Stifling exchange controls need to be lifted – Grant Thornton
The legacy foreign exchange control policy designed to safeguard South Africa from a mass exodus of large volumes of individual capital is no longer relevant and is likely stifling the nation’s competitiveness, Grant Thornton CEO Andrew Hannington believes.
He noted in a statement issued on Monday that the priorities that had laid the foundation for the country’s steadily slackening exchange controls for individuals were no longer applicable, leaving the regulations with “no real purpose”.
With the Reserve Bank also moving away from the application of exchange controls and with several other mechanisms in place to mitigate foreign exchange, it was now time to abolish the statute, he said.
Hannington pointed out that those most likely to invest large sums of capital internationally, such as asset managers, were already governed by separate restrictions that further limited the economy’s exposure to capital outflows.
The number of individuals able to surpass the R10-million a year foreign investment allowance limit was negligible – and, even then, individual investors could seek out permission from the Reserve Bank to invest much greater amounts offshore.
“Similarly, the number of corporations able to invest R1-billion a year is also minimal,” he said, pointing out that the “bigger risk” was the flight of foreign money from capital markets, which was not subject to any controls or restrictions and was driven by the attractiveness as a modern, stable economy.
While measures were needed to combat illegal practices, such as money laundering, South Africa boasted a “sophisticated and respected financial system” that was geared to preventing such practices, with no need to leverage foreign exchange control as a mechanism.
“We need government to show confidence in this [financial] system by finally doing away with exchange control regulations for individuals,” he concluded.
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