STATEMENT BY ALEXANDER MACGREGOR BRUCE-BRANDOVERVIEW OF EXCHANGE CONTROLS IN SOUTH AFRICA COMMISSION OF INQUIRY INTO THE RAPID DEPRECIATION OF THE EXCHANGE RATE OF THE RAND ("COMMISSION")STATEMENT BY ALEXANDER MACGREGOR BRUCE BRAND I, Alexander Macgregor Bruce-Brand, hereby make the following statement to the Commission to provide an overview of Exchange Controls in South Africa - HISTORICAL BACKGROUND1 Although South Africa has had exchange controls since 1939, the current governing legislation is set out in the Exchange Control Regulations promulgated in 1961 in terms of the Currency and Exchanges Act (Act No. 9 of 1933). A copy of the Regulations are contained at pages 26 to 49 of SARB Volume 6 to which I shall refer to as SARB volume 6 and which is attached to this statement.2 Exchange controls in South Africa were applied more stringently during 1985 when international sanctions, trade boycotts, disinvestment campaigns and the withdrawal of loan funding to South Africa exerted severe pressure on the balance of payments and the domestic economy as a whole. At that stage certain restrictive measures applied to a few current account transactions, while the Financial Rand system for capital account transactions was reintroduced. Any outward transfer of funds, other than normal trade related transactions, were subject to prior approval by the Exchange Control authorities. Where necessary these transfers were also subject to certain limits. The 1985 developments also resulted in the debt standstill arrangements.3 As South Africa moved out of the sanctions era the new government was able to address the liberalisation of exchange controls and the first major event was the abolition of the Financial Rand system in March 1995. The ongoing removal of exchange controls is more fully described in paragraphs 12 to 20 below.4 The responsibility for exchange control policy has, throughout its existence, remained vested with the Minister of Finance, who delegated certain powers and functions to the Exchange Control Department of the South African Reserve Bank to which I will refer to as the Bank, who implements and administers such policy on behalf of the Government. All policy decisions in this regard are taken by the Minister of Finance, and the Bank therefore, only acts in an advisory capacity to Government relating to decisions on exchange control policy.5 Exchange controls not only apply to South Africa but also to the Common Monetary Area region which includes Lesotho, Namibia and Swaziland.THE LEGAL FRAMEWORK OF EXCHANGE CONTROL6 As an introduction, it is necessary to distinguish between the following:6.1 The Currency and Exchanges ActThe Currency and Exchanges Act, and more specifically Section 9 thereof, is the foundation of exchange control in South Africa. Section 9(1) of the Act provides that the "Governor-General (the President) may make regulations in regard to any matter directly or indirectly relating to or affecting or having any bearing upon currency, banking or exchanges."6.2 The Exchange Control RegulationsThe current set of Exchange Control Regulations were promulgated on 1 December 1961 and amended from time to time. In terms of the Exchange Control Regulations, the control over South Africa's foreign currency reserves, as well as the accruals and spending thereof, is vested in the Treasury. The Treasury is defined as "... in relation to any matter contemplated in these regulations, means the Minister of Finance or an officer in the Department of Finance who, by virtue of the division of work in that Department, deals with the matter on the authority of the Minister of Finance."6.3 Orders and RulesThe Minister of Finance issues Orders and Rules under the Exchange Control Regulations and the current set was published on 1 December 1961, and amended from time to time. The Orders and Rules contain various orders, rules, exemptions, forms and procedural arrangements. A copy of the orders and rules are contained at pages 108 to 130 of SARB volume 1.6.4 Delegation and Assignment6.4.1 The Exchange Control Department