FOREX CONTROL THE COST OF CURRENCY AND COMMUNICATION Transparency, cost, communication and administrative efficiency are at the core of service offerings for Incompass Foreign Exchange. Blue Chip sat down with managing director, Nico Le Roux, to determine the true worth of these values that led the company to disrupt the local forex market. Nico, why is it important to choose the right currency provider? A currency provider should offer a service that encompasses proper information, administration and communication, as well as fair pricing on foreign currency. A huge emphasis should be placed on transparency, which should enable the potential client to evaluate the value proposition. How has Incompass disrupted the South African forex industry? The disruption of the foreign exchange market was built on two factors: better pricing on foreign exchange and bringing a consulting service to an under-serviced part of the market. Individuals and SME markets in South Africa have historically been charged incredibly high foreign exchange prices (or spreads) by the local banks. According to legislation, banks do not have to disclose their spread on foreign currency. With the price of foreign currency changing every second of the day, an average individual or SME cannot easily monitor how much value deduction takes place when foreign currency is bought or sold. Incompass solved the problem by bringing full transparency to this process, as well as negotiating a competitive set spread on foreign currency by converting as a collective for all clients. When it comes to service, the administrative demand portion of the market was under-serviced in terms of proper consulting for individuals and SMEs. Why is transparency in the foreign exchange process important? Lack of transparency can lead to a product supplier charging a disproportionately high margin, and where the product’s price is changing every second of the day, this can lead to value destruction unbeknown to the client. Transparency makes it clear what the true value destruction is when money is exchanged. Transparency gives the client the power to properly compare price, value and service to ensure that the proposition gets maximised. It is not surprising that the FSB (now the FSCA) had transparency as a focus with the introduction of the FAIS Act, many years ago. South Africa is regulated by exchange control. How does this affect international money transfers? South African Exchange Control Regulations (internationally known as capital controls) were introduced to our economy in 1939. The regulations are used by the South African Reserve Bank to control capital flows in and out of South Africa. The regulations set limitations on certain transactions and place an additional administrative burden on international money transfers. During the past 10 years, the limitations have been lowered significantly. The administrative procedures are still well in place and have become particularly important to perform correctly. This curbs the complete unburdened transfer of money through technology like online platforms or so-called apps. What are the rules for non-residents wishing to buy property locally? In simplistic terms, the capital that non-residents introduce to South Africa can be repatriated at any stage. It is, however, important that the funds are registered accurately with the Reserve Bank upon entering South Africa to avoid hassles with the repatriation at a later stage. Should the non-resident make a profit, this profit can be repatriated after tax has been paid on the profit (either income or capital gains tax). Why should non-residents consider dealing with a South African entity when selecting a currency provider? Non-South African currency providers can exchange currency like any provider in South Africa, but these providers normally have extremely limited knowledge of current exchange control regulations and the administration required to report the transactions correctly. It can become especially difficult and time consuming to repatriate funds that were not registered appropriately with the Reserve Bank when they were introduced to South Africa. These foreign providers are also not regulated by the South African FSCA or Reserve Bank and could limit recourse should a transaction go wrong. Legislation on formal emigration, also known as financial emigration, changed on 1 March 2021. How did it change and how can Incompass help? The formal emigration process changed completely. For years, tax residency and residency, from an exchange control point of view, were two entirely separate processes. This has changed. SARS and its definition of non-tax residency is now the determining factor in the new financial emigration process once non-tax residency for three years has been established by SARS. Clarifications on certain scenarios are still in process and some rulings have already been amended since March. Incompass assists our clients with the money exchange and transfer of their wealth when emigrating out of South Africa. 64 Nico Le Roux, Managing Director, Incompass Foreign Exchange
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