South Africa Treasury Management Profile 2018 - Together we thrive - HSBC Group
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South Africa
Treasury Management
Profile 2018
Together we thrive
2 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 3
Contents Introduction and
Purpose
Introduction and Purpose 3 South Africa
This is one of a series of Treasury Management Profiles designed for finance and treasury professionals worldwide. By providing a
Legal and Regulatory 6 snapshot of banking, payments and cash management in selected locations, these profiles can help treasury managers to make
informed decisions, manage risks effectively and take advantage of new opportunities. However, this information is not intended to
Taxation8 be comprehensive and does not constitute financial, legal, tax or other professional advice. Accordingly you should not act upon the
information contained in this document without obtaining your own independent professional advice. The materials contained in this
Banking13
document were assembled in June 2017 (unless otherwise dated) and were based on the law enforceable and information available
Payment Instruments 14 at that time.
Payment Systems 18
Facts and Figures
Cash Management 21
Capital/Other major cities: Pretoria/Johannesburg, Cape National holidays: 2019 — 1 Jan, 21 Mar,
Electronic Banking 23 Town, Durban Source: www.goodbusinessday.com. 19, 22, 27 Apr, 1 May, 17 Jun,
9 Aug, 24 Sep, 16, 25, 26 Dec
Trade Finance 24 Area: 1,219,090km2
Population: 54.30m Business hours: 08:30/09:00–17:00 (Mon–Fri)
Useful Websites 26
Languages: South Africa has 11 official Banking hours: 08:30/09:00–15:30/16:00
languages: Afrikaans, English, (Mon–Fri) and 08:00/08:30–
Ndebele, Northern Sotho, 11:00/11:30/12:00 (Sat)
Southern Sotho, Swati, Tsonga,
Stock exchange: Euronext
Tswanga, Venda, Xhosa and
Zulu Leading share index: FTSE/JSE Africa All Share Index
(JALSH)
Currency: South African rand (ZAR)
Sectoral distribution Agriculture 2.2%,
Country telephone code: 27
of GDP (% of GDP): Industry 29.2%,
Source: https://www.cia.gov/library/
Weekend: Saturday and Sunday Services 68.7%
publications/resources/the-world-
factbook/index.html. (2016 estimate)
National holidays: 2018 — 1 Jan, 21, 30 Mar, 2,
Source: www.goodbusinessday.com. 27 Apr, 1 May, 16 Jun, 9 Aug,
24 Sep, 17, 25, 26 Dec
Government The next general election is scheduled to be held in 2019.
Legislature
Presidential republic with a bicameral parliament composed of Head of state and political leader
the National Assembly and the National Council of Provinces. Cyril Ramaphosa, president (head of state and government) since
15 February 2018.
®® National Assembly: 400 members are elected to serve five-year
terms. ®® The president is elected every five years by the National
®® National Council of Provinces: 90 members are elected to Assembly. The next presidential election is scheduled to be
serve five-year terms. held in 2019.
4 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 5
Country credit rating
Fitch Ratings rates South Africa for issuer default as:
Term Issuer Default Rating
Short B
Long BB +
Long-term rating outlook Stable
Source: www.fitchratings.com, October 2017.
Exchange rate & Interest rate (%) Consumer inflation & GDP volume growth (%)
Economy South Africa South Africa
2017
2010 2011 2012 2013 2014 2015 2016 16 16 8 8
Q1 Q2 Q3
Exchange rate* (ZAR/USD) 7.3212 7.2611 8.2100 9.6551 10.8527 12.7589 14.7096 13.2490 13.2384 13.176
14 14 6 6
Interest rate *
(Lending rate) (%) 9.83 9.00 8.75 8.50 9.13 9.42 10.46 10.50 10.50 NA
Unemployment (%) 24.9 24.7 24.9 24.7 25.1 25.35 26.73 27.70 NA NA 12 12 4 4
Consumer inflation** (%) + 4.3 + 5.0 + 5.7 + 5.4 + 6.4 + 4.6 + 6.3 + 6.3 + 5.3 NA
10 10 2 2
GDP volume growth** (%) + 2.8 + 3.3 + 2.5 + 2.8 + 1.7 + 1.2 + 0.1 NA NA NA
GDP (ZAR bn) 2,664 2,964 3,155 3,385 3,796 4,038 4,328 – – – 8 8 0 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
GDP (USD bn) 364 408 384 351 350 316 294 – – –
Exchange rate (ZAR/USD) Consumer inflation %
GDP per capita (USD) 7,073 7,858 7,273 6,564 6,482 5,808 5,808 – – – Interest rate (lending rate) GDP volume growth %
BoP (goods/services/income) as % GDP – 0.9 – 1.7 – 4.3 – 5.3 – 4.4 – 3.5 – 2.6 – – –
* Period average. ** Year on year. Sources: IMF, International Financial Statistics, November 2017 and 2017 Yearbook. Sources: IMF, International Financial Statistics, November 2017 and 2017 Yearbook.6 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 7
Legal and
Regulatory
Central bank All cross-border transactions, irrespective of value, are captured companies, branches and offices that are outside the CMA, Account opening procedures require formal identification of the
The South African Reserve Bank (SARB) is an autonomous and reported and any transfers of current account payments and outside their current line of business, requires approval. account holder and of any person acting on behalf the account
institution operating in accordance with the South African abroad must have supporting documentary evidence confirming South Africa must remain the effective place of management holder. For persons acting on behalf of any business entity,
Reserve Bank Act 1989 (Act No 90 of 1989), as amended. the amounts involved. for the applicant company and FinSurv approval is required for written confirmation that the person has authority to act on behalf
applicants to redomicile. of the entity must be furnished.
