EXCHANGE controls remain one of the biggest impediments to the competitiveness of South African business. They are an apartheid-era relic born out of fear that capital would leave South Africa without the heavy hand of bureaucracy to hold it back. That heavy hand continues to hold back businesses’ global ambitions.
Since democracy there has been a somewhat hesitant relaxation of various exchange controls. For individuals, this has meant you hardly face any controls at all. But while that is the case on paper, the problem now is our banks, which have largely failed to reform their systems and offer clients the international services that are now possible.
Individuals can send up to R1m a year out of the country for any purpose they wish. You should, in theory, be able to do it without even a form to get in the way. Your bank needs to report to the Reserve Bank that you are doing it — but it doesn’t need permission. And the information it needs is one word about the purpose it will be used for.
But try put that into action at your local bank branch and you’ll be met with a look of nervous confusion. Eventually a series of forms will be produced, which look as if they haven’t been updated for a decade, requiring a tedious series of details as to exactly what you intend to do with the money offshore.
I’m quite convinced that the front line staff of most of our banks have no idea that exchange control has changed. That might have something to do with the fact that the systems they work within haven’t changed either.
I’m aware of one exception. First National Bank is the first and still only bank to enable its customers to make international payments as part of online banking.
If you have the international details of the account you want to pay into, it’s about as simple as making a local transfer. For anyone with kids abroad or any other foreign interest, FNB can save you a big headache when you want to do quick payments.
The regulatory dominoes don’t often fall in neat succession. The Treasury is meant to design policy, the Reserve Bank to enforce it and the banks to operate competitively within that environment. But there sometimes seems to be a broken telephone between each layer.
The banks seem to still be petrified of the Reserve Bank which enforces exchange control like a zealous scout master. That terror is not entirely misplaced, from what I hear of the Bank’s heavy-handed approach. A whole department in the Bank seems to think its existence is justified by controlling rather than enabling international transactions.
Back in 2008, then-finance minister Trevor Manuel announced that the department ominously known as excon would change its name to the financial surveillance department. That was meant to signal a shift in culture from command and control to the oversight of cross-border financial relationship between South Africa and the rest of the world.
The Bank did make the shift in name, but the culture doesn’t seem to have followed. Have a look at how the bank describes the activities of the financial surveillance department on its website and you’ll see much about enforcing exchange controls.
It doesn’t sound like a department interested in supporting international transactions.
Of course cultural change is a slow and sometimes painful process. It needs sticks and carrots to cajole it along. There are many within the South African firmament who are progressive over exchange controls — some in banks and some among the regulators. That is why FNB should be applauded for having taken services to a new level. The other banks should take note.
Banks should grow a backbone when it comes to pushing back at regulators in the interests of making customers’ lives easier. Of course it is a different story for businesses which remain enmeshed in Kafkaesque bureaucracy. They must still endure a barrage of form filling and permission seeking just to make the most basic of international payments.
It is particularly onerous for small businesses who don’t have the staff to spend hours doing the admin. For entrepreneurs wanting to build global businesses, it still makes much more sense to set yourself up in London rather than Johannesburg or Cape Town. Large businesses suffer too, and have taken to setting up offshore holding companies in Mauritius and elsewhere just to get around forex rules. Exchange control remains a dead weight on South Africa’s competitiveness.
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