South Africa proposes new framework to allow 100% offshore asset investment

The South African Reserve Bank, National Treasury, and the Johannesburg Stock Exchange have introduced a draft Synthetic Financial Centre (SFC) framework. This proposal would allow licensed asset managers, banks, insurers, and private equity firms to invest up to 100% of qualifying ring-fenced portfolios in foreign assets, effectively removing a longstanding 45% offshore investment cap for these mandates.

Under the proposed rules, while the 45% limit would still apply when an institution initially commits capital to an SFC vehicle, managers would be permitted to invest the entire portfolio in foreign assets once the funds are within a registered mandate. The originating institution would still be required to include the investment when calculating its own prudential foreign-asset limits.

This reform aims to improve the competitiveness of South Africa’s financial sector. Currently, approximately 5 trillion rand ($301 billion) in South African portfolio assets are held offshore, often managed through overseas financial centers due to existing local restrictions. The Johannesburg Stock Exchange estimates that the broader overhaul of exchange controls could attract 10 trillion rand in investment over time.