Beware African exchange controls

Companies working in Africa need to ensure that they are compliant with the local exchange control regulations – or face sometimes severe penalties, warns PwC associate director Michael Butler. Addressing a PwC Africa Tax Business Symposium conference in Dubai recently, Butler said foreign investors would face exchange controls “if they went directly into African countries, for example Nigeria or Mozambique. They could encounter them on multiple levels if they used South Africa (frequently seen as the gateway to the rest of Africa) as a continental head office for their other African operations – as there would be regulations between the operational country and SA, and then from SA to the offshore head office.” Alternatives for head offices would be countries without exchange controls, such as Botswana, Egypt, Kenya, Mauritius, Rwanda, Uganda and Zambia. Butler said regulations differed from country to country, and an offshore investor needed to become familiar with the requirements of each to understand how it affected inward and outward remittances, and how the regulations affected foreign personnel working in Africa. Most countries with foreign exchange control also have detailed requirements on approvals and supporting documentation. Some countries, such as Nigeria, will not generally permit retrospective approvals in certain circumstances. “This means offshore investors should ensure that they work closely with their advisers/ bankers before making inward remittances.”