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hat documents are required for South African exchange control purposes?
South Africa has a system of exchange control regulations in place that restricts the circumstances under which foreign currency can flow out of and into the country, and who may acquire and hold foreign currency. These regulations place certain requirements on the exporter concerning the foreign exchange he receives as payment for his exported goods. Exchange control policy is dictated by the Treasury (controlled by the Department of Finance) and executed by the South African Reserve Bank. The Reserve Bank delegates the day-to-day administration of exchange control regulations to “authorised dealers in foreign exchange”, which refers to most of the banks in South Africa. Certain travel agents in South Africa have limited authority in respect of exchange control and may grant overseas travel allowances and issue foreign currency travellers’ cheques. In practical terms, the exporter deals with his bank concerning most foreign exchange matters, including exchange control regulations. The exchange control regulations of Namibia, Swaziland and Lesotho – but not Botswana – are harmonised with those of South Africa and the whole region is referred to as the Common Monetary Area (CMA). Note that Namibia, Swaziland, Lesotho and Botswana, together with South Africa, form the Southern African Customs Union (SACU). The basic requirement regarding foreign exchange received for exported goods is that the exporter must sell his foreign currency to an authorised dealer (i.e. to his bank), within 180 days of receipt of the foreign currency. Furthermore, the exporter must sell the goods and receive the full foreign currency proceeds within six months of the date of shipment. However, banks may authorise exporters to grant credit of up to 12 months from the date of shipment. Credit for a longer period, e.g. for capital goods exported, must be referred to the Reserve Bank for approval. The exporter must be paid in a freely convertible foreign currency or in rand from a non-resident account. A “freely convertible currency” is any currency that is generally traded internationally – it is not likely that the exporter would want to be paid in any other currency! Receipt of foreign currency into South Africa is controlled by the Reserve Bank through three forms, which the exporter may obtain from his bank: ➤ Form F178 must be completed by the exporter when he expects to receive foreign exchange from the sale of his export goods. If the consignment is valued at R50 000 or less, Form F178 does not need to be completed but the proceeds must still be repatriated to South Africa. ➤ Form E must be completed in order to sell the foreign exchange proceeds to the bank; if the proceeds are less than R40 000, Form E is not required. ➤ Form NEP (no exchange proceeds) must be completed by the exporter where the value of the consignment is greater than R50 000 but does not result in any income for the exporter because it consists of, for example, no-charge trade samples, or is the replacement of rejected or defective goods, or supplements a short shipment. When completing Form F178, the exporter must state his anticipated export earnings as accurately as possible. The form is usually attested by the exporter’s bank, which will reconcile the foreign exchange received into the exporter’s account with the amount stated on the form. While the basics of exchange control and the documentation associated with it are relatively simple, complexities can sometimes occur. The exporter should therefore discuss the foreign exchange control procedure with the international division of his bank to ensure that he understands the process and does not incur any penalty through default. Because Form F178 has to be attested, it is one of the documents that the exporter himself must complete. It cannot legally be completed by the freight forwarder, although many offer assistance in this regard.
Exports to CMA countries. Shipments to Namibia, Swaziland and Lesotho do not require the exporter to complete Form F178/Form NEP. The exporter must complete Form F178/Form NEP for goods shipped to Botswana if the value of the shipment exceeds R50 000.
Foreign travel allowances. The exporter should note that exchange control provisions also limit to R100 000 a year the amount of foreign currency that may be taken out of South Africa to spend abroad, whether in the form of currency, travellers’ cheques or credit card authorisation. The traveller applies for the allowance on Form A and also completes Form MP928 if he requires credit card authorisation. He must have a passenger ticket issued in his name in South Africa, and both his ticket and the traveller’s passport are endorsed with the amount of the travel allowance being utilised. Banks may approve omnibus foreign travel allowance facilities of up to R1 million a year to companies for use at their discretion by their staff for bona fide business visits abroad. Applications for facilities in excess of R1 million must be referred to the Reserve Bank. Exchange control regulations also apply to foreign expenditure the exporter may wish to incur in respect of advertising, participation in trade fairs, bid bonds, performance guarantees, export settlement refunds or foreign legal expenses. The exporter should discuss any matters of this nature with his bank.
RESOURCES Exchange Control Manual. Publisher: South African Reserve Bank. Cost: R150. Obtainable: South African Reserve Bank. E-mail:
[email protected]. Web site: http://www.resbank.co.za. Contents: This manual is issued to assist authorised dealers in foreign exchange, their customers and other interested parties by providing a general understanding of the purpose, scope and operation of the exchange control system in the Republic of South Africa and in the Common Monetary Area. It is not intended to have the force of law or any other legal status.
