FROM REFORM TO REALITY: PRACTICAL QUESTIONS ON THE DRAFT CAPITAL FLOW MANAGEMENT REGULATIONS, 2026
By Jaymee Rebecca Gobetz, Tax Consultant and Lilian Zanele Mongwe, Trainee Tax Consultant
In our recent article, From Exchange Control to Capital Flow Management, Michelle Phillips considered the broader shift from the Exchange Control Regulations, 1961 to the proposed Capital Flow Management framework.
Building on that discussion, members of the Arro and Bravura Structured Solutions teams recently attended a breakfast session, hosted by the Johannesburg branch of the Society of Trust and Estate Practitioners (STEP) and AfrAsia Bank, where Nicole Paulsen of OWP, an exchange control specialist, facilitated a discussion on some of the more practical and potentially far-reaching consequences of the Draft Capital Flow Management Regulations, 2026 (the Draft).
Although the Draft remains subject to revision, the session highlighted several areas that may materially affect cross-border structuring, fiduciary planning and the management of offshore wealth.
Could the Draft Extend Beyond South African Residents?
One of the most significant issues explored during the session was the inconsistent language used to identify the persons to whom the various provisions apply.
In relation to crypto assets, the Draft provides that “a person” may not export crypto assets from South Africa without the permission of National Treasury. It separately provides that “any person in the Republic” who possesses crypto assets must submit a written declaration to National Treasury, setting out when and how the assets were acquired, where they are held and whether they serve as security for a foreign liability.
A similar distinction appears in the provisions dealing with foreign currency and foreign assets. While “a person” may not export foreign currency without permission, “any person in the Republic” who possesses foreign currency or foreign assets may be required to declare those holdings to National Treasury.
By contrast, the provisions relating to gold apply expressly to “every person resident in the Republic” who wishes to sell gold, or who becomes entitled to sell or procure the sale of gold exceeding a determined threshold.
The use of broader wording in relation to crypto assets, foreign currency and foreign assets raises an important question: are these provisions intended to apply only to exchange control residents, or could they also capture non-residents who are physically present in South Africa?
This uncertainty is compounded by proposed Regulation 10(4), which provides that any person who has been in the Republic at any time since the publication of the Regulations is deemed to be resident until the contrary is proved, potentially extending the practical reach of the Draft beyond those traditionally regarded as exchange control resident.
The resulting inconsistency creates uncertainty regarding the territorial reach of the Draft and may give rise to practical, legal and constitutional considerations.
Reporting, Permission and State Acquisition
The session also examined the extensive reporting obligations contemplated by the Draft. Depending on the asset concerned, a person may be required to disclose when and how the asset was acquired, where it is held and whether it has been provided as security for a foreign liability.
These provisions appear to go beyond passive reporting. In certain circumstances, permission may be required before crypto assets, foreign currency or foreign assets are exported or disposed of.
The Draft also contemplates that certain crypto assets, foreign currency and qualifying gold may need to be offered to National Treasury, subject to the applicable thresholds and pricing provisions.
The practical questions explored during the session was whether a framework intended to reduce transaction-by-transaction approvals could instead give the authorities greater involvement in the timing and execution of legitimate transactions, particularly where a disposal forms part of a time-sensitive commercial deal.
Important Details Remain Unanswered
The practical reach of many of these provisions will depend on the “determined thresholds” referred to throughout the Draft. These thresholds have not yet been specified.
The applicable exemptions, declaration procedures, response periods and conditions will also be critical. Without this supporting detail, it remains difficult to determine whether the provisions are intended to target only high-value or high-risk capital flows, or whether they could apply more broadly.
The discussion also raised a broader policy question regarding why gold, foreign currency and crypto assets have been singled out for possible acquisition by the State. While possible reserve-management considerations were discussed, particularly in relation to gold, the policy rationale and intended operation of these mechanisms remain uncertain.
Our View
The need to modernise South Africa’s exchange control framework is widely recognised The more important question is whether the wording of the Draft achieves National Treasury’s stated objective of facilitating legitimate capital mobility while strengthening oversight of high-risk and illicit financial flows.
Greater clarity will be required regarding who falls within the framework, the thresholds that will apply, the circumstances in which permission will be required and the timeframes within which decisions must be made.
The STEP session provided valuable insight into how these proposals may influence both the advice we provide to clients and the future of cross-border structuring.
We now look forward to National Treasury’s response to the public comments received, and to seeing whether the next iteration of the Draft strikes an appropriate balance between protecting South Africa’s financial system and facilitating legitimate cross-border transactions.
Our thanks to Nicole Paulsen and OWP for sharing their valuable insights, and to STEP Johannesburg and AfrAsia Bank for facilitating and hosting such an engaging and thought-provoking session.
