New exchange control regulations for Institutional Investors

South Africa’s National Treasury has introduced the further easing of foreign exchange controls in an effort to make it possible for South AfricanĀ  companies and institutions to invest more overseas.

The Treasury increased the upper limit on the amount institutional investors can take offshore by five percentage points. The limit is going to be somewhere between 25% and 35% when it comes to investors.

“The National Treasury wishes to alert investors that the proclaimed increase in prudential foreign asset limits should also be perceived as a mechanism for absorbing current holdings of inward-listed instruments not having a domestic classification.”

The Treasury said the Reserve Bank would provide additional details on this with regard with an announcement in the near future.

Finance Minister Pravin Gordhan

Emerging market investment

As part of his Medium Term Budget Policy Statement in October, Finance Minister Pravin Gordhan unveiled that the prudential framework for foreign investment by private and public pension funds, along with the Government Employees Pension Fund, would be reviewed “in order to support portfolio re-alignment and offshore diversification of such funds, especially in other African continent and into other emerging markets”.

Retirement funds in particular, which represent a substantial portion of the industry investable assets, could be restricted by the current prudential foreign asset limit, as indicated by current analysis.

Additionally, the Treasury delayed the disclosure of the discussion paper on the country’s financial sector to February 2011.

“To provide for additional time for internal consultations within government, the release of the comprehensive discussion document, known as ‘Strengthening the financial sector to better serve South Africa’, is postponed and will be unveiled for public comment in February next year,” it said.

Source: BuaNews


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