South African Exchange Controls: A Planning Perspective

South African exchange controls were introduced into South Africa in 1978, and despite having been relaxed over the years, remain as firmly entrenched as ever.  Certainly when I started work as an articled clerk in 1986, my principal at the time informed me that they would be abolished shortly.  30 years later I wait with bated breath.  For a brief moment it even seemed possible that Mark Shuttleworth’s challenge would upset the applecart.  That too was not to be.  Exchange controls have been the central point of innumerable personal and corporate decisions over the years, and continue to be so till today.  There is nothing like feeling trapped in a country with a declining currency, where as hard as you work your international wealth declines, to give you pause for thought.
I recently reread a superb article written by Michael Honiball in 2011 entitled 11 Good Reasons to Emigrate (www.michaelhoniball.com) and those reasons to emigrate remain as valid today as they did then.  The article did, however, cause me to think over a number of other planning issues with regards to exchange control that still remain worth considering and I raise a couple for consideration here.
If you are one of the tens of thousands, if not hundreds of thousands of South Africans, who simply up and left over the last decade or two, you should consider formally emigrating ie: going through the South African Reserve Bank process to acknowledge that you have left.  Here’s why:
When you decide to sell that holiday home in Plett that you have not visited for the last 5 years, you can take the money out of South Africa, and not, with a shock, find you are still regarded as “temporarily abroad” even though you left decades ago;
When a relative dies and leaves you a bequest, that too may leave without limit;
When you are invited to participate in a new venture in South Africa because you bring the funding or the foreign connection, you may freely invest from offshore and not create a “loop”;
When your parents’ local trust distributes some dividends, those may leave without limit;
When your parents need a retirement home, you can safely bring the money into South Africa to acquire one, knowing that the funds can leave again.
Use your R10m annual allowances whenever you can afford to, it just makes sense.  Yes, the allowance is more generous than it has been for a while, but it is not a lot to the truly wealthy who remain trapped in a Rand based economy.  However, is it not also an opportunity to consider doing more than simply investing the funds? Many people who can afford to send out R10m are already entrepreneurs and have their own businesses.  Why not use the R10m as the seed capital to expand that business internationally?  Many companies are already transacting internationally and with a bit of thought those transactions don’t necessarily have to be done out of or via South Africa and can simply happen elsewhere. Similarly, an expansion into Africa, for example, could be done via a third country using that allowance instead of directly.
What about children going to university?  Why not get them to study abroad?  A 5 year stint studying in London on an ancestral visa for example, is cause for emigration and will result in having a very useful, well-educated family member abroad.  Offshore son or daughter can now have resident non domiciled tax status in the UK, and participate very usefully in family businesses both inside and outside of South Africa.
Many South Africans have also bought holiday homes, or investment properties abroad.  Why not buy one in a country that comes with a right of residence?  Many countries now offer this, with some of the more attractive ones including Mauritius, Portugal, Spain and Malta.  Many of these countries also offer attractive tax incentives if your holiday or investment home ends up something more permanent.  Some like Mauritius and Malta might also become the source of your new found business expansion, and before you know it, that holiday home is your real home from home.
The point is that once your funds are trapped, people turn to finding ways around the problem, and often times they exist.  In my experience, the very act of finding that solution actually leads to a whole new set of opportunities.  We would welcome the opportunity to assist in that endeavour.