Bank supervision Banks (or certain corporates, credit/debit card companies and
The Bank Supervision Department of the SARB supervises the bureaux de change) typically undertake reporting on behalf No more than ZAR 11 million (previously ZAR 5 million) can be For legal entities, shareholders with 25% or more of the equity
banking sector in South Africa. of their customers on a daily basis via an online same-source invested abroad or in a foreign exchange account in South Africa must be identified. However, there is no general duty to identify
system. by a resident individual in any calendar year. Inward foreign the beneficial owner. All cash transactions of ZAR 25,000 and
Resident/non-resident status investment of more than 15% in a bank requires prior approval above must be reported.
A company is considered resident in South Africa if it is formed, Exchange controls from the Registrar of Banks; the Ministry of Finance’s approval is
incorporated or effectively managed in South Africa. The South African rand (ZAR) is South Africa’s official currency. required for foreign investment of more than 49%. In July 2015, an exemption to the Money Laundering and Terrorist
Financing Control Regulations was introduced whereby residents
Residents of the Common Monetary Area (CMA) are classified as ®® The ZAR is legal tender within the CMA and is freely Residents may lend up to ZAR 1 million to non-residents per and non-residents can transfer or remit funds to a destination
resident. The CMA comprises Lesotho, Namibia, South Africa and convertible with each CMA member state’s own currency. calendar year via authorised dealers. Prior approval from the outside of South Africa up to an amount of ZAR 3,000 a
Swaziland. There are no restrictions on payments within the CMA. SARB is required for loans in excess of ZAR 1 million. A 2.5% transaction, per day, within a limit of ZAR 10,000 for an individual
reserve requirement must be met for all deposit accounts in per calendar month, without the need for authorised dealers to
Bank accounts Exchange controls are administered by FinSurv of the SARB. South Africa. obtain and verify income tax numbers and residential addresses.
Resident Exchange controls are applicable to all cross-border transactions Various record keeping provisions were also introduced as part of
Foreign exchange accounts can be held by residents both regardless of size. Anti-money laundering/counter-terrorist financing1 this measure.
domestically and abroad; deposits must not exceed the South Africa has implemented anti-money laundering and
equivalent of ZAR 11 million per annum ( ZAR 1 million single Domestic currency exceeding ZAR 25,000 cannot be brought counter-terrorist financing legislation. Notable legislation includes: Financial institutions in the broadest sense must record and
discretionary allowance and ZAR 10 million foreign capital into South Africa from outside the CMA. report suspicious transactions to the FIC. All records must be kept
allowance). Resident domestic currency (ZAR) accounts cannot ®® The Prevention of Organised Crime Act 1998; for at least five years after account closure or the date of the last
be held abroad and are not convertible into foreign currency. Export proceeds must be repatriated within 30 days unless transaction.
®® The Financial Intelligence Centre Act, 2001, as amended 2008
otherwise directed. However, exporters who hold customer
and 2017; and
Non-resident foreign currency (CFC) accounts can retain funds in these Individuals entering South Africa must declare the amount
®® The Financial Intelligence Centre Money Laundering Control
Non-resident bank accounts are permitted in both foreign and accounts and are not obliged to convert the funds into ZAR. of cash in their possession to the customs authorities. South
Regulations 2002, updated 2005 and 2008.
domestic currency. Non-resident domestic currency accounts are Africans and residents leaving the country with cash exceeding
convertible into foreign currency. Residents require prior authorisation from the SARB in order to ZAR 175,000 for individuals, or ZAR 250,000 for families, must
The Finance Intelligence Centre has also issued a series of related
issue or sell securities abroad. declare this to the customs authorities.
guidance notes.
Interest can be offered on current and savings accounts.
Overdraft facilities are available to residents and non‑residents. Entities listed on the Johannesburg Stock Exchange (JSE) may
A Financial Action Task Force (FATF) member, South Africa
transfer up to ZAR 2 billion per calendar year from the parent
observes most of the FATF 49 standards. South Africa is also
Reporting company to the holding company without restriction, provided
a member of the Eastern and Southern Africa Anti-Money
All transactions between residents and non-residents must be transfers are not undertaken to avoid tax.
