Johannesburg - Some South African investors are exceeding limits on offshore investments set by the country’s exchange controls, and may be ordered to bring their foreign assets into line with the rules, the central bank said.
The rand gained the most in more than a month.
While it had not identified any case of investors deliberately flouting the prudential rules, some are “experiencing challenges” holding offshore assets at or below the regulatory limit due to the rand’s slump, Bulelwa Boqwana, chief of staff at the South African Reserve Bank, said in an e- mailed response to questions on Thursday.
“The main challenge is attributed to the weakening of the rand, which is outside of the institutional investors’ control or influence, and not as a result of any additional foreign currency transfers from South Africa,” Boqwana said, without identifying any investors.
Institutional investors that exceed their offshore allowance of 25 percent, plus an additional 5 percent in Africa, will be banned from moving any further funds out of the country and ordered to report quarterly on “corrective measures implemented to bring their over-exposed positions back in line,” Boqwana said. They will be given 12 months to do so, she said.
Repatriation of offshore funds may help slow the deprecation in the rand, according to Barclays. The currency has slumped 31% in the past year amid slowing growth in China and a drop in commodity prices at a time when the prospect of rising US interest rates is drawing money away from emerging markets.
The currency gained 0.7% to 16.4529 per dollar by 14:12after surging 1.2% yesterday, the most since December 15.
“These remarks are one of the factors that support our view that the rate of rand depreciation is likely to slow,” Barclays’ said in a note on Friday.
The rand’s gain on Thursday was partly due to the Reserve Bank’s reminder that some investors may have to repatriate assets, the note said.
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