Although the level of South African funds allowed to be used by local companies to finance approved foreign direct investment will remain unchanged, Finance Minister Trevor Manuel yesterday announced an increase in the percentage of excess cost that can be funded from South Africa, from 10% to 20%.

Companies’ allowed use of South African funds to finance approved foreign direct investment currently stands at R2-billion a project for investment in Africa and R1-billion for projects elsewhere, Manuel said during his 2004 Budget Speech.

Since 1995, South Africa has steadily eased exchange controls in line with progress in achieving macroeconomic stability, strengthening of the balance of payments and financial sector development.

To improve their access to domestic credit in financing investment in South Africa or domestic working capital requirements, foreign companies or foreign-owned South African companies may now borrow locally up to 300% of the total shareholders’ investment.

Manuel also said that measures would be implemented during the course of this year to enable foreign firms to list on South African capital markets, thus allowing them to raise debt and equity finance on the JSE Securities Exchange and the Bond Exchange.

“South African individuals and institutional investors will be able to participate in such listings through their foreign investment allowances,” he added.

In a further contribution to the aims of the New Partnership for Africa’s Development, Manuel proposed to develop a policy framework during the year to promote South Africa as a regional financial centre, able to cater more fully for the needs of the African continent.

“It is envisaged that inward listings by African companies, institutions and governments should be encouraged through a special allowance for institutional investors, allowing them to invest up to an additional 5% of their total retail assets in African securities listed on the JSE or Bond Exchange.

“Last year, we announced an exchange control amnesty and accompanying tax measures to deal with the contravention of past exchange control transgressions,” he said.

The exchange control and tax amnesty process began in June 2003, with the appointment of an independent amnesty unit.

There have been several refinements to the regulations, and the deadline for submission of applications was extended to February 29, 2004. By the end of January, 14 250 applications had been received, Manuel reported.