Laundering Group (ESAAMLG).The Financial Intelligence Centre
reported to the Financial Surveillance Department (FinSurv) of
Outward investment exceeding ZAR 1 billion (ZAR 500 million (FIC), the country’s financial intelligence unit, is a member of the
the SARB for balance of payment purposes. Transactions can be
previously) in a calendar year by a resident company into Egmont Group.
reported on a daily or monthly basis.
1.
Data as at June 2017.8 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 9
Taxation
1
Resident/non-resident of immovable property and assets of a permanent establishment
Withholding tax (subject to tax treaties)
Companies are deemed to be resident in South Africa if they are in South Africa. Foreign-sourced income derived by residents
formed or incorporated in South Africa or are effectively managed is subject to corporation tax in the same way as South African- Payments to: Interest Dividends Royalties Service fees Branch remittances
in South Africa (unless a corporation is deemed to be exclusively sourced income.
Resident companies None None None None NA
resident in another country for purposes of the tax treaty with
such other country). Income tax is imposed on a company’s taxable income, being Non-resident companies 15% *
15%*
15% None None
its gross income minus exemptions, allowances and deductions,
* Subject to the provisions of an applicable tax treaty.
Tax authority plus specific inclusions for net capital gains and after the set-off
®® South African Revenue Service (SARS). of any assessed loss brought forward from the prior fiscal year.
To be allowed as a deduction, expenditure and losses must
Tax year/filing be incurred in the production of income and may not be of a has also expanded its reportable arrangement provisions to Tax treaties/tax information exchange agreements (TIEAs)
A company’s fiscal year is the same as its financial year. capital nature. give the revenue authority an early warning with respect to South Africa has exchange of information relationships with 101
transactions that may give rise to an undue tax benefit. The jurisdictions through 83 double tax treaties and 20 TIEAs.
A company’s annual income tax return must be submitted within The standard rate of corporation tax is 28%. Non-resident definition of a reportable arrangement is set out in section 35 of
12 months of its year-end. companies’ South African taxable income is taxed at a rate of the Tax Administration Act. In addition to this, a list of reportable South Africa, as part of the Organisation for Economic Co-
28%, but no withholding or dividend tax is payable in respect arrangements was published in the Government Gazette (GG operation and Development (OECD)/G20 Base Erosion and Profit
Companies are required to make two provisional tax payments of branch profit distributions. There is no surtax or alternative 38569) on 16 March 2015. The list is not final and will be Shift (BEPS) initiative, is a signatory of the Multilateral Competent
each year. These are based on estimates of the company’s minimum tax. amended as and when necessary. Authority Agreement (MCAA). Under this multilateral agreement,
annual taxable income and are paid at the end of the first and
information will be exchanged between tax administrations,
second halves of the company’s fiscal year. To avoid penalties, Incentives include a preferential corporate tax rate for small Capital gains tax giving them a single, global picture on some key indicators of
the aggregate of the company’s first and second taxable income business corporations; an R&D deduction; depreciation In the case of corporate taxpayers, 80% of any net capital gains economic activity within multinational enterprises (MNE).
estimates must be at least 80% of the company’s actual annual allowances; urban development and infrastructure development are included in a company’s taxable income. Gains on the sale of
taxable income (for companies with taxable income of more than allowances; public-private partnership grants; environmental substantial foreign shareholdings are exempt if certain conditions With country-by-country reporting, the tax authorities of
ZAR 1 million) as finally determined. An optional final top-up expenditure deductions; a carbon-reducing exemption; oil and are satisfied. jurisdictions where a company operates will have aggregate
payment based on actual annual taxable income for the year is gas income tax incentives; and a film allowance. information annually relating to the global allocation of income
payable within the six months following the year‑end to avoid Stamp duty/securities transfer tax (STT) and taxes paid, together with other indicators of the location of
incurring interest on underpayments of provisional tax. Losses can be carried forward indefinitely in most cases, Stamp duty/STT is levied at a rate of 0.25% on the taxable economic activity within the MNE group. The reports will also
but certain anti‑avoidance rules apply. There is no carryback of amount of any transfer of a listed or unlisted security (with certain cover information about which entities do business in a particular
Consolidated returns are not permitted and each company must losses. There is no surtax or alternative minimum tax. exemptions). jurisdiction and the business activities each entity engages in.
file a separate return.
The information will be collected by the MNE group’s country
Advance tax ruling availability Withholding tax (subject to tax treaties)
Corporate taxation of residence, and will be exchanged through exchange of
Binding rulings are available from the tax authorities on the Where a purchaser of South African immovable property makes
Resident companies are taxed on their worldwide income with information.
interpretation of most provisions of the Income Tax Act. a payment to a non-resident, the purchaser must withhold a
certain exemptions.
percentage of the amount payable, depending on whether the Country-by-country reporting obligations apply for tax periods
Anti-avoidance and disclosure requirements seller is an individual, a company or a trust.
