Budget 2023
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Damp squib on exchange controls

Pretoria - Finance Minister Pravin Gordhan announced some mild reforms to exchange controls on Wednesday, which came as a disappointment to those expecting more sweeping action.

The move is seen as an effort to weaken the rand, which is regarded as overvalued.

The first reform was for headquarter companies seeking to leverage SA's infrastructure and skills base to invest on the rest of the continent.

To complement the proposals contained in recent tax law amendments on international headquarter companies, it is proposed that qualifying companies be allowed to raise and deploy capital offshore without exchange control approval.

This will come into effect from next year.

The next reform was for emigrants who are currently allowed to remit up to R8m offshore in capital, with the rest of the assets blocked and only released upon payment of a 10% exit levy.

The Treasury proposes releasing emigrants’ blocked assets without any exit levy applying to free those assets.

"This would support reforms aimed at curbing the excessive appreciation of the domestic currency and would enable the transfer to emigrant assets to residents," Finance Minister Pravin Gordhan said.

There were also further reforms on exchange control limits on individuals.

The present R4m lifetime limit on offshore investment is converted into a R4m annual investment.

Investments above the proposed threshold, including offshore properties, would require the approval of the financial surveillance department of the Reserve Bank.

In addition, the single discretionary allowance will be increased from R750 000 to R1m.

It seems likely that further reforms will be forthcoming for portfolio investors, once government has finalised Regulation 28 of the Pension Funds Act.

 - Fin24
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