Alec Hogg: Dirty secret behind SARB backpedal on RAs
The big story of the past week was the backtracking by National Treasury and the SA Reserve Bank on an exchange control regulation which provided a much needed breakthrough for embattled South African savers. In a nutshell, the highly detailed and obviously long-considered new regulations removed a 30% cap on the foreign investment component of retirement annuities. An official circular announced the termination of a destructive situation where 70% of all money invested into RAs had to go into a narrow pool of poorly performing local assets.
The SARB's decision, referenced by Tito Mboweni in last month's Mini-Budget, was warmly welcomed by independent voices, including BizNews. We oppose exchange control in any form, not just because it is a hangover from apartheid, a government regulation implemented to prevent capital outflows after the Sharpeville Massacre in 1960. Excon kept apartheid on life support for decades and continues to shield perpetrators from taking responsibility for destructive political policies.
So we were among those who congratulated SARB on a decision which, in essence, removed a hefty tax on retirement savers – one whose impact was so negative it has played a role in the decisions of many SA financial emigrants. But on Monday Pretoria backtracked and suspended its own new rules. Insiders say this was due to pressure from vested interests and is the first step to dropping the change entirely.
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