Non-resident companies are taxed on South African-sourced beginning on or after 1 January 2016. The first exchanges under
The tax authorities may, for purposes of the administration of
income only, subject to the application of any relevant tax the MCAA will begin in 2017–18, based on 2016 information.
the Income Tax Act, require any taxpayers or any other person A final withholding tax of 15% is withheld on gross payments to
treaties. Income includes capital gains arising from the disposal to furnish information, documents or other items. South Africa non-resident entertainers and sportspersons who earn income in
South Africa.
1
All tax information supplied by Deloitte Touche Tohmatsu (www.deloitte.com) and
Deloitte Highlight, 2017.10 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 11
Non-resident companies’ South African
taxable income is taxed at a rate of 28%.
No withholding or dividend tax is payable in
respect of branch profit distributions.
Thin capitalisation Certain services (e.g. financial services, letting of residential
Thin capitalisation provisions limit the deduction of interest accommodation and road or rail transport) are exempt.
payable by South African companies on debt provided by a
non-resident connected person in relation to the South African ®® A person making standard or zero-rated supplies of more than
borrower, or a non-resident connected person entitled to ZAR 1 million per year is required to register;
participate, directly or indirectly, in not less than 20%, of the ®® Non-residents that carry on an enterprise in, or partly in, South
company’s equity. Africa are required to register; and
®® All foreign suppliers of electronic services to South African
The main test for thin capitalisation purposes is to assess the customers are required to register in respect of supplies of
commercial terms and conditions of an agreement concluded e-commerce services made on or after 1 April 2014. These
between independent parties as compared to the terms and foreign suppliers fall into the compulsory VAT registration
conditions concluded between a South African taxpayer and a category, which has a monetary threshold of ZAR 50,000 to
non-resident connected person. trigger a VAT registration liability.
Transfer pricing There are excise duties on, inter alia, alcohol and tobacco
Cross-border transactions with certain connected parties that are products and a fuel levy and excise duty is imposed on fuel.
carried out at amounts not considered to be at arm’s length may
be adjusted by SARS for tax purposes. Such adjustments are Certain excise levies are imposed on environmental inefficiencies.
required to be made by the taxpaying entity itself at tax year-end.
Financial transactions/banking services tax
South Africa’s transfer pricing rules are based on the OECD Other than STT, there are no specific financial transactions/
Guidelines. banking services taxes in South Africa.
Cash pooling Payroll and social security taxes
South Africa has no specific tax rules for cash pooling A 1% payroll levy (skills development levy) is imposed on
arrangements, but the application of general anti‑avoidance rules, employers, but companies with annual payroll costs below
transfer pricing rules and exchange control regulations should be ZAR 500,000 are exempt. Employers are obliged to withhold
taken into consideration. and pay to SARS, on a monthly basis, personal income tax on
behalf of their employees in respect of their employees’ salary or
Property taxes remuneration. This deduction system is known as PAYE.
Municipal authorities levy a ‘rates’ tax on the owners of real
estate. Rates are corporation tax deductible. Transfer duty at Employers and employees equally contribute in aggregate 2%
progressive rates up to 8% is payable on the acquisition of (up to maximum of ZAR 178,464 per annum per employee) of the
immovable property where the transaction is not subject to VAT. employee’s remuneration to the Unemployment Insurance Fund.
Sales taxes/VAT (incl. financial services) Employers contribute to the Workmen’s Compensation Fund at
The standard rate of VAT is 14% on the value of goods and various rates depending on the industry.
services supplied by vendors.
Donations tax
Certain goods and services are zero rated (e.g. basic foodstuffs, Donations tax is levied at a rate of 20% on the value of donations
goods exported and certain services rendered to non-residents). made by a resident (subject to certain exceptions).12 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 13
Banking
Overview
Major banks
There are 17 commercial banks operating in South Africa, of
which ten are locally controlled. In addition, there are 15 branches Total assets (USD millions)
Bank
of foreign banks and 31 foreign banks with local representative 30 June 2017
offices. There are also three mutual banks.
Standard Bank 149,368
South Africa’s financial sector is dominated by five banks. At the of South Africa
end of 2016, these banks accounted for over 85% of the banking FirstRand Bank 93,155
sector’s total assets. They also rank as Africa’s most profitable
banks with extensive operations across continental Africa. Nedbank 73,886
Absa Bank 71,658
African Bank (commonly known as Abil), the country’s seventh
largest bank in terms of assets, was rescued by SARB and Investec Bank 32,565
relaunched as African Bank Limited in April 2016. It is expected Source: www.accuity.com, October 2017.
that the bank will eventually be relisted on the Johannesburg
Stock Exchange.
Foreign banks, including China’s ICBC (20% of Standard Bank),
Citibank, Credit Suisse and Société Générale, play an active role
in the country’s financial sector. Indian bank ICICI opened its first
branch in South Africa in 2016, the first Indian private sector bank
to launch operations in Africa.
