In South Africa, the Reserve Bank's Financial Surveillance Department oversees and regulates the movement of capital in and out of the country. In M&A transactions, exchange control approval is often required in, inter alia, the following instances:
• South African residents acquiring a shareholding in a foreign entity.
• South African residents providing guarantees, suretyships, or indemnities to non-residents, leading to offshore payment obligations.
• Agreements where South African residents are obliged to pay royalties or license fees to non-residents.
• Non-residents purchasing or subscribing to shares in a South African company.
• Non-residents providing "financial assistance" (including inward foreign loans or credits) to South African residents.
Without prior approval, South African target companies may face limitations in transferring funds to non-resident shareholders or lenders. Seeking approval involves submitting an application and supporting documents through licensed foreign exchange dealers appointed by the Reserve Bank. All the major banks have forex departments and are “authorised dealers” for forex purposes.
These exchange controls have seen gradual relaxation in recent years. For instance, as of 1 January 2021, restrictions on "loop structures," where a South African resident holds an interest in a foreign structure that owns assets in South Africa, have been lifted, albeit subject to supervisory measures.