EXCHANGE CONTROL REGULATIONS 

The financial rand was eliminated in early 1995 and, subsequently, forex controls were relaxed to permit asset sweep. Government has undertaken to remove all forex controls but has given no date. 

Local borrowing (excluding normal trade credit) of a South African company in which non-resident have at least 25% ownership or control is limited to a percentage of effective capital based on a set formula. 

Limitations on debt: equity (3:1), and equity:fixed asset (1:1) ratios of non-resident controlled companies. 

Where unlisted shares, fixed property, a business or other major assets are transferred between a resident and a non-resident, the value of the assets transferred must be verified by a commercial bank. 

There are restrictions on the remitance of income. Exchange Control approval is required for royalties, technical services payments, design, technical and management fees and certain devidend remittances, rental agreements and copyright payments. There is also a limit of R 4 000 per year in respect of directors fees paid to a non-resident director. 
  

INVESTMENT RESTRICTIONS 

CONTROLS 

There are extensive controls in South Africa to protect the local currency. The Reserve Bank is the regulatory authority and has delegated some authority to the commercial banks. Through the commercial banks, the Reserve Bank relaxes or tightens its controls as the economic conditions changes. 

EXCHANGE CONTROL APPROVAL 

Exchange control approval is required for transfer of loan capital to South Africa, in order to finance the local enterprises. 

OTHER EXCHANGE CONTROL REGULATIONS 

There are also complex exchange control regulations concerning local borrowing by foreign owned companies. Local borrowing by a foreign Participant is termed "local financial assistance" and is subject to regulations related to the degree of foreign ownership via a formula. 

The normal maximum level of local financial asistance which a firm that is more than 25% foreign owned may receive is a proportion of the total effective capital. Effective capital comprises share capital, share premium accounts, reserves created from profit, inappropriate profits, loans from shareholders and, by negotiation, that portion of the current account indebtedness for imports regarded as "hard core". 

The ratio is calculated as follows:- 

50% + (South African participation × 50%) 
 ----------------------------------------- 
           (non-resident participation) 

e.g. A company with 65% foreign ownership may borrow locally:- 

50% + (35×50%) = 50% + 27% = 77% of the total effective capital employed. 
          --------- 
            65% 

Local financial assistance includes hire purchase and leasing agreements, discounting and factoring as well as the granting of bank credit, but it does not include trade credit. Once an external concern has been registered, its capacity to own immovable property is in all respects equal to that of a South African company.