Barclays Bank is in the process of reducing the shares it holds
in Barclays Africa Group Limited (BAGL). It plans to reduce its
shareholding to 15%. BAGL trades as Absa in South Africa. In
addition to Absa Bank in South Africa, BAGL controls banks
in nine other African countries including Ghana, Kenya and
Tanzania.
In 2017, the Human Settlements Bank was launched as a
development finance bank aimed at providing affordable home
loans. Discovery Bank, is expected to launch in 2018, and
Postbank has submitted its application for a full banking licence;
at present it accepts deposits only.
In order to increase efficiencies, and customer numbers, the
adoption of digitalisation continues to be a strategic priority for
South African banks. Digital banking, and in particular mobile
banking, is seen as a way of reaching those sections of the
population currently excluded from traditional banking services.14 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 15
Payment
Instruments
DebiCheck, Cash
Cash is an important payment medium in South Africa,
particularly for low-value retail and commercial transactions. Cash
Payment statistics
Millions of transactions Traffic (ZAR billions)
which launched
% change % change
transactions account for over 52% of all transactions1. 2015/2014 2015/2014
2014 2015 2014 2015
Credit transfers
in 2017, will only
Cheques 22.86 16.89 – 26.1 383.4 294.0 – 23.3
Credit transfers in South Africa can be paper based or automated.
Credit transfers 695.32 738.31 6.2 22,035.1 23,846.2 8.2
be processed to a
®® High-value (greater than ZAR 5 million) and urgent electronic
credit transfers are cleared and settled via SAMOS, the Direct debits 785.97 782.91 0.39 1,248.3 1,297.3 3.9
national RTGS system, in real time. Card payments 1,927.92 2,260.32 17.2 752.0 882.0 17.3
consumer’s account, ®® Low-value (equal to or below ZAR 5 million), non-urgent and
high-volume electronic credit transfers are cleared via the Total 3,432.07 3,798.43 10.7 24,418.8 26,319.5 7.8
RTC or ACB EFT Credits systems on a same-day basis. Low-
if the mandate has
Source: ECB Payment Statistics, December 2016.
value credit transfers include payroll, supplier and third-party
payments.
been electronically
®® Paper-based credit transfers are settled in the CLC system.
Cheques MasterCard debit card issued by the South African Social Security
There is a maximum value threshold of ZAR 500,000.
Cheque use is in terminal decline in South Africa, due to an Agency to grant recipients has helped fuel debit card growth.
confirmed by the
increasing preference for electronic payments for both high-value Contactless payment cards are available. Visa and MasterCard
Credit transfers accounted for 79% of the value of all cashless
and low-value transactions; year-on-year cheque volumes and are the principal payment card brands issued, although American
payments in 2016, but just 19.4% of the volume1.
value fell 28% and 25% respectively in 20161. The maximum Express and Diners Club credit cards are also available.
consumer. Direct debits value threshold for cheques is ZAR 500,000.
Debit card payments with a value of ZAR 500,000 or less are
Direct debits are available in South Africa for low-value recurring
Cheques are cleared electronically by the CLC system with processed by the Debit Card PCH; settlement occurs once a day
payments such as utility bills.
funds credited to the beneficiary’s account on a same-day basis. via SAMOS. Nineteen banks participate in the Debit Card PCH.
Direct debits have a maximum value threshold of ZAR 1 million. Electronic clearing takes place the next day while the physical
clearing of cheques takes approximately seven working days. Credit card payments with a value of ZAR 500,000 or less are
They are cleared via the ACB EFT Debits system on a same-day
Cheques can also be cleared bilaterally between banks. processed via the Credit Card PCH. Eleven banks participate
basis.
in the Credit Card PCH. Most payments are cleared by their
A new debit order, the DebiCheck, launched in 2017 and will be Card payments respective international card schemes before being settled on a
implemented over a two-year period. A DebiCheck debit order Payment cards are a popular method of payment in South Africa. bilateral basis.
will only be processed to a consumer’s account if the mandate They accounted for 56% of the volume of all cashless payments
in 2016, but just 7% of the value1. There were approximately 28,906 ATMs and 394,309 POS
for such a debit order has been electronically confirmed by the
terminals in South Africa at the end of 20152. ATMs are interlinked
consumer.
There were approximately 77.5 million payment cards in via the SASWITCH system. All card payments are processed by
Direct debits accounted for 20.6% of the volume of all cashless circulation at the end of 2015, a year-on-year decrease of 11%2; the ATM PCH. Seventeen banks participate in the ATM PCH.
payments in 2016, but just 7% of the value1. approximately two‑thirds of all cards are debit cards. The SASSA16 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 17
Electronic wallets % volume of all cashless
Electronic money schemes are available in the form of reloadable payments 2016
pre-paid cards. Notable examples include
®® Absa Bank’s multipurpose, reloadable e-purse debit card
issued in conjunction with Visa. The card can be reloaded at
ATMs or by using mobile or online banking. EFT Credit 15%
EFT Debit 12%
®® Nedbank’s Impeza card, a national, standalone e-purse card.
