South Africa to further relax forex controls

CAPE TOWN (Reuters) - South Africa, struggling with its first recession in 17 years, will further ease foreign exchange controls to reduce the cost of doing business, the National Treasury said on Tuesday.

South Africa has gradually relaxed controls since holding its first democratic elections in 1994.

"Given the strength of our regulatory system and the shift towards a risk-management approach... government is in a position to announce further reforms to lower the cost of doing business in South Africa," the Treasury said in its 2009 Medium Term Budget statement.

It said it would increase the limit to 500 million rand from 50 million for company applications to make outward investment and remove a 180-day rule deadline for companies to convert their foreign exchange into rand.

"South African companies are still required to repatriate export proceeds to South Africa," Treasury said.

South Africa will also do away with the 250,000 rand advance payment needed for imports and will allow South African companies to open foreign bank accounts without prior approval but subject to reporting obligations.

Investment limits for individuals will be relaxed.

"The foreign capital allowance for resident individuals, last adjusted in 2006, has been increased from 2 million rand to 4 million rand, and the single discretionary allowance from 500,000 rand to 750,000 rand," Treasury said.

The restriction on non-resident investments, requiring investors to bring in money to be able to borrow, was removed so as to improve access to domestic credit to help finance foreign investment.