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'Exchange control won’t disappear overnight’

Wednesday, 09 September 2015   (0 Comments)
Posted by: Author: Ingé Lamprecht
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Author: Ingé Lamprecht (Moneyweb)

Not enough foreign reserves to cater for potential outflows – expert.

While the South African Reserve Bank (Sarb) and National Treasury have stated their intention to continue with the relaxation of exchange controls, it probably won’t disappear any time soon, an expert says.

As part of a broader move towards the relaxation of exchange controls, National Treasury announced in its Budget Review this year that South African residents’ foreign capital allowance would increase from R4 million to R10 million per calendar year from April 1.

Speaking at the Tax Indaba 2015, Charles van Staden, head of exchange control at Hogan Lovells, said the increase was a major announcement.

Van Staden said the allowance of R4 million catered for the requirements to exit funds of about 95% of all households in South Africa. At this point (following the increase) it is probably closer to 97%.

Yet, there are still families that need to exit more than this, he said.

"I however do not see exchange control disappearing overnight.”

Van Staden, a former deputy general manager at the Sarb, said the bank will probably increasingly relax controls on current account transactions, which will have to be supported by documentary evidence. The tax implications and requirements will also have to be considered.

"As I’ve said to some of my colleagues at the Reserve Bank, as you relax exchange control you introduce more control albeit on the tax side.”

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