ATM 13%
Mobile wallet payment apps are offered by a number of banks Card Payments 56%
and are increasingly popular. SWAP Mobile is an electronic
mobile wallet enabling payments, money transfers or fund top-
ups to be made without bank accounts via mobile phones. % value of all cashless
payments 2016
In 2016, MasterPass, MasterCard’s mobile wallet, partnered
with bank-based wallet SnapScan to expand its network to
SnapScan’s 30,000 South African in-store and online merchant
partners. MasterPass is now the most widely accepted digital
wallet in South Africa. Visa launched Visa Checkout in late 2016. EFT Credit 79%
EFT Debit 7%
Alipay, the world’s largest online and mobile payment platform, ATM 2%
was launched in South Africa in June 2017. Card Payments 7%
Source: Payments Association of South Africa, Annual Report 2016.
1.
Payments Association of South Africa, Annual Report 2016.
2.
Bank for International Settlements, December 2016.18 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 19
Payment
Systems
All electronic funds Type
SAMOS (South African Multiple Option Settlement), South
Africa’s national real‑time gross settlement (RTGS) system, is
The RTC system processes individual, low-value (equal to or
below ZAR 5 million) credit transfers. The threshold drops to
ZAR 250,000 after 16:00 SAST.
The RTC
The RTC system processes credit transfers on a deferred net
settlement basis. Customers are able to make individual credit
transfers greater operated by the SARB.
The CLC system clears cheques electronically. The maximum
payments in real time (within 60 seconds) to beneficiaries.
®® SAMOS processed 7.035 million transaction in 2015, with a value threshold for cheques is ZAR 500,000. Payments are cleared via BankservAfrica’s ACB and settled via
than ZAR 5 million value of ZAR 117,159 billion, an increase of 9.5% and 11.2%
respectively on 2014 figures. Operating hours
SAMOS within one hour.
are processed via
SAMOS and the NPS are operational 24 hours a day, seven days The CLC
The NPS (National Payment System), operated by PASA, a week. The payee is credited with the value of the cheque on the date of
South Africa’s payment system management body, comprises deposit. Magnetic Ink Character Recognition (MICR) technology
SAMOS, South three subsystems: Clearing cycle details is used to transmit the data in electronic files to the ACB for
SAMOS clearing. The physical cheques are matched with electronic data
®® The ACB EFT: an electronic low-value credit (EFT Credits) and SAMOS settles transactions in real time and with immediate and dispatched to the respective homing banks.
Africa’s national debit (EFT Debits) system;
®® The RTC (Real-Time Clearing) system: for electronic credit
finality. Payment instructions are submitted via a bank’s own
proprietary message network service and/or SWIFT. ®® 9:00 local time (13:00 Saturdays): final settlement takes place
transfers; and across participants’ accounts held at the SARB via SAMOS.
RTGS system. ®® The CLC (Code Line Clearing) paper-based system.
Final settlement takes place across the participant banks’
correspondent accounts held at the SARB.
Participants
EFT Credits Currency centre holidays
SAMOS has 29 participants.
Transfers are processed in batches by EFT Credits at the end of 2018 1 Jan, 21, 30 Mar, 2, 27 Apr, 1 May,
The NPS has 28 participants. the day or on an overnight basis. Transactions processed by the 16 Jun, 9 Aug, 24 Sep, 17, 25, 26 Dec
EFT system are cleared via BankservAfrica’s Automated Clearing
Transaction types processed Bureau (ACB). 2019 1 Jan, 21 Mar, 19, 22, 27 Apr, 1 May,
SAMOS processes high-value and urgent ZAR-denominated 17 Jun, 9 Aug, 24 Sep, 16, 25, 26 Dec
funds transfers. In addition, SAMOS effects the final settlement ®® 19:00 local time (13:00 Saturdays): final settlement takes place
Source: www.goodbusinessday.com.
of participants’ net balances originating from South Africa’s other across participants’ accounts held at the SARB via SAMOS.
payments systems, as well as from SASWITCH, the national
EFT Debits
ATM network. There is no minimum value threshold, although
Direct debits are processed in batches by EFT Debits on a same-
all electronic funds transfers greater than ZAR 5 million are
day basis.
processed via SAMOS.
®® 19:00 local time (13:00 Saturdays): final settlement takes place
EFT Credits processes low-value (equal to or below
across participants’ accounts held at the SARB via SAMOS.
ZAR 5 million) credit transfers in batches.
EFT Debits processes direct debits in batches. The maximum
value threshold for direct debits is ZAR 1 million.20 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 21
Cash
Management
When intercompany Domestic
Notional pooling
Notional pooling is permitted and offered by the major
loans are made, international and domestic cash management banks in South
Africa. However, notional pooling is not permitted between
companies need
resident and non-resident companies.
One or more legal entities may be included in a notional pool.
to be aware of
Each company in a group is treated as a separate legal entity
in a notional pooling arrangement. Where intercompany loans
are made, companies need to be aware of South Africa’s rules
South Africa’s rules governing transfer pricing and thin capitalisation.
