The South African Reserve Bank (SARB) has published for consultation a draft Synthetic Financial Centre (SFC) framework that would allow approved institutions to manage qualifying foreign portfolios and related foreign currency activities from South Africa through segregated arrangements. This is the first phase of an initiative advanced by National Treasury and previously outlined in the 2026 Budget. Foreign exposure would remain attributable to the underlying investor and count against that investor’s applicable foreign investment limits or allowances, rather than the managing institution’s limits unless acquired for its own account. Eligible operators would include appropriately licensed investment managers, qualifying private equity managers and authorised dealers, subject to registration and approval requirements. Foreign financial services providers could also apply but could not begin SFC activities before obtaining all required licences and approvals. South African institutional investors and individuals could invest within their existing limits or allowances, while nonresidents could invest without restriction. Qualifying portfolios would need predominantly foreign economic exposure, assessed through their underlying assets, risks and returns. Incidental South African holdings would retain their domestic classification. Participants would have to segregate SFC assets, liabilities and transactions from other business, maintain dedicated resident foreign currency accounts with authorised dealers, and fund activities from approved foreign currency sources. Records and quarterly reporting would identify underlying investors, exposures and funding arrangements. SARB could amend, suspend or withdraw approval for breaches or circumvention of applicable limits. A second phase would consider broader reforms, potentially including foreign currency securities issuance and trading in South Africa and the domiciliation of investment vehicles, subject to further regulatory assessment and consultation.
South African Reserve Bank launches consultation on framework for managing foreign portfolios from South Africa
The South African Reserve Bank is consulting on a Synthetic Financial Centre framework that would let approved institutions manage qualifying foreign portfolios and foreign currency activities from South Africa. Exposure would remain attributable to investors under their applicable limits or allowances, with participants required to segregate operations, use approved foreign currency funding and report exposures. A later phase would consider broader capital market reforms, including foreign currency securities issuance and investment vehicle domiciliation.