14 December 2010
South Africa’s National Treasury has announced the further easing of exchange controls in order to allow local institutions to invest more abroad.
The Treasury raised the limit on the amount institutional investors can take offshore by five percentage points. The limit will be between 25% and 35% for investors.
“[The] National Treasury would like to alert investors that the announced increase in prudential foreign asset limits should also be regarded as a mechanism for absorbing current holdings of inward-listed instruments not having a domestic classification.”
The Treasury said the Reserve Bank would provide further details on the announcement.
Emerging market investment
In his Medium Term Budget Policy Statement in October, Finance Minister Pravin Gordhan announced that the prudential framework for foreign investment by private and public pension funds, including the Government Employees Pension Fund, would be reviewed “to support portfolio re-alignment and offshore diversification of these funds, especially in the rest of the African continent and into other emerging markets”.
Retirement funds in particular, which represent a significant portion of the industry investable assets, could be constrained by the current prudential foreign asset limit, according to current analysis.
Additionally, the Treasury delayed the release of the discussion paper on the country’s financial sector to February 2011.
“To allow for more time for internal consultations within government, the release of the comprehensive discussion document, entitled ‘Strengthening the financial sector to better serve South Africa’, is postponed and will now be released for public comment in February next year,” it said.