Cross-border notional pooling is not permitted.
governing transfer Cash concentration
All the major international and domestic cash management
pricing and thin banks offer cash concentration techniques. However, cash
concentration is restricted to resident domestic currency
capitalisation.
accounts only. Zero balancing is the most widely used cash
concentration technique.
Cross-border cash concentration is not permitted.
Collections
A number of banks in South Africa offer comprehensive cash
handling collections solutions. These include the use of electronic
cash vaults that accurately record payments and securely store
cash on business premises; cash-in-transit management services
to transfer cash deposits to a bank branch; automated cash
acceptance through branch and ATM networks; and online
management solutions.
Lockbox services for cheques are also available.
Cross-border
Cross-border payments are routed via SWIFT and settled through
accounts held with correspondent banks abroad.22 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 23
Electronic
Banking
Retail cross-border transactions can be made by payment cards
issued by international companies or by money transfer services.
®® Municipal authorities and large state-owned and private
companies issue bonds, which are listed on the Bond South Africa’s Electronic banking is available in South Africa and offered by all
of the country’s leading domestic and international banks. There
Exchange of South Africa. is no bank-independent electronic banking standard; each bank
The Southern African Development Community (SADC) regional
cross-border settlement system, the SADC Integrated Regional
®® Promissory notes and investor promissory notes are available,
with maturities ranging from two to five years.
mobile penetration offers its own proprietary system for corporate banking purposes.
Electronic Settlement System (SIRESS), operates across CMA Internet banking and mobile banking is offered by all of South
rate is in excess of
®® Fixed-rate repurchase agreements are used by banks and are
member states. Customers in CMA countries can make cross- Africa’s banks for both corporate and retail purposes. Adoption
available via auctions from the SARB. They have one-week
border payments via electronic credit transfers that are settled rates, particularly of mobile banking, are high. Standard Bank’s
maturities.
145%. Adoption
in real time through SIRESS. Paper-based instruments, such as mobile platform processed 726 million transactions in 2016,
®® Banker’s acceptances are available. Traded at discount,
cheques and ZAR-denominated drafts are not accepted. according to data released by the bank, with a value of
maturities range from one month to one year, but are typically
ZAR 360 billion. Nedbank’s digitally-enabled customers increased
rates of mobile
Lifting fees issued with maturities of 90 days. The standard investment
59% in the same period to 5.3 million, of which 1.4 million are
Fixed item-based fees are applied on funds transfers between amount ranges between ZAR 100,000 and ZAR 1 million.
active. FNB saw a year-on-year increase of 26% and 11% in
resident and non-resident accounts. Percentage-based lifting fees ®® Money market funds are available. mobile and internet transactions in 2016, and an 80% increase in
are applied to card transactions.
Custody and securities settlement1 banking are high. the number of transactions conducted via its banking app.
Short-term investments Depository South Africa’s internet penetration rate is expected to reach 40%
®® Interest can be earned on resident and non-resident current ®® Share Transactions Totally Electronic (STRATE). in 20171. Mobile penetration is in excess of 145%2.
accounts, savings accounts and short-term deposits.
STRATE is the licensed central securities depository (CSD) for
®® Time deposits are available, with maturities of up to
the electronic settlement of financial instruments in South Africa.
12 months. Banks usually accept deposits above ZAR 1,000.
STRATE handles the settlement of equities and bonds for the JSE
®® Certificates of deposit (CDs) are offered by banks. Negotiable
as well as money market securities.
CDs are commonly issued by commercial banks, with
typical maturities of three, six or nine months. The minimum STRATE provides services to issuers for their investors in terms
investment amount is ZAR 500,000, with a typical investment of the Companies Act and Securities Services Act, as well as a
amount of ZAR 1 million. range of IT communication services, including operating as a
®® Commercial paper is issued by large companies and public SWIFT bureau.
authorities. Commercial paper has maturities ranging up to
one year. Settlement cycle
®® Treasury bills (T-bills) are issued by the SARB on behalf of ®® T+3 for bonds.
the National Treasury via weekly auctions held every Friday ®® T+3 for equities and warrants.
morning. T-bills are issued with maturities of three, six, nine or ®® T+0 for money market securities.
12 months. The minimum investment amount is ZAR 100,000.
®® SARB debentures are issued via weekly auctions, with
maturities of one or two months. The minimum investment
amount is ZAR 5 million.
1.
Data as at June 2017. 1.
Internet Access in South Africa 2017, World Wide Worx.
2.
Global Digital Overview 2017, Cape Digital Foundation.24 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 25
Trade For capital goods, authorised dealers can
allow advance payments of up to 100% of the
Finance ex-factory cost up to a total of ZAR 10 million.
