From 1 January 2021, there is no longer a prohibition on loop
structures in South Africa. This is a significant exchange control
relaxation that will impact many structures for both corporates and
individuals.
A loop structure is essentially an arrangement whereby a South
African resident invests in an offshore vehicle which, in turn,
invests in South African assets.
Loop structures were previously prohibited on the basis that
they created a channel for the direct or indirect export of capital
from South Africa. This prohibition has been in place for decades
and has been the subject of much debate as well as various court
cases. Limited exceptions have been made in the past, especially
for inward listed vehicles. More recently, South African resident
individuals and companies have been allowed to invest in up to 40%
of an offshore vehicle that invests in South African
assets.
