The change in name of the Reserve Bank's exchange control department - now called financial surveillance - may seem a bit like changing the airport from Jan Smuts to O R Tambo, but there is a difference. It heralds a softer regime whose role is to monitor rather than control cross-border flows of money.It is also clearly another step in the process that finance minister Trevor Manuel has called the "gradual removal of exchange controls".
Several changes will make investing offshore easier. They are obviously intended to allow investors to diversify portfolios internationally without causing a huge exodus of cash from individuals. In short, individuals still can't invest more than R2m outside our borders. But they can get a larger exposure to foreign assets through their pension fund or unit trust.
The amount will depend on whether the pension fund decides to increase its foreign exposure from 15% to the interim 20% now allowed, and from 25% to 30% for collective investments. Investment bank JP Morgan estimates that this will open the door to R133bn to leave the country. But many institutional investors haven't utilised their existing limits. The new "prudential foreign exposure limits" will be finalised during the year.
Institutions will also find it easier in terms of process to invest offshore. The pre-application process will be replaced by a system of quarterly reporting and monitoring.
In the rand futures market, companies and banks now have unrestricted access (vs forex restriction previously), allowing them to diversify their foreign exposure.
Though no further steps have been taken to allow banks foreign exposure equal to 40% of their liabilities offshore, a promise was made that 2008 would be the year in which measures would be finalised.
One change that should please small and medium-sized companies is the removal of the application process for foreign direct investments up to R50m, alleviating red tape and costs.
For individuals there are few direct changes, apart from combining their annual allowance to a "discretionary" R500 000, rather than a number of amounts split between travel, gifts, donations and maintenance.
