxpayer
illegally held foreign assets51. The promulgation of the FICA increased the risk of holding
48 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 177 – 178.
49 Botha, L., 2017, ‘Tax and Exchange Control Alert: More exchange, less control – further amendments made to the
Currency and Exchanges Manual for Authorised Dealers’, Cliffe Dekker Hofmeyr, p. 4.
50 OECD, n.d., ‘What is the Multilateral Competent Authority Agreement’.
51 Botha, L and Brunton, L., 2017, ‘Tax and Exchange Control Alert: More exchange, less control – further amendments
made to the Currency and Exchanges Manual for Authorised Dealers’, Cliffe Dekker Hofmeyr, p. 4.
19
illegal foreign-held assets. FICA stipulated that SARS had the power to impose income tax
on foreign-held assets or funds that were not declared. SARS calculated an amount to be
imposed based on their knowledge of the assets or funds which were unaccounted for. This
right was provided for the 2003 tax year, ending 28 February 2003, and subsequent tax years.
There was a rise in the intolerance of tax haven jurisdictions, particularly relating to exchange
of information, which resulted in South Africa enforcing exchange control to prevent illegal
money laundering.52 The joint tax and exchange control amnesty is fundamental to evolution
of exchange control, which is discussed in detail in Chapter 3 below.
Specific to Value-Added Tax (VAT), the SARS Interpretation Note 30 (IN30) deals with the
supply of movable goods in terms of section 11(1)(a)(i) read with paragraph (a) of the Value-
Added Tax Act, 89 of 1991 (VAT Act) of the definition of ‘exported’ and the corresponding
documentary proof53. The supply of movable goods that are going to be exported, may be
zero-rated (in other words VAT charged at a rate of 0%). In order for this to apply,
documentary proof is required. The vendor is required to procure certain documentary proof
within 90 days from the date on which the movable goods are exported from South Africa. In
terms of the aforementioned, Authorised Dealer or SARB exchange control approval is a
form of documentary proof that is required. As such, the vendor must enter into a valid
written contract detailing the recipient of the payment, for the consideration of supply, which
is made after a period exceeding 6 months but less than 12 months, accompanied by the proof
of exchange control approval. Similarly, if the supply is made after 12 months, the relevant
exchange control approval is still required.54 The author submits that this is an administrative
intensive process which has to be complied with. The exchange control administrative
considerations are discussed in detail in Chapter 5 below.
Based on the above, the author submits that exchange control and tax in South Africa works
hand-in-hand and should be considered in conjunction when reviewing exchange control’s
relevance in today’s time.
52 Botha, L. and Brunton, L., 2017, ‘Tax and Exchange Control Alert: More exchange, less control – further amendments
made to the Currency and Exchanges Manual for Authorised Dealers’, Cliffe Dekker Hofmeyr, p. 4.
53 SARS Interpretation Note 30 (Issue 3), p. 1.
54 SARS Interpretation Note 30 (Issue 3), p. 10 - 11.
20
2.3.1 Influential exchange control case law in South Africa
2.3.1.1 The Shuttleworth cases
The Shuttleworth cases were influential cases in the exchange control and tax sphere in South
Africa; namely: South African Reserve Bank and Another v Shuttleworth and Another55, and
Shuttleworth v South African Reserve Bank56. Mr Shuttleworth had challenged the imposition
of a 10% exit charge, from a constitutional point of view, specifically his view was that the
exchange control system was unconstitutional in nature, in terms of section 195.57 The reason
for this thought is that the general public needs to consult the Authorized Dealers, in order to
provide permission for transfers, which contradicts the obligations in terms of public
administration. In addition to section 195 of the Constitution, it was also seen to be a
contravention of section 1 of the Constitution on the basis of foundational values of
accountability, responsiveness and openness. Upon consideration of the matters relating to
the Constitution, the court concluded that the ‘closed door policy’ was in line with the
constitution and was lawful. This was brought about based on the point that the SARB only
considered a fraction of the total exchange control applications received. Specifically, during
2010, SARB received 54,000 application from a total of 10,147,090 applications. It was
agreed that SARBs’ intervention is only required if it is beyond the scope of Authorised
Dealers.58
Typically, the 10% exit charge is payable by all South African citizens who are moving
amounts in excess of ZAR750,000 offshore59. Therefore, based on the courts view that the
transaction was constitutional and did not contravene the exchange control circulars, this was
a valid transaction on which the 10% exit levy is chargeable. As a result, Mr Shuttleworth
was not able to receive a refund of the 10% exit levy which he paid. The court further
accepted that the exit levy was imposed to ensure that capital remained in South Africa and
this was a method of preventing the export of capital from South Africa to offshore
jurisdictions, of which this is valid in terms of the Constitution.60
55 [2015] ZACC 17.
56 (864/2013) [2014] ZASCA 157 (1 October 2014).
