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Inward foreign loans: a quick exchange control guide for South Africans

Inward foreign loans: a quick exchange control guide for South Africans

April 26, 2024


Foreign loans can be a powerful tool for South African residents, offering access to capital at potentially lower interest rates with longer repayment terms compared to domestic credit options. However, navigating the complexities of the exchange control regulations is important when it comes to offshore lending to ensure you stay on the right side of the law. With this in mind, let’s take a look at what you need to know about inward foreign loans, including the benefits and risks, and then quickly run through the process of obtaining such a loan while adhering to South African Reserve Bank (SARB) regulations.

Understanding inward foreign loans

  • Definition: An inward foreign loan is when a South African resident (individual or entity)borrows money from a non-resident. (non-resident creditor).
  • Regulations: All inward foreign loans require prior approval from an Authorised Dealer (usually the resident’s bank) and registration with SARB.
  • Structure: These loans can be structured in various ways, including:
    – Currency: South African Rand (ZAR) or foreign currency.
    – Security: Secured or unsecured.
  • Interest rate: Subject to SARB regulations, with different rates for specific loan types.

Inward foreign loans – regulation and structuring

All inward foreign loans from a non-resident must be placed on record with the SARB. It is important to note that foreign loan funds cannot be paid into a foreign currency account, and the funds must be converted to Rand before they can be paid to a resident entity or individual.

Benefits and risks of inward foreign loans


  • Access to capital: Source funding not readily available domestically.
  • Competitive interest rates: Potentially lower than domestic options.
  • Flexible repayment terms: Longer repayment periods compared to domestic loans.


  • Currency fluctuations: Changes in exchange rate can affect repayment amount.
  • Compliance complexity: Navigating regulations and paperwork can be challenging.
  • Repayment obligations: Ensuring timely loan repayments is essential.

Key requirements and restrictions – overseas loans for South Africa

  • Minimum loan term: 1 month.
  • Interest rate limits:
    – Foreign currency denominated loans: base lending rate + 3% (third-party loans) or prime lending rate (shareholder’s loans) as determined by commercial banks in the country of denomination.
    – ZAR-denominated loans: base rate i.e., prime lending rate + 5% (third-party loans) or prime lending rate (shareholder’s loans)
  • Loan funds cannot be invested in sinking funds.
  • Upfront payment of commitment fees, raising fees and other administration fees: Commitment, raising, and administration fees may only be paid once the loan funds have been received in South Africa and converted to Rand. The fees may not exceed 5% of the loan amount authorised.

While the regulations do not explicitly outline the necessary supporting documents, they typically include:

  1. The written loan agreement, which outlines the specific terms of the foreign loan.
  2. Comprehensive details on both the resident and the non-resident.

If the Authorised Dealer has received all pertinent details of the loan, they can proceed to release the foreign loan funds to the resident recipient.

How long after approval must the principal loan amount be paid out?

Within 12 months after the exchange control approval has been received.  Any extensions to this deadline must be communicated to the Financial Surveillance Department through the local borrower’s Authorised Dealer.

How must the inward foreign loan be repaid?

The repayment of the capital portion of the inward loan is only permissible up to the amount that was paid out/received in South Africa. Such repayment must occur by means of an Authorised Dealer. The capital and interest payments must be reported separately on the FinSurv Reporting System.

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FinGlobal: exchange control specialists for South Africans

Engaging in business activities with overseas partners, whether or not you’re a South African resident, often involves the movement of funds across borders. These transactions are subject to South African exchange control regulations established by the SARB.

As a result, following the correct proper procedures is key to ensuring a smooth and timely flow of funds. Any delays or complications can have significant consequences, especially for businesses that rely on foreign funds. If you are new to inward foreign loans, offshore lending or overseas loans for South Africa, our exchange control specialists are ready to help you to understand your obligations and navigate the process of cross-border transactions.

To find out how we can help with your exchange control requirements, leave your contact details in the form below and we’ll be in touch.

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