3.14. Residents borrowing abroad (South African Resident Individuals)

3.14.1 Resident individuals must approach their Authorised Dealer to obtain approval to avail of inward foreign loans and foreign trade finance facilities from any non-resident, and such loans must be recorded via the Loan Reporting System by the Authorised Dealer concerned.

3.14.2 All applications for inward foreign loans and foreign trade finance facilities must, inter alia, contain the following information which must be furnished to the Authorised Dealer:

(a) Full names of the local borrower;
(b) Identity number or temporary resident permit number or registration number of the borrower;
(c) Full names of the foreign lender;
(d) Domicile of the foreign lender;
(e) Relationship between the foreign lender and the borrower;
(f) Denomination of the loan;
(g) Currency and amount of principal sum;
(h) Interest rate and margin;
(i) Purpose of the loan;
(j) Details of the type of security required, if any;
(k) Tenor. In instances where a loan will be repaid at a fixed future date, the date on which the loan will be repaid must be provided and, where a loan will be repaid in instalments, the date of the first instalment should be provided as well as the interval of the instalments, e.g. monthly/quarterly intervals;
(l) Copy of the loan agreement, if available/applicable;
(m) Full details of early repayment options, as well as currency switch options, if any;
(n) In the case of foreign trade finance facilities, written confirmation from the borrower to the effect that the relative import or export transaction is not being financed elsewhere; and
(o) Detail of any commitment fees, raising fees and/or any other administration fees payable by the borrower.

3.14.3 The following minimum requirements must be met for the loan to be approved by the Authorised Dealer:

(a) The tenor of each loan must be at least one month;
(b) The interest rate in respect of third party foreign denominated loans may not exceed the base lending rate plus 3 per cent or, in the case of shareholders’ loans, the base lending rate as determined by commercial banks in the country of denomination;
(c) The interest rate in respect of Rand denominated loans may not exceed the base rate, i.e. prime rate, plus 5 per cent on third party loans or the base rate, in the case of shareholders’ loans;
(d) The fixed interest rate linked to the base rate, if applicable, may not exceed the interest rate mentioned in (b) or (c) above. In this regard, approved inward foreign loans should always be adjusted accordingly in line with the set criteria;
(e) The loan funds to be introduced may not represent or be sourced from a South African resident’s foreign capital allowance, foreign earnings retained abroad, funds for which amnesty has been granted in terms of the Exchange Control Amnesty and Amendment of Taxation Laws Act, 2003 (Act No. 12 of 2003), funds regularised under the Exchange Control Voluntary Disclosure Programme and/or foreign inheritances;
(f) The loan funds may not be invested in foreign sinking funds;
(g) No upfront payment of commitment fees, raising fees and/or any other administration fees are payable by the borrower;
(h) The above-mentioned fees may be paid from South Africa once the loan funds have been received and converted into Rand locally, provided that such fees do not exceed 5 per cent of the principal sum; and
(i) Early repayments may be effected offshore, provided that the relevant loans are fully drawn down, reported correctly on the Loan Reporting System, and that there are no anomalies on the Loan Reporting System.

If the above-mentioned requirements cannot be met, a suitable application must be submitted via an Authorised Dealer to the Financial Surveillance Department.