Key import partners Imports South Africa is among 12 member states that are party to the Financing imports and exports
Documents SADC trade protocol. Imports
No documentation is required for imports from Southern African Authorised dealers do not need SARB approval to offer foreign
Customs Union (SACU) member states (Botswana, Lesotho, South Africa has five industrial development zones: Richards Bay, exchange for advance payments and/or cash-with-order requests,
Namibia and Swaziland), although it is good practice to send a Coega near Port Elizabeth, Elidz in East London, Saldanha Bay, in order to cover the cost of permissible imports, excluding
China 18% and OR Tambo International Airport near Johannesburg.
commercial invoice. capital goods, against the presentation of an invoice stating that
Germany 12%
payment must be made in advance.
USA 6.8% In order to import goods into South Africa, a customs declaration, Prohibited imports
India 4.2% commercial invoice, bill of lading, packing list, form SAD 500 A negative list (of products that may not be imported) is in For capital goods, authorised dealers can allow advance
Saudi Arabia 3.8% (transit document), terminal handling receipts, inspection report operation. It is prohibited to import certain commodities, in payments of up to 100% of the ex-factory cost up to a total of
Japan 3.5% and cargo release are required. order to protect the safety and health of fauna and flora, and for ZAR 10 million.
national security and moral reasons.
A certificate of origin is required in certain cases. For advance payments of up to ZAR 50,000, authorised dealers
Exports are not required to review the South African Revenue Service
Key export partners Licences Documents customs declaration.
Imports originating from Botswana, Lesotho, Malawi, Namibia, No documentation is required for exports to other SACU member
Swaziland and Zimbabwe, with the exception of used and states, although it is good practice to send a commercial invoice. Exports
second-hand goods, do not require a licence. Exporters may extend credit for up to one year, provided the
In order to export goods from South Africa, a customs declaration, credit is necessary in that particular trade or needed to protect an
China 9.9% Licences are required for the import of waste and scrap, commercial invoice, bill of lading, packing list, form SAD 500 existing export market or capture a new one.
USA 7.9% radioactive materials, ozone-depleting substances, certain (transit document), terminal handling receipts, inspection report
Germany 7.6% minerals (including fuels), gold, armaments, gambling machines, and, in certain cases, certificate of origin are required.
Botswana 5.4% pneumatic tyres, fish, shellfish and molluscs.
Namibia 5.1% Licences
Japan 5.0% Licences with quotas are required for the import of several Export permits are required for some agricultural and
UK agricultural and manufactured products, including textile and manufactured products to countries outside the SACU.
4.6%
clothing products from Zimbabwe.
A licence from the Department of Defence is required for the
Source: The World Factbook. Washington, DC: Central Intelligence Agency, 2017 Taxes/tariffs and other fees export of military equipment.
(https://www.cia.gov/library/publications/resources/the-world-factbook/index.html).
South Africa is a member of the SACU, the Common Monetary
Area (CMA), alongside Lesotho, Namibia, and Swaziland, and the Taxes/tariffs and other fees
Southern African Development Community (SADC). No taxes are charged on exports from South Africa.
There are no tariffs on imports from South Africa’s fellow SACU Prohibited exports
member states, with the exception of 14% VAT. Imports into A negative list (of products that may not be exported) is in
South Africa from outside the SACU are subject to a variety of operation.
tariffs, ranging from 45% for commercial goods to 60% for motor
vehicles.26 HSBC Treasury Management Profile 2018 | South Africa HSBC Treasury Management Profile 2018 | South Africa 27
Useful
Websites
South African Reserve Bank www.resbank.co.za
Leading banks: Absa Bank www.absa.co.za
FirstRand Bank https://www.firstrand.co.za
Investec Bank www.investec.co.za
Nedbank www.nedbank.co.za
Standard Bank www.standardbank.co.za
Financial Services Board www.fsb.co.za
The Banking Association of South Africa www.banking.org.za
SADC Banking Association www.sadcbanking.org
Disclaimer
National Treasury www.treasury.gov.za
Department of Trade and Industry www.dti.gov.za This document has been produced by HSBC Bank plc and members of the HSBC Group (“HSBC”), together with their third-party contributor, WWCP Limited. We make no
representations, warranties or guarantees (express or implied) that the information in this document is complete, accurate or up to date. We will not be liable for any liabilities
South African Revenue Services www.sars.gov.za arising under or in connection with the use of, or any reliance on, this document or the information contained within it. It is not intended as an offer or solicitation for business
to anyone in any jurisdiction. The information contained in this document is of a general nature only. It is not meant to be comprehensive and does not constitute financial,
Johannesburg Stock Exchange www.jse.co.za legal, tax or other professional advice. You should not act upon the information contained in this document without obtaining your own independent professional advice. The
information contained in this document has not been independently verified by HSBC.
Payments Association of South Africa www.pasa.org.za
This document contains information relating to third parties. The information does not constitute any form of endorsement by these third parties of the products and/or
BankservAfrica www.bankservafrica.com services provided by HSBC or any form of cooperation between HSBC and the respective third parties.
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or projection contained in this document or any other written or oral information provided in connection with the same, or (ii) any loss or damage (whether direct, indirect,
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