BoN announces change in exchange control policies

THE Bank of Namibia (BoN) has considered various exchange control measures taking into consideration the country’s socio and macro-economic situation to preserve domestic economic and financial stability.

BoN Governor Tom Alweendo announced the changes in a media statement on Friday. The new regulations should see more investments and growth of the economy, and Namibia would now stop imitating the exchange control amnesty introduced by South Africa.”Having given due consideration to the desirability and feasibility of replicating the exchange control amnesty introduced by South Africa last year, it was concluded not to go ahead with such an arrangement in Namibia.”The decision was taken because of insufficient evidence of large amounts of capital having been transferred illegally out of the country.Moreover, the cost and effort to administer such amnesty seems to outweigh the benefit of capital repatriation and the collection of the amnesty levy,” said Alweendo.The Governor said during the calender year 2001 long-term insurers, pension funds and unit trusts through unit trust management companies (institutional investors) were permitted to invest in the Southern African Development Community (SADC) and elsewhere up to 10 per cent of the net inflow of funds during the calender year 2000.Thereafter, the statement said, no further outward investments were allowed, mainly in response to the rapid depreciation of the Namibia Dollar at the end of 2002.Alweendo said: “To give institutional investors greater scope to diversify their foreign portfolio investments, it was decided to resume the arrangement whereby institutional investors are allowed to invest their assets outside the common monetary area.”Therefore, institutional investors may with immediate effect seek approval from the Bank of Namibia to make foreign currency transfers outside the common monetary area of up to 15 per cent of total assets of long-term insurers and pension funds and 15 per cent of total assets under management by unit trust management companies.”Investment by foreign firms into the Namibian economy, said Alweendo, was likely to lead to the diversification of the economy, access to technology, increased competition and better services and products.To support this foreign companies are now permitted greater access to domestic credit in financing foreign direct investment into the country, and as of June 16, foreign owned companies may borrow locally up to 200 per cent of the total shareholders’ investment.”This dispensation does, however, not apply to emigrants and may not be used by non-residents to acquire properties or to engage in portfolio investments, security lending and hedging.In these cases, the 100 per cent ration still applies,” explained Alweendo.The Central Bank has also tightened time given to repatriation of foreign currency proceeds emanating from exports.An exporter was allowed a period of six months from the date of shipment before repatriating the export proceeds to Namibia and another six to keep such foreign currency invested in a customer foreign currency (CFC) account with a local authorised dealer.”The bank regards this time lapse as too liberal and has decided to reduce the period for the mandatory repatriation of export proceeds to Namibia from six to three months from the date of shipment.The retention period of foreign currency in the CFC account at a commercial bank in Namibia has likewise been reduced from 180 days to 90 days.”A regulation to this effect was issued by President Sam Nujoma on July 8.Meanwhile the Central Bank continues to monitor the developments in the market of institutional investors to ensure and encourage a sound financial system that will benefit the nation at large.The new regulations should see more investments and growth of the economy, and Namibia would now stop imitating the exchange control amnesty introduced by South Africa.”Having given due consideration to the desirability and feasibility of replicating the exchange control amnesty introduced by South Africa last year, it was concluded not to go ahead with such an arrangement in Namibia.”The decision was taken because of insufficient evidence of large amounts of capital having been transferred illegally out of the country.Moreover, the cost and effort to administer such amnesty seems to outweigh the benefit of capital repatriation and the collection of the amnesty levy,” said Alweendo.The Governor said during the calender year 2001 long-term insurers, pension funds and unit trusts through unit trust management companies (institutional investors) were permitted to invest in the Southern African Development Community (SADC) and elsewhere up to 10 per cent of the net inflow of funds during the calender year 2000.Thereafter, the statement said, no further outward investments were allowed, mainly in response to the rapid depreciation of the Namibia Dollar at the end of 2002.Alweendo said: “To give institutional investors greater scope to diversify their foreign portfolio investments, it was decided to resume the arrangement whereby institutional investors are allowed to invest their assets outside the common monetary area.”Therefore, institutional investors may with immediate effect seek approval from the Bank of Namibia to make foreign currency transfers outside the common monetary area of up to 15 per cent of total assets of long-term insurers and pension funds and 15 per cent of total assets under management by unit trust management companies.”Investment by foreign firms into the Namibian economy, said Alweendo, was likely to lead to the diversification of the economy, access to technology, increased competition and better services and products.To support this foreign companies are now permitted greater access to domestic credit in financing foreign direct investment into the country, and as of June 16, foreign owned companies may borrow locally up to 200 per cent of the total shareholders’ investment.”This dispensation does, however, not apply to emigrants and may not be used by non-residents to acquire properties or to engage in portfolio investments, security lending and hedging.In these cases, the 100 per cent ration still applies,” explained Alweendo.The Central Bank has also tightened time given to repatriation of foreign currency proceeds emanating from exports.An exporter was allowed a period of six months from the date of shipment before repatriating the export proceeds to Namibia and another six to keep such foreign currency invested in a customer foreign currency (CFC) account with a local authorised dealer.”The bank regards this time lapse as too liberal and has decided to reduce the period for the mandatory repatriation of export proceeds to Namibia from six to three months from the date of shipment.The retention period of foreign currency in the CFC account at a commercial bank in Namibia has likewise been reduced from 180 days to 90 days.”A regulation to this effect was issued by President Sam Nujoma on July 8. Meanwhile the Central Bank continues to monitor the developments in the market of institutional investors to ensure and encourage a sound financial system that will benefit the nation at large.