The South African Reserve Bank proposes allowing licensed managers to run mandates from the country that may be invested entirely in foreign assets, under a draft framework published on 21 October and open for comment until 30 November.
The scheme, called a Synthetic Financial Centre, would not remove the limits applying to South African investors. When a domestic institution places funds with an approved manager, its foreign exposure would continue to count against its prudential limit, currently 45% according to Reuters.
The exemption would apply to the manager for assets administered on behalf of an eligible investor. Portfolios would have to be ring-fenced from other activities, funded from approved foreign-currency sources and reported quarterly to the central bank.
The draft covers life insurers, collective investment scheme managers, certain discretionary financial services providers and private equity managers that meet licensing requirements. Non-residents could invest without restriction, while resident individuals would remain subject to their foreign capital and discretionary allowances.
South African portfolios hold about 5 trillion rand in foreign assets, according to Reuters. The new framework seeks to bring some of the management activity and related financial jobs back to the country without requiring the capital itself to return.
The Johannesburg Stock Exchange estimates that the reform could attract as much as 10 trillion rand in additional assets over time. This is an estimate of potential, not an achieved result or a time-bound target.
A second phase could allow foreign-currency securities to be issued, listed and traded in South Africa. The central bank says that stage would still require regulatory assessment and further consultation.