The Business Day (28/10/2009), reporting on the budget speech by the Minister of Finance, gave details of the changes to the foreign exchange regulations announced in Parliament. http://www.businessday.co.za/articles/Content.aspx?id=85202
The sweeping new measures to relax exchange controls yesterday are designed to weaken the rand to a more “competitive” level and cut red tape for investors. As a result, the rand weakened nearly 1% to R7,69/USD in response to the news.
The rand has been one of the best-performing currencies in the world this year, scaling a 14-month peak at R7,15/ earlier this month. Its sustained strength has threatened to erode the competitiveness of local exports and undermine SA’s fragile economic recovery.
The measures included removing a 180-day time limit during which local companies were required to convert foreign exchange earnings into South African Rands, although they still have to repatriate the money within a month.
South African companies will now be able to open foreign bank accounts without prior approval.
Local firms can also now invest up to R500m anywhere offshore without prior approval, up from R50m previously.
A foreign capital allowance for residents is doubled to R4m.
This is good news for both foreign and the South African investors. Any action that allows for the free movement of currency is welcome.
Neil@directinvestment.biz
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