South African Reserve Bank (SARB) Governor Tito Mboweni deserves support for his position that remaining exchange controls should be abolished, says the official opposition Democratic Alliance.
Its finance spokesperson Ian Davidson said on Thursday that Mboweni’s position is “clearly at odds with Finance Minister Trevor Manuel’s commitment to a phased relaxation” that he repeated as recently as two weeks ago.
Earlier, I-Net Bridge reported that any further announcement on exchange-control relaxations over and above those announced in last month’s Medium-Term Budget Policy Statement (MTBPS) is to be withheld until the Budget is tabled in Parliament next February.
“As the finance minister indicated previously, any further announcement on exchange control will be kept until the February 15 Budget,” Treasury spokesperson Thoraya Pandy said.
Mboweni said on Wednesday that South Africa’s remaining foreign-exchange controls have become “purposeless” and should be scrapped as they are not worth the effort of monitoring and enforcing them.
Davidson said he intends moving a motion in the National Assembly for the matter to be debated. He will also submit parliamentary questions on the matter.
In Mboweni’s view, the scrapping of exchange controls will lead to foreign capital inflows rather than the feared outflow, he told the Bureau for Economic Research conference in Somerset West on Wednesday.
Manuel, who determines government policy on exchange controls while the SARB enforces them, raised the foreign-exposure limits on collective investment schemes to 25% of total retail assets from 20% previously, while raising that on investment managers to 25% from 15%, in the MTBPS on October 25.
Manuel said the exchange-control relaxations would further enable South African residents to diversify their investment portfolios through domestic channels and enhance the role of South African fund managers in facilitating the flow of funds to the African continent.
Meanwhile, Davidson said there is no evidence to suggest that in the long term exchange controls enhance growth or investment.
“In light of the fact that foreign reserves have improved markedly and that South African investors seem to have little appetite for foreign investment, one would be hard pressed to argue that now is not the right time for a rapid relaxation of exchange controls.”
Davidson said exchange controls carry a cost to South African citizens and institutional investors through interfering with their investment decisions. — I-Net Bridge