{"id":654284,"date":"2026-06-18T07:07:54","date_gmt":"2026-06-18T05:07:54","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=654284"},"modified":"2026-06-18T07:08:40","modified_gmt":"2026-06-18T05:08:40","slug":"apartheid-era-law-kept-alive-which-is-holding-south-africa-back","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/cryptocurrency\/654284-apartheid-era-law-kept-alive-which-is-holding-south-africa-back.html","title":{"rendered":"Apartheid-era law kept alive which is holding South Africa back"},"content":{"rendered":"\n

VALR co-founder and CEO Farzam Ehsani has argued that South Africa should abolish exchange controls and replace them with a modern framework based on reporting, supervision, and enforcement.<\/p>\n\n\n\n

Ehsani made his argument in an opinion piece responding to government\u2019s proposed Capital Flow Management Regulations, which would replace the Exchange Control Regulations of 1961.<\/p>\n\n\n\n

National Treasury and the South African Reserve Bank published the proposed regulations for public comment on 17 April 2026, with comments initially due by 18 May 2026.<\/p>\n\n\n\n

Following criticism from the crypto industry and other stakeholders, the regulators extended the submission deadline to 30 June 2026.<\/p>\n\n\n\n

Treasury said the draft rules would modernise exchange controls by reducing pre-approvals, increasing reporting, and improving surveillance of high-impact cross-border transactions.<\/p>\n\n\n\n

However, the regulations also contain provisions that could allow government to restrict how much crypto South Africans may own.<\/p>\n\n\n\n

They could also force investors to liquidate crypto assets into rands when their holdings exceed a yet-to-be-specified threshold.<\/p>\n\n\n\n

The SARB and Treasury issued a statement on 15 May 2026 assuring that the intention was not to criminalise crypto ownership or undermine private property rights.<\/p>\n\n\n\n

They also said the regulations would not be applied retroactively, but acknowledged that more details would only follow in a separate draft manual.<\/p>\n\n\n\n

Ehsani argued that the debate should start with a more fundamental question: what exchange controls are actually trying to achieve.<\/p>\n\n\n\n

He said they are usually justified on the basis that they control asset movements and prevent unauthorised capital exports, protect foreign currency reserves, and safeguard the financial system.<\/p>\n\n\n\n

\u201cThese sound reasonable. But the first two objectives rely on a mental model that is increasingly outdated,\u201d Ehsani stated.<\/p>\n\n\n\n

\u201cThey imagine capital as something that can physically leave the country, like gold bars, banknotes, or bearer instruments crossing a border.\u201d<\/p>\n\n\n\n

They also imagine the rand as something the state must defend by spending scarce dollars, and private citizens or businesses converting rand into dollars as a direct loss to South Africa.<\/p>\n\n\n\n

Rules for physical assets applied to new digital reality<\/h2>\n\n\n\n
\"\"
Finance minister Enoch Godongwana, flanked by Reserve Bank governor Lesetja Kganyago and former SARS commissioner Edward Kieswetter.<\/figcaption><\/figure>\n\n\n\n

\u201cMost rands today are not physical notes and coins. They are digital entries on the balance sheets of South African banks. In fact, over 97% of South Africa\u2019s money supply is digital,\u201d Ehsani said.<\/p>\n\n\n\n

\u201cA digital rand exists because a South African bank records a rand liability to a customer. It cannot be placed in a suitcase. It cannot be loaded onto a ship.\u201d<\/p>\n\n\n\n

Crucially, it cannot exist inside a New York, London, Dubai, or Singapore bank account as rands unless there is a South African banking relationship behind it.<\/p>\n\n\n\n

\u201cSo when someone says \u2018money left South Africa,\u2019 we need to ask: what exactly left?\u201d<\/p>\n\n\n\n

Ehsani said that when a South African buys dollars, their rands do not physically leave the country; they merely change ownership within the banking system.<\/p>\n\n\n\n

From the individual\u2019s perspective, value may have been externalised, but from a macroeconomic perspective, no capital was externalised. Only ownership changed.<\/p>\n\n\n\n

Ehsani said this distinction matters because exchange controls often treat individual externalisation as though it were macroeconomic capital flight.<\/p>\n\n\n\n

He also argued that private foreign exchange or crypto transactions do not automatically reduce the SARB\u2019s foreign currency reserves.<\/p>\n\n\n\n

\u201cForeign currency reserves are not the country\u2019s private stock of dollars. They are official public-sector foreign assets held by the SARB and, in relevant respects, National Treasury,\u201d he said.<\/p>\n\n\n\n

These are used for external obligations, confidence, liquidity, and shock absorption, and not every time a private person buys dollars, pays a foreign supplier, invests offshore, or buys crypto assets.<\/p>\n\n\n\n

\u201cThe SARB\u2019s own policy is not to defend a fixed rand price. It may smooth disorderly market conditions, but it does not target a particular exchange-rate level,\u201d Ehsani explained.<\/p>\n\n\n\n

\u201cSo the idea that exchange control is necessary to prevent ordinary South Africans from draining SARB reserves misrepresents how the system works.\u201d<\/p>\n\n\n\n

Better rules, not no rules<\/h2>\n\n\n\n
\"\"<\/figure>\n\n\n\n

Ehsani argued that exchange controls create friction and uncertainty and give officials discretion over lawful private transactions.<\/p>\n\n\n\n

\u201cIt makes international investors worry about whether they can get money in and out. It makes South African entrepreneurs less globally competitive. It encourages structuring offshore,\u201d he said.<\/p>\n\n\n\n

\u201cIt tells the world that South Africa is not fully confident in its own investment proposition. And that is deeply damaging, because capital is confidence.\u201d<\/p>\n\n\n\n

Ehsani said that capital goes where it is welcomed, protected, respected, and allowed to move. \u201cThe question should not be: how do we stop people from taking money out?\u201d he said.<\/p>\n\n\n\n

\u201cThe question should be: how do we make South Africa a place where people want to bring money in?\u201d<\/p>\n\n\n\n

Ehsani said concerns about tax evasion, illicit financial flows, systemic risk, and financial crime should be addressed with targeted tools.<\/p>\n\n\n\n

These include tax enforcement, anti-money laundering rules, beneficial ownership reporting, prudential supervision, and modern financial surveillance systems.<\/p>\n\n\n\n

\u201cAbolishing exchange controls would not mean abolishing oversight. It would mean replacing pre-approval, suspicion, and restriction with disclosure, reporting, supervision, and enforcement,\u201d he said.<\/p>\n\n\n\n

\u201cIt would signal that South Africa is ready to compete for global capital and is more attractive for foreign direct investment.\u201d<\/p>\n\n\n\n

Ehsani argued that such a framework would help entrepreneurs raise capital, encourage companies to domicile locally, and broaden South Africa\u2019s tax base.<\/p>\n\n\n\n

Exchange controls make South Africa look afraid<\/h2>\n\n\n\n
\"\"<\/figure>\n\n\n\n

He said South Africa should move from a fear-based capital regime to a confidence-based capital regime.<\/p>\n\n\n\n

\u201cThis is not an argument for no oversight. It is an argument for better oversight,\u201d Ehsani said.<\/p>\n\n\n\n

\u201cIt is an argument that South Africa can protect financial integrity without restricting lawful capital movement. It can protect the tax base without making citizens ask permission to invest.\u201d<\/p>\n\n\n\n

He added that South Africa could protect its financial system without telling the world that capital is welcome only if it leaves by permission.<\/p>\n\n\n\n

\u201cThis policy was created for a different era. A world of physical bearer assets. A world of sanctions, isolation, and scarce reserves. It is now holding South Africa back,\u201d he said.<\/p>\n\n\n\n

Former President Nelson Mandela himself envisioned a South Africa without Apartheid-era exchange controls. In his 1996 State of the Nation Address, he said it would only be a matter of time.<\/p>\n\n\n\n

\u201cTo improve the investment climate, our monetary authorities are reviewing, on an ongoing basis, the timing and pace of lifting existing exchange controls,\u201d Mandela said.<\/p>\n\n\n\n

\u201cFor us, it is not a matter of whether, but of when, these controls will be phased out.\u201d<\/p>\n\n\n\n

Ehsani said that, 30 years later, it was time to bring that vision to reality by abolishing exchange controls and replacing them with a modern framework.<\/p>\n\n\n\n

\u201cThe future of South Africa will not be built by controlling exits. It will be built by becoming a country people want to enter.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

VALR co-founder and CEO Farzam Ehsani argued that South Africa should abolish exchange controls and replace them with a modern framework.<\/p>\n","protected":false},"author":15,"featured_media":643893,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[44696],"tags":[44668,12285,2630,23511,56040],"class_list":["post-654284","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptocurrency","tag-farzam-ehsani","tag-national-treasury","tag-nelson-mandela","tag-south-african-reserve-bank-sarb","tag-valr"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/654284"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=654284"}],"version-history":[{"count":4,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/654284\/revisions"}],"predecessor-version":[{"id":654548,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/654284\/revisions\/654548"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/643893"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=654284"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=654284"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=654284"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}