Capital flows, capital control regulations and foreign exchange policies in South Africa*

Abstract

The relationship between capital flows, exchange control regulations and foreign exchange policies has long occupied policymakers in South Africa. In particular, outflows on the capital account in the late 1950s resulted in tighter and more pervasive exchange controls, initially on residents but extended to non-residents after 1961. These controls on non-residents in turn resulted in a parallel exchange rate system which was abolished only in 1995. The transition to democracy in the 1990s, however, resulted in the nature of the relationship between capital flows, exchange control regulations and foreign exchange policies changing once more. The process of reintegration into world financial markets has provided opportunities for liberalising exchange control, and also new challenges for policymakers.