Review procedurei Overview
Although the South African government has identified the need for a uniform policy for the assessment of foreign direct investment in the country, South Africa is yet to adopt laws giving effect to this policy. Consequently, there is no uniform oversight and review of foreign investments in the country. However, the country does regulate foreign investment in, ownership and control of, its strategic industries through sectoral regulation, including the banking, insurance, and broadcasting and telecommunications sectors. The foreign investment restrictions in respective of each of these sectors are briefly discussed hereunder.Banking sector
The Banks Act of 1990 (the Banks Act) permits a foreign bank to apply to the Prudential Authority (operating within the administration of the South African Reserve Bank) for consent for the establishment of a representative office or a local branch of that foreign bank in South Africa. The Prudential Authority may grant such application, either unconditionally or subject to such conditions as the Prudential Authority may determine. A representative office has authority to promote and assist the business of a foreign bank, while a branch is authorised by the Prudential Authority to conduct the business of a bank. Consent to operate a branch of a foreign bank is subject to, inter alia, the relevant foreign bank fulfilling capital adequacy, risk management and other operational requirements. The Prudential Authority will not grant an application for the establishment of a branch office, unless it is satisfied that the responsible supervisory authority of the foreign bank's country of domicile will exercise proper supervision over the foreign bank.Insurance sector
The Insurance Act of 2017 prohibits persons from conducting insurance business in South Africa without being appropriately licensed by the Prudential Authority under that Act. The provision of reinsurance services directly, or through agents or intermediaries, in South Africa is considered to be the conduct of insurance business in the country. However, in instances where a South Africa-based customer secures insurance with a foreign insurer or reinsurer, the actions of the foreign insurer or reinsurer would not qualify as conducting insurance business in South Africa. The Insurance Act permits a foreign