57 Evans, S., 2015, ‘Shuttleworth loses R250m exit charge case in ConCourt’.
58 Croome, B., 2013, ‘Exchange control and the Shuttleworth decision’.
59 Evans, S., 2015, ‘Shuttleworth loses R250m exit charge case in ConCourt’.
60 Croome, B., 2013, Exchange control and the Shuttleworth decision.
21
The jurisdiction of implementing any tax regulation lies with the Minister of Finance and not
with the SARB, therefore the Minister of Finance was responsible for implementing the 10%
exit levy. An argument raised by Mr Shuttleworth was that the imposition of the 10% levy
was not reviewed and approved by the parliament. This argument was rejected on the
grounds that in terms of section 9(4) of the Currency and Exchanges Act, the promulgation of
the same regulation and Act was not implemented with the intention to increase revenue or
raises tax in. Instead, the reason for implementing the 10% levy was to protect the South
African currency.61
Mr Shuttleworth applied to the SARB to move ZAR2,5 billion offshore, on which an exit
charge of 10% was imposed, amounting to ZAR250 million. In this regard, the crux of the
case is that Shuttleworth argued that the exit charge was a form of taxation, while the
government argued that the charge was not a tax. The government regarded the exit charge as
a disincentive for wealthy individuals to move the inheritance or fortunes offshore. The
SARB argued that the exit charge was not a revenue or tax raising mechanism, in other words
tax, instead it is a regulatory mechanism. This mechanism was tailored to prevent the moving
of capital offshore. The Supreme Court of Appeal agreed with the National Treasury that the
exit charge was a regulatory mechanism, not a revenue raising mechanism.62
2.3.1.2 Oilwell v Protec
There was uncertainty around the meaning of ‘capital’ as stated in regulations 10(1)(c) of the
exchange control regulations, which was clarified in Oilwell v Protec [2011]63. This case
clarifies that the National Treasury does not have the power to prohibit the export of
intellectual property overseas. The National Treasury amended the exchange control
regulations to include intellectual property as part of ‘capital’ as defined, in order to exercise
control over capital-related matters.64
The Court came to the verdict that the validity of the 1998 assignment was apparent and that
Oilwell had no claim to the trademark, this was mainly in conjunction to regulation 10(1)(c)
61 Croome, B., 2013, ‘Exchange control and the Shuttleworth decision’.
62 Evans, S., 2015, ‘Shuttleworth loses R250m exit charge case in ConCourt’.
63 Strauss, B., 2011, ‘Tax Alert: "Oilwell” that ends well: exchange control and export on capital’, p. 1.
64 Strauss, B., 2017, ‘Tax and exchange control alert: relaxation of exchange controls relating to intellectual property and
foreign investment’, p. 2.
22
which states that trademarks cannot be ‘exported’. A further acknowledgement from the court
was that trademarks, just like any other intellectual property rights are jurisdictional and
similar to the nature of immovables. The Treasury is focused on preventing the export of
intellectual property, similarly The Treasury also sets out to prevent the export of copyrights
and trademarks. As a result of the Oilwell case, it has been established that The Treasury
however has no jurisdiction on putting a hold to offshore assignments relating to intellectual
property. In this regard, The Treasury is able to amend the regulations such that the transfer
of intellectual property is not allowed. This amendment would potentially be viewed to be
contradictory in nature, as according to the state policy of the Treasury, there has been a
gradual relaxation of exchange controls over numerous years and limiting the transfer of
intellectual property would not be a reflection of this intention.65
2.3.1.3 Krok v CSARS
Another influential case focused on exchange control and tax is Krok v CSARS [2015], which
is discussed in detail below.
During 2002, Mr Krok made the decision to emigrate from South Africa to Australia. A trust
was previously established for the benefit of Mr Krok, through which assets were granted to
him. Accordingly, Capital Gains Tax (CGT) arose in his hands as the beneficiary. The assets
were distributed to Mr Krok as it was considered to be tax efficient. In other words, the asset
would have been taxed at a lower rate in his hands compared to the high tax rate in the trust.
This would also be to his advantage as he has ceased to be a South African tax resident and as
such, if the assets are held in his name, the assets will not be subject to CGT. Thereafter he
had been directed to a view point that it was less complex for income to be remitted to him
under the exchange control rules if the assets were in his name compared to holding the assets
in the South African trust. The DTA concluded between Australia and South Africa was
affected on and after 21 December 1999. The DTA, specifically Article 25, initially
addressed the exchange of information, however did not contain an Article for the gathering
of taxes by the revenue authorities. 66
65 Strauss, B., 2011, ‘Tax Alert: "Oilwell” that ends well: exchange control and export on capital’, p. 2 - 3.
66 Mazansky, E., 2016, ‘South African Supreme Court of Appeal Confirms Application of Protocol to a Tax Treaty to a
Period before Signature Date’.
23
The decision brought about in the Krok and Another case urges the SARS to apply a wide
translation to the Mutual Administrative Assistance in Tax Matters. South African courts are
therefore liable to adopt a liberal strategy in light of the Krok and Another case, in
sanctioning aid under the Multilateral Convention with regards to the taxes applying to years
going before its date in which it came into effect. The SARS could look to depend on these
decisions to convince offshore jurisdictions to aid with gathering charges owed by South
African citizens, where they have recognized funds which were offshore and would have
given rise to a tax obligation before the Multilateral Convention came into effect.67
2.4 Summary remarks
This chapter illustrates the how exchange control and tax are not mutually exclusive.
Exchange control has played a fundamental role in South Africa’s tax collection by the
SARS. It is apparent that the exchange of information amongst the South African authorities;
namely the SARB and SARS, have improved and this communication limits illegal activity.
It is also vital for taxpayers to remain compliant with the SARS in order to be regarded as an
exchange control resident in South Africa and to obtain exchange control approval since the
Tax Clearance Certificate is a part of the exchange control approval process. Accordingly, the
exchange control regulations and transparency with regards to the exchange of information,
assists the SARS in its tax collection.
It is important to establish the difference between tax residency and exchange control
residency. A South African exchange control resident may re-transfer capital offshore more
freely conduct his/her affairs through a South African bank or Authorised Dealer. Exchange
control residents are still required to obtain prior approval for specific transactions.
Therefore, the approval attaches the rights to effecting certain transactions.
In support of the view that exchange control and tax are linked, there are numerous influential
case law that arose which addresses both exchange control and tax matters in South Africa.
These cases provide clarity on the capital as defined (such as the inclusion of intellectual
property), the removal of capital from South Africa, the collection of tax by the SARS from
individuals who should have been liable for tax in South Africa.
67 Mazansky, E., 2016, ‘South African Supreme Court of Appeal Confirms Application of Protocol to a Tax Treaty to a
Period before Signature Date’.
24
Consequently, the liberalisation and abolishment of exchange control regulations will likely
affect tax in South Africa and potentially affect the tax base and related collection of tax by
the SARS.
25
CHAPTER 3: THE EVOLUTION OF EXCHANGE CONTROL
3.1 Introduction
The progression of exchange control in South Africa is demonstrated by establishing the
differences and similarities of exchange control in South Africa against comparative
jurisdictions, namely: Mozambique and Iceland. The purpose of this chapter is to assess the
movement of exchange control in South Africa compared to an African country and a
European country.
A fundamental element to the evolution of exchange control is the joint tax and exchange
control amnesty, which gave individuals and entities the opportunity to declare any illegal
transfer of funds. This chapter explores the joint tax and exchange control amnesty and the
contribution it had to exchange control.
3.2 South Africa compared to the SADC
As discussed previously, individual taxpayers who were in good standing with SARS and
over the age of 18, were permitted to move capital offshore, limited to ZAR750,000 during
February 2000. In conjunction with this, individuals were allowed to invest in fixed
properties, such as farms and holiday homes, in any Southern African Development
Community (SADC) country.68 The SADC was established in 1992. The purpose is a
platform to assist in regional integration and poverty eradication in Southern Africa. A means
of eradication is through economic developments and establishing peace and security. The
regional economic community comprises of 16 states namely;
Angola, Botswana, Comoros, Democratic Republic of Congo, Eswatini, Lesotho,
Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Tanzania,
Zambia and Zimbabwe.69 Mozambique is a part of the SADC.
It has been observed that the liberalisation of exchange control matters has progressed more
in other SADC countries compared to South Africa, as such there has been slow progress in
South Africa in this regard. Consequently, some SADC members have put pressure on South
68 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 169.
69 SADC, n.d., ‘About SADC’.
26
Africa to further liberalise its exchange control regulations. Focus has been placed on
improving investments made by South African residents in the respective SADC member
countries. In this way, the SADC members will be assisting in improving its platform and
growth for regional integration and poverty eradication in Southern Africa. Accordingly, the
SADC showed strong arguments in favour of its proposal that South Africa builds on its
investments into the SADC member countries, in which portfolio investments should be
made by South African investors into the SADC. The liberalisation of South Africa’s
exchange control regulations was insinuated by a public relations triumph that the SADC
members were focused and dedicated to achieve financial and economic co-operation
amongst the SADC member countries.70 There was a suggestion to maintain unrestricted
capital mobility in the SADC, however a common wall of exchange and capital control
among the SADC countries will still remain. As a result, the common currency is not
subjected to international capital mobility, this would also be the situation with the CMA
rand zone.71 As defined in the SARB currency and exchanges guidelines, the CMA includes
Lesotho, Namibia, South Africa and Eswatini. This being said, prior to any liberalisation of
the exchange control regulations in South Africa, the members of the CMA must be
considered and consulted, as these jurisdictions shared similar exchange control measures. 72
The exchange control measures focused on capital accounts have been liberalised in countries
where the domestic savings rate is low, as this will promote the inflow of funds into the
SADC member country. The liberalisation of exchange controls also assists in the spread of
risks, because the economic climate differs across different countries. Therefore, the cycle
differs and the diversification of one’s investment portfolio reduces the risk of volatility in
their personal inflow of funds. As such, there are great benefits to be reaped from
diversifying investments between the local and international markets since the risk the shares
are faced are different and take place at different times. This also encourages welfare and
improved technology. Please see Appendix ‘A’ attached hereto for a tabular summary
illustration of these costs and benefits associated with liberalising capital account. 73
70SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 164
71 Ellyne, M., and Chater, R., ‘A new index for measuring SADC exchange control restrictiveness’, p. 139 - 140.
72 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 165.
73 Ellyne, M., and Chater, R., ‘A new index for measuring SADC exchange control restrictiveness’, p. 141 - 142.
27
Specific to the SADC jurisdictions, the relaxation of exchange control measures relating to
the restrictions placed on current accounts will give rise to a positive reflection of the relevant
country’s policies and economic governance. Accordingly, investors are motivated to invest
within the SADC member countries, therefore there will be an increase in the inflow of funds
(in other words increased trade) and less outflows of capital in comparison. With a specific
focus on service accounts, the prime reason for maintaining exchange control measures is to
prevent illegal capital outflow of funds. To the contrary, the liberalisation of current accounts
may increase competition and uncontrollable exchange rate fluctuations. Please see Appendix
‘B’ attached hereto for a tabular summary illustration of these costs and benefits associated
with liberalising current account. 74
The relaxation of both the capital and current account is an indication of the country’s
commitment to improving economic matters and that country is committed to all-
encompassing future management. 75
Similarly, to South Africa, in Mozambique pre-approval is required from the Central Bank
prior to remitting funds to an offshore jurisdiction. The proof of the relevant agreements is
required by the Central Bank for their perusal, after which approval is provided. This process
is required for every offshore payment that is made, in other words each payment requires
pre-approval by the Central Bank to remit the funds. In addition, specific to a company, the
company’s commercial bank is required to disclose to the Central Bank the company’s
financial capacity to make a payment of the related magnitude. 76
The Mozambique revenue authority requires proof of withholding tax compliance that may
apply.77
The fundamental goal of the new regulation in Mozambique, discussed below, is to enable
the Central Bank to police the ‘Exchange Control Authority by the Mozambique Central
Bank’ as put forward under the Constitution of the Republic of Mozambique. 78
74 Ellyne, M., and Chater, R., ‘A new index for measuring SADC exchange control restrictiveness’, p.141 - 142.
75 Ellyne, M., and Chater, R., ‘A new index for measuring SADC exchange control restrictiveness’, p.141 - 142.
76 Harding, C., 2010, ‘African exchange controls – almost everywhere you go’.
77 Harding, C., 2010, ‘African exchange controls – almost everywhere you go’.
78 EY, 2017b, ‘Mozambique approves new exchange control regulations’.
28
In Mozambique, an infringement of trade controls regulations is viewed as a criminal offense,
which as a result attracts concomitant penalties. On 15 August 2017, Mozambique's Council
of Ministers scrapped the exchange control regulations that existed at the time and endorsed
the new regulations under the Exchange Control Law. As a result, the Central Bank now
regulates the process and sets the terms and conditions that need to be met in order to attain
exchange control approval.79
It is normal that the Central Bank will supply increasingly versatile and vigorous exchange
rules, to be balanced every now and then, as it showcases the market’s pre-requisites. The
main changes to the regulations have been set out below.
i. Pre-approval by the Central Bank is required for a rundown of transactions.
ii. The inflow and outflow of foreign currency will be liable to conditions and
confinements, which are dictated by the Central Bank.
iii. The remittance of fare profits of products, ventures and investment income
created abroad will be liable to the terms and conditions which are characterised
by the Central Bank.80
On 11 December 2017, the Central Bank Issued Notice No. 20/GBM/2017, which has come
into effect on its publication as part of the Official Gazette. The changes that arose have been
briefly set out below.
i. The sale of goods or services and the revenue arising from offshore investments
are no longer subject to an apportioned local currency, namely Mozambican
metical (MZN), conversion of 50%, instead the funds are fully held in the foreign
currency. The foreign denominated currency is used to fund any cross-border
transactions, while only the funds used for local payments is converted to the
local currency. This is known as the repatriation of export earnings regime.
79 EY, 2017b, ‘Mozambique approves new exchange control regulations’.
80 EY, 2017b, ‘Mozambique approves new exchange control regulations’.
29
ii. The foreign direct investment is only required to be registered with the local bank
within 90 days of the entrance of funds, as a result this allows flexibility when
there is an inflow of capital into Mozambique.
iii. Subject to certain requirements, the investments through loans or credit received
from related entities received from a non-Mozambique resident no longer require
prior approval from the Central Bank and is only subject to the local bank’s
approval. 81
In considering the above, the changes are mainly focused on the Bank of Mozambique, as an
exchange control authority, as more power has been placed in its hands as it has been
allocated its own regulatory power. The reason for this change is the influx of transactions
and movement of funds between Mozambique and foreign jurisdictions. Other than this, there
has not been a substantial change in the fundamentals of the exchange control regime in
Mozambique.82
Similarly, to South Africa, Mozambique has liberalised its exchange control regulations.
Factors which display this relaxation is the increased flexibility, reduced bureaucracy, the
reduced administrative burden on the respective Central Banks and the positive impact on
business activity.83
Particularly from a South African perspective, it was essential that the relaxation of exchange
control does not defeat the essence of the purpose of the regulations and that the remaining
regulations were still sufficient and executed. As an example, SARB has provided the
following: If South African investors were allowed to buy shares on the Botswana Stock
Exchange, specifically in Gaborone, it is vital to ensure that these investors do not
subsequently sell the shares listed on the Botswana Stock Exchange to foreign investors (for
example from London).84 As such, the author submits that both South Africa and
Mozambique have taken the initiative to liberalise exchange control regulations in South
Africa and Mozambique. Neither South Africa nor Mozambique are ahead of one another,
81 PwC, n.d., ‘Revision of the Exchange Control Regulation – Notice No. 20/GBM/2017’, p. 1.
82 Neves, L., 2018, ‘Mozambique’s new rules on foreign exchange control’.
83 PwC, n.d., ‘Revision of the Exchange Control Regulation – Notice No. 20/GBM/2017’, p. 1.
84 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 165.
30
instead both have taken the necessary steps in tailoring the exchange control liberalisation to
the circumstances apparent in their respective jurisdictions.
3.3 South Africa compared to Iceland
Iceland, a European country, experienced a crisis in which investors needing liquidity,
through the form of cash, had tried to remove all their cash reserves out of Iceland. As a
result, Iceland experienced a major influx of capital, exploiting the high interest rates paid by
the banks, while individuals in Iceland loaned from foreign jurisdictions at a lower interest
rate. The currency in Iceland is Icelandic Króna (ISK), and this caused the ISK to deteriorate
and collapse. In addition, the banks in Iceland too collapsed. Subsequently, Iceland secured a
rescue package from the International Monetary Fund (IMF). In terms of the exchange
control regime, investors who held offshore ISK-denominated accounts that yielded high
returns, were restricted from bringing the funds back into Iceland. During 2015, the Central
Bank of Iceland announced that the exchange controls would be revoked and in this regard,
investors had the ability to bring the funds back into Iceland. This was either done by buying
ISK currency, which was purchased at a discounted official exchange rate. Alternatively
investors had the option to purchase government bonds in Iceland, which is a long-term
investment. A significant penalty will be imposed if the long-term investments are sold early,
therefore if the government bonds are attained the investors are indirectly ‘locked-in’.85
From 14 March 2017, new Rules on Foreign Exchange came into effect. In this regard, a
prominent portion of the restrictions have been removed for the flow of foreign exchange
transactions, particularly in relation to the movement of local and foreign currencies inflow
and outflow from Iceland. These changes have largely impacted households and businesses
and have had a significant impact since it was first introduced in 2008. The foreign exchange
act no longer applied restrictions to households and businesses relating to foreign investment,
foreign exchange transactions, hedging and lending activity.86
85 Kenton, W., n.d.,’ Exchange Control’.
86 EY, 2017a, ‘Iceland removes most restrictions on foreign exchange transactions and cross-border movement of domestic
and foreign currency’, p. 1.
31
Previously certain transactions were subject to exemptions, however these transactions which
were not authorised, have now become authorised transactions, such as foreign investments
made by pension funds or collective investment schemes (known as UCITS). 87
Cross-border transactions which are denominated in ISK are now authorised to be
undertaken. These transactions may be in the form of funds denominated in ISK and financial
instruments which have been issued in Iceland in ISK. Accordingly, the transactions may be
in an inflow into or outflow outside Iceland. Despite the change in the aforementioned, where
the requirements are met in terms of the restrictions detailed in the Treatment of ISK-
Denominated Assets Subject to Special Restrictions Act no, 37/2016, known as the offshore
ISK assets, there rules remain the same and these assets denominated in ISK require
authorisation. In addition, no changes have been made to specified investments, relating to
the inflow of foreign currency into Iceland, therefore the special reserve requirements still
exist and remain unchanged.88
In terms of the Iceland Foreign Exchange Act no. 87/1992, the rules provide for a general
exemption on all the limitations, with the exception of the following on which has the
restrictions will still be maintained in terms of the rules:
i. derivatives trading which are held for purposes other than hedging;
ii. foreign exchange transactions that are carried out between residents and non-
residents, without the input of a financial undertaking; and
iii. foreign-denominated loans made by residents to non-residents, which are
assessed based on the specific circumstances.
The Central Bank of Iceland released guidelines which explain the restrictions placed on
trade, in relation to the Rules on Special Reserve Requirements on New Foreign Currency
Inflows, no. 490/2016. This shows the relaxation of exchange control regulations, in terms of
the Foreign Exchange Act, to which a further amendment was made. These changes ensure
that there is no undesirable inflow of capital funds into Iceland. These amendments to the
87 EY, 2017a, ‘Iceland removes most restrictions on foreign exchange transactions and cross-border movement of domestic
and foreign currency’, p. 1.
88 EY, 2017a, ‘Iceland removes most restrictions on foreign exchange transactions and cross-border movement of domestic
and foreign currency’, p. 1.
32
rules are subjected to special restrictions in terms of the Treatment of ISK-Denominated
Assets Subject to Special Restrictions Act no. 37/2016, in which ISK-denominated assets
held offshore are not affected. Most of the exchange control measures have been removed
from businesses and households, therefore the relevance of exchange control is questionable.
The intention of further liberalising exchange control is to focus on offshore ISK-
denominated assets. A consideration for Iceland in how to resolve the release of these assets.
Any movement of capital funds still require the Central Bank of Iceland to oversee the
transactions. As such, approval is no longer required, however foreign exchange transactions
that were previously required to be approved, now it merely needs to be disclosed to the bank
(in other words a disclosure requirement). The focal point is to reduce administrative burden
and simplifying disclosure requirements. As a result, the Central Bank of Iceland will be able
to pay attention to the balance of payments and the financial system. The reason for placing
focus on the balance of payments is because there instability here could have adverse effects,
such as monetary, exchange rate and financial instability. 89
The Iceland Foreign Exchange Act was liberalised as the maximum amount of transfers were
no longer in effect. As a result, no limitations were placed on individuals and companies in
respect of capital transfers. Previously, limitations were placed on the amount of capital
transfers that were allowed to take place, as this affected the movement of capital across
borders and the foreign exchange market. As mentioned, this maximum was later removed.
Subsequently, the Central Bank of Iceland’s foreign exchange reserves largely increased, to
approximately ISK800 billion. The goal is to maintain the surplus on current accounts, to
reduce foreign liabilities and to retain Iceland’s related net external position. The
aforementioned promotes a stable market. Accordingly, Iceland is in the position where
exchange control liberalisation of the capital measures will positively impact its economy, as
the conditions of global economy too are favourable. 90
89 EY, 2017a, ‘Iceland removes most restrictions on foreign exchange transactions and cross-border movement of domestic
and foreign currency’, p. 2.
90 EY, 2017a, ‘Iceland removes most restrictions on foreign exchange transactions and cross-border movement of domestic
and foreign currency’, p. 2.
33
Lastly, the Central Bank of Iceland faces lower risk in the long-run when considering the
acquisition of offshore ISK-denominated assets from the dominant owners. This will likely
enable the abolishment of exchange control.91
As discussed above the author submits that, Iceland, similarly to South Africa, is in the
process of liberalising exchange control measures, with the view of eventually abolishing
exchange control regulations. The economic conditions present in South Africa compared to
Iceland differ, therefore the mechanisms in which they liberalise exchange control differ.
Iceland has experienced positive results from the removal of the cap on the outflow of capital
from the country. This is not an aspect that South Africa adopted as there is a limitation in the
outflow of capital from the country. Consequently, South Africa is able to consider the
liberalisation of its exchange control measures by removing this limitation as this may
improve its economy, competitive advantage and be in line with global conditions.
Both South Africa and Iceland are on similar paths as they have both released further
guidelines with the intention of further liberalising exchange control, and they consider all
risk and rewards present in the economic environment prior to making a drastic removal of
exchange controls.
3.4 South Africa’s holistic movement in exchange control
In the instance that the macroeconomic and financial policies were more favourable in South
Africa, the conversion of capital or capital flight would have been easier to manage. Ideally,
these policies should incorporate the conditions of the domestic and international financial
markets. South Africa specifically needs to incentivise individuals and/or entities to not move
funds offshore by displaying the favourable conditions South Africa has to offer. The reason
is that there would be less capital flight if South Africa was marketed as an attractive place
for financial investment (in other words making money). As such, South Africa would
typically need to limit the levying of tax on financial income, wealth and transactions. The
attention of foreign investors was caught based on South Africa’s economic conditions which
promoted the inflow of capital into South Africa. It was vital that Exchange Control remains
in the context of South Africa’s economic conditions and policies. South Africa would need
91 EY, 2017a, ‘Iceland removes most restrictions on foreign exchange transactions and cross-border movement of domestic
and foreign currency’, p. 2.
34
to build on its domestic financial system and a reduction in the inflation rate would also be
beneficial prior to the removal of exchange control.92
As explained above, within the SARB, the exchange control department are the successors of
the FSD. The objective of establishing the FSD is to ensure the rand is at all times protected
to ensure that the South African economy is balanced and sustainable into the future. The
powers allocated to the FSD is granted in terms of the legislature, in which it states that its
main purpose is to govern the inflow and outflow of capital. Another layer to the FSD lies an
investigation division. This division is responsible for to investigating alleged contraventions
of the exchange control regulations and to ensure the losses are recovered and the same losses
are recouped to the country’s foreign currency reserves.93
During 1995, South Africa received large inflows of foreign capital. This assisted South
Africa with its integration with the international financial market and hugely beneficial to
South Africa since numerous years of huge outflows of capital from South Africa. An
increase in the net foreign reserves was facilitated by these inflows of capital, which was
more than enough to finance the South African deficit on the current account of the balance
of payments. In conjunction, this caused difficulties relating to the management of the South
African money market.94
The FSD announced amendments to the Authorised Dealer Manual and other guidance
documents on 20 April 2017. These amendments granted additional powers to the Authorised
Dealers, which resulted in a decrease of the FSD’s involvement and the need for approval.
This is regarded to be positive progress as conducting business in South Africa and abroad
became easier. Examples of the amendments which resulted in a decline in the FSD’s
involvement and in shifting the responsibility to Authorised Dealers, are the setting up of
foreign bank accounts, the approval solely by the Department of Trade and Industry (DTI) of
licence agreements involving the local manufacture of goods and miscellaneous transfers
such as refunds which now required approval from the Authorised Dealers.95
92 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 153
93 Croome, B., 2013, ‘Exchange control and the Shuttleworth decision’.
94SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 172.
95 Botha, L. and Brunton, L., 2017, ‘Tax and Exchange Control Alert: More exchange, less control – further amendments
made to the Currency and Exchanges Manual for Authorised Dealers’, Cliffe Dekker Hofmeyr, p. 2-3.
35
SARB issued Exchange Control Circular No. 7/2017 and the Currency and Exchanges
Manual for Authorised Dealers, which explained that individuals and companies no longer
required SARB approval for intellectual property transactions, provided that these
transactions were at fair market value and were at arms-length. These changes allowed the
Authorised Dealers to provide approval and approval was no longer required from the SARB.
This change came with conditions such as the Authorised Dealers are required to review the
sale or transfer agreements and the basis of calculation of royalty or licence fee through an
auditors letter or the intellectual property valuation certificate. This transfer was required to
take place 30 days from approval by the Authorised Dealers and the transfer of the license
back to South Africa was not allowed. The transfer of intellectual property is subject to the
appropriate tax implications.96 The exercise of obtaining an auditor’s letter and intellectual
property valuation is time-consuming and cost-intensive97.
Since South Africa is still subject to exchange control regulations, individuals and/or
companies should diversify their savings abroad. As South Africa has become import
intensive, this influences the changes in the rand, inflation, credit ratings and interest rates.
Therefore, it is vital not to be isolated to South Africa as local income may stagnate while
offshore income rises.98
A contributing factor to the lack of outflows of capital was high share prices internationally,
this hindered foreign investments, and the high interest rates which were imposed in South
Africa. Foreign investments made by individuals continued to be low as a result of high
indebtedness. In conjunction with this, the income to savings ratio in South Africa was low,
which further did not promote foreign investments.99 Collectively, this attributed to the lack
of increased capital outflows from South Africa to offshore jurisdictions100.
Currently, if the total value of your baggage exceeds ZAR50 000, you are, for the purposes of
exchange control, required to get a No Exchange Provided (NEP) form at any commercial
bank before your departure from South Africa.101
96 Strauss, B., 2017, ‘Tax and exchange control alert: relaxation of exchange controls relating to intellectual property and
foreign investment’, p. 2.
97 Strauss, B., 2017, ‘Tax and exchange control alert: relaxation of exchange controls relating to intellectual property and
foreign investment’, p. 3.
98 Smith, C., 2018, ‘Managing foreign exchange volatility’.
99 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 177 – 178.
100 SARB, 2011, ‘South African Reserve Bank monetary policy in the decade 1989 to 1999’, p. 169, 177 – 178.
101 Network migration, 2018, ‘SARS notice to people leaving South Africa - May 2018’.
36
In terms of exchange control residence, a natural person will constitute a resident who has
established permanent residence or is domiciled in South Africa. The formal emigration
process and approval must be obtained from the SARB, which can be obtained through an
Authorised Dealer. Thereafter the individual will be viewed as an emigrant in South Africa.
With regards to formal emigration, it is not required to forego South African citizenship,
submission of one’s passport, or disposing of any immovable property in South Africa.102
The emigration application will incorporate a form, titled the MP336(b). Coupled with this
form, a Tax Clearance Certificate must be obtained from SARS. This can be generated
through the SARS e-filing system. So as to be viewed as an emigrant person of South Africa,
a formal migration endorsement must be secured from the SARB through the approved
Authorised Dealer at the person's South African commercial bank. The South African
authorities also look for the individual’s net financial position in South Africa. In other
words, the individuals are required to compile a statement of assets and liabilities for the
authorities to review. This is required for any spouse who is also emigrating alongside the
individual. This is not a conclusive list and the authorities may require further detailed
information, which will be requested at their discretion. In terms of exchange control
facilities, a foreign capital allowance of ZAR20 million per family unit or ZAR10 million for
each individual may be utilised by emigrants during the period of emigration. The process of
emigration is a lengthy process, which may take place over a period of 12 months, if not
more, prior to the finalisation of the emigration process. This period will depend on the
nature of the assets and liabilities and the furnishing of supporting documents which may not
be easily accessible.103
It is clear that exchange control regulations in South Africa have experienced considerable
movement and has not remained unchanged. The author submits that this is of importance as
it depicts that with the changing economic environments, exchange control regulations too
has evolved. A focal point of liberalisation has been the delegation of powers, specifically
that South Africa has placed less focus on the FSD and has allocated a degree of exchange
control approval authority to the Authorised Dealers.
102 La Grange, H., 2017, ‘Relocating from South Africa’.
103 La Grange, H., 2017, ‘Relocating from South Africa’.
37
Based on the above analysis is noted that the exchange control approval process, specifically
the emigration process, is still a lengthily process which is both administrative cost-intensive.
This indicates that the exchange control process is not necessarily efficient and may in fact
hinder economic growth if transactions and emigration are time consuming.
3.5 Joint tax and exchange control amnesty
The Minister of Finance, Trevor Manuel, announced the introduction of the joint tax and
exchange control amnesty on 15 May 2003. He explained that this was a chance to prevail
unfavourable economic climate by placing confidence in the South African economy, by
allowing individuals to declare their contravention of the Exchange Control Regulations and
the South African Tax Acts. 104 The introduction of the joint tax and exchange control
amnesty is viewed to be an interesting mechanism in achieving the relaxation of exchange
control. The reason for this is that amnesties more likely than not erode government
credibility and is known to be ‘deeply destructive of sound public finance’. The reason for
considering the tax amnesty was as a result of international success. Specifically applicable to
South Africa is the intention to regularise the assets which are held offshore and to correctly
include this amount in the South African tax base, this is titled the ‘regularisation of
undisclosed offshore investments’.105
The application of the same amnesty would attain the regularisation, in terms of exchange
control and tax, of their affairs in respect of foreign assets held. The timing thereof was also
appropriate as there was an increased desire amongst South Africans to voluntarily regularise
their personal affairs to attain international co-operation, specifically in relation to tax
compliance.106
In terms of the exchange control regulations, the non-disclosure of foreign-held assets or
funds resulted in criminal prosecution. Therefore, South Africans were reluctant to disclose
any funds which were illegally held for tax purposes as there was a fear of criminal
104 Botha, L. and Brunton, L., 2017, ‘Tax and Exchange Control Alert: More exchange, less control – further amendments
made to the Currency and Exchanges Manual for Authorised Dealers’, Cliffe Dekker Hofmeyr, p. 1, 4.
105 Farrell, G.N. and Todani, K.R., 2004, ‘Capital flows, exchange control regulations and exchange rate policy: The South
African experience’, p. 28 – 30.
106 Botha, L. and Brunton, L., 2017, ‘Tax and Exchange Control Alert: More exchange, less control – further amendments
made to the Currency and Exchanges Manual for Authorised Dealers’, Cliffe Dekker Hofmeyr, p. 1, 4.
38
prosecution.107 Despite the fact the fund arising from these investments were legally and
legitimately acquired, the issue lies with the way in which these funds were repatriated
offshore. This manner in which the funds were transferred puts it into the illegal and criminal
bracket.108
South Africa applies the residence-based tax system, therefore since the investments of the
funds offshore were not reported to the SARB, the funds remained outside of the tax
system109. The joint tax amnesty entailed an opportunity to rectify matters which were not
previously disclosed. This provided an equitable treatment for previous transgressions. The
reason for implementing the tax amnesty was to regularise these transfers of funds by
bringing them into the South African tax net, putting it on SARS’ radar, and removing the
chances of any criminal prosecution.110 This also paved the path for the disclosure of future
foreign income earnings or the acquisition of foreign assets. Accordingly, this allowed
individuals to retain their offshore assets and allowed for the repatriation of assets.111
The key to the success of the joint tax and exchange control amnesty was that with it comes
credibility. This relates to credibility with SARS, as taxpayers understand that the investment
market will continue to be favourable. A further point of credibility was the government’s
commitment to de-criminalise the previous non-disclosure of repatriating funds and that no
future amnesties will be applied, in other words it’s now or never as there is a deadline for
submission. 112
In order to obtain the benefits of the joint amnesty, an application needed to be submitted
between 1 May 2003 and 31 October 2003.113
107 Botha, L. and Brunton, L., 2017, ‘Tax and Exchange Control Alert: More exchange, less control – further amendments
made to the Currency and Exchanges Manual for Authorised Dealers’, Cliffe Dekker Hofmeyr, p. 4.
108 Farrell, G.N. and Todani, K.R., 2004, ‘Capital flows, exchange control regulations