Exchange controls were implemented to regulate the flow of capital into and out of South Africa. The legal framework is based on the premise of a total prohibition to dealing in foreign exchange, except with permission and on the conditions set out by National Treasury.
Because of its obvious impact on the conduct of normal international trade and payments, the underlying economic policy is not totally prohibitive. The purpose of exchange control in this context is to ensure the timeous repatriation into the South African banking system of foreign currency acquired by South African residents, and to prevent the loss of foreign currency resources through the transfer abroad of real or financial capital assets held in South Africa.
The administration of exchange control in South Africa has been delegated to the South African Reserve Bank and administratively performed by its Financial Surveillance Department. Certain powers, set out in the Exchange Control Rulings, have been delegated to authorised dealers (banks licensed to deal in foreign exchange).
The distinction between residents and non-residents of the Common Monetary Area (which comprises Lesotho, Namibia, South Africa and Swaziland) is important for exchange control purposes. Non-residents are not directly subject to exchange control.
Exchange controls affect all cross-border transactions, which are subject to approval. Investors and parties to cross-border transactions should consult with an adviser or authorised dealer prior to entering into any transaction, to ensure compliance with exchange controls.
“Exchange controls were implemented to regulate the flow of capital into and out of South Africa.”
For a comprehensive document outlining the implications of this area of law in South Africa