SA Reserve Bank amends exchange control rules

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The Reserve Bank's Financial Surveillance Department has recently issued a circular amending the exchange control rules. The amendment relaxes the exchange control rules, to a limited extent, to allow unlisted South African companies to list on stock exchanges located offshore and raise foreign loans and capital more easily.

To qualify for the exception, the entity must be: (i) a South African company, (ii) operating in the technology, media, telecommunications, exploration or 'other research and development industry', and (iii) not currently listed on the South African stock exchange.

The entity must also:

• register with the Financial Surveillance Department;
  
• operate as a South African tax resident;
  
• be incorporated in South Africa and effectively managed and controlled in South Africa;
  
• ensure that its intellectual property remains registered in South Africa. However, intellectual property may be assigned offshore, subject to appropriate tax treatment; and
  
• submit an annual report on the operations including details of the funds raised offshore to the Financial Surveillance Department.

Furthermore, if the entity intends to list offshore, it must:

• submit a report on the status of the offshore listing to the Financial Surveillance Department; and
  
• within two years of successfully listing offshore, list on the South African stock exchange.

Despite the fairly onerous requirements this represents a welcome step in the right direction in helping private South African companies access international venture capital markets and seek primary listings offshore.