In its typical form, a so-called “loop structure”
arises where a South African exchange control resident (individual
or company) holds an investment in a foreign company that directly
or indirectly owns shares or assets (including loan claims) in the
Common Monetary Area (“CMA”), which
includes South Africa.
The policy of the South African Reserve Bank
(“SARB”) that in principle prohibits
loop structures, emanates from Regulation 10(1)(c) of the
Exchange Control Regulations, on the basis that such a structure
creates a channel for the direct or indirect export of capital from
South Africa to an offshore vehicle, for the ultimate benefit of
South African residents.
In terms of current policy, the Exchange Control Manual provides
for two general exceptions to the “loop” structure
prohibition. Firstly, in the context of the foreign direct
investment dispensation, South African exchange control resident
companies may acquire up to 40% equity and/or voting
