A welcoming investment environment? Exchange control circulars released pursuant to the 2022 Budget

In our 2022 Special Edition Budget Speech Alert, we discussed some of the exchange control changes announced in the 2022 Budget (Budget). The changes were far-reaching, to say the least, and following the publication of the Budget, the Financial Surveillance Department of the South African Reserve Bank (FinSurv) released numerous circulars giving effect to these announcements. In terms of these circulars, sections of the Currency and Exchanges Manual for Authorised Dealers (AD Manual) were amended.

17 Mar 2022 4 min read Tax & Exchange Control Alert Article

A number of the changes announced relate to the making of investments into and out of South Africa. We discuss some of the most important changes in a bit more detail here.

Institutional investors: Increase in the prudential limit for offshore investments

In Exchange Control Circular 10/2022 numerous changes to section B.2(H) of the AD Manual, which deals with the exchange control rules pertaining to institutional investors, were announced. The most notable and important change relates to the amount of retail assets (assets from individuals, trusts, etc. received for investment purposes) a South African institutional investor may invest offshore.

Prior to the publication of the circular, there was a prudential limit of 30% for offshore investments and an additional allowance of 10% for investments into Africa. This has now been replaced with a single limit of 45%, but with a requirement to report the number of African investments on a quarterly basis (as part of the general reporting requirement contained in the AD Manual) remaining. It is unclear why this requirement has remained, but it may be that FinSurv wants to monitor the impact of South Africa being part of the African Continental Free Trade Area and the effect on investments into Africa. The prudential limit applies to pension funds, linked and non-linked business life insurers, CIS managers and discretionary financial services providers registered as institutional investors with FinSurv.

In addition, it was announced that institutional investors may open foreign currency accounts locally, but that the amount of foreign currency held in these accounts will count towards the prudential limit. This is a relaxation from the previous rule where foreign currency could only be held locally where a foreign investment was sold and pending the reinvestment of those sale proceeds offshore.

For retail investors, including individuals, the announcement regarding the prudential limit ultimately means that they can potentially indirectly invest more of their assets offshore. Individuals can still invest offshore in their own names, using the single discretionary allowance and foreign capital allowance.

South African resident companies: Foreign direct investment dispensation

In terms of Exchange Control Circular 11/2022, section B.2(C) of the AD Manual, dealing with South African resident companies seeking to invest offshore, was amended. In terms of the amendment, a South African resident company can now invest up to R5 billion offshore annually, without prior FinSurv approval. In other words, such investments are subject only to authorised dealer approval. In addition, the requirement to repatriate sale proceeds from an investment approved under this dispensation was also removed, so that the sale proceeds may now be retained abroad. However, these sales would still have to be reported in the annual report submitted to FinSurv. The increased limits also apply to investments made under the foreign portfolio investment dispensation, which deals with investments where a South African resident company acquires less than 10% of the equity shares/voting rights in a foreign target.

Domestic treasury management companies

The limits currently applicable to domestic treasury management companies (DMTCs), which can hold funds in foreign currency for offshore investment purposes, have been increased pursuant to the following in Exchange Control Circular 12/2022:

  • In relation to listed companies, the calendar year limit for offshore investment has been increased from R3 billion to R5 billion.
  • In the case of unlisted companies, the calendar year limit has been increased from R2 billion to R3 billion.
  • For financial services sector companies, such as banks and insurers, the DMTC may now invest up to R5 billion in a calendar year, which is up from the previous amount of R3 billion.

Inward listings

Pursuant to the announcements in Circular 9/2022, section H of the AD Manual dealing with the rules pertaining to inward listings, has been replaced with a brand new section.

Some of the most notable changes are:

  • The uncertainty regarding the classification of inward listed instruments referencing foreign assets has been settled. Inward listed exchange traded funds and approved debt and derivative instruments referencing foreign assets remain classified as foreign assets. Banks and institutional investors need to keep this in mind as such investments would count towards their macro-prudential limit and prudential limit respectively. However, investments into inward listed shares would not count towards these limits.
  • Any instrument referencing foreign assets will now require prior FinSurv approval before listing, and these applications must include specific information referred to in section H.
  • The classification of inward listed shares has been broadened to include shares on all South African exchanges and not only the JSE.
  • The use of inward listed shares as acquisition currency is still permitted, but can still only be done with prior FinSurv approval. The criteria that will be considered, including the benefit to South Africa, are expressly stated.
  • It is also noted that FinSurv can refer inward listing applications to National Treasury for its consideration.


Following the devastating impact of the COVID-19 pandemic and concomitant lockdown these welcome changes will hopefully not only make investing into and out of South Africa more appealing, but also assist in South Africa’s attempts to stimulate economic growth.

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