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South African Reserve Bank

Inward loans 

  • What is an inward foreign loan?

    An inward foreign loan is when money is borrowed from abroad.
  • Who can borrow abroad?

    Any resident can borrow money abroad from a non-resident, which borrowing must be approved by an Authorised Dealer, i.e. commercial bank and will be subject to specific criteria applicable to inward foreign loans being adhered to and that such loans are recorded, by the Authorised Dealer, via the Loan Reporting System. 
  • How must I apply for an inward foreign loan?

    You must approach your South African bankers and provide them with full details of the loan.
  • What is a base lending rate?

    The base lending rate, for exchange control purposes, is defined as the prime lending rate at which commercial banks lend money to the public.
  • What specific criteria must be adhered to in order to obtain approval for an inward foreign loan?

    (i) The term of the loan must be at least one month.
    (ii) The interest rate in respect of third party foreign denominated loans may not exceed base lending rate plus 3%, or in the case of shareholders' loans, the base lending rate as determined by commercial banks in the country of denomination.
    (iii) The interest rate in respect of Rand denominated loans may not exceed prime lending rate plus 5% on third party loans or the base rate, in the case of shareholders’ loans.
    (iv) The fixed interest rate linked to the base rate, if applicable, may not exceed the interest rate mentioned in above. In this regard, approved inward foreign loans should always be adjusted accordingly in line with the set criteria.
    (v) The loan funds to be introduced may not be sourced from a South African resident's foreign capital allowance, foreign earnings retained abroad, funds for which amnesty had been granted, funds regularised under the Exchange Control Voluntary Disclosure Programme and/or foreign inheritances.
    (vi) There may not be any direct/indirect South African interest in the foreign lender.
    (vii) The loan funds may not be invested in foreign sinking funds.
    (viii) No upfront payment of commitment fees, raising fees and/or any other administration fees are payable by the borrower.
    (ix) The above-mentioned fees may be paid from South Africa once the loan funds have been received and converted into Rand locally, provided that such fees do not exceed 5 per cent of the principal sum.
  • What is a trade finance facility?

    A facility for a period not exceeding 12 months for financing current imports or exports. Such facilities are normally used by South African residents when the overall effective covered cost of the facility is lower than that of local short term Rand finance.
  • In what time period must the principal amount be introduced?

    The principal amount of the loan must be introduced within a period of 12 months from the date of approval. Any extensions in this regard must be communicated to the Financial Surveillance Department via the Authorised Dealer, i.e. commercial bank, on behalf of its client. 
  • How can the inward loan be repaid?

    The capital portion of foreign loans can only be repaid up to the amount that has been received in South Africa and the repayment must take place through an Authorised Dealer, i.e. commercial bank in South Africa. Capital and interest payments must be reported separately by the commercial bank on the FinSurv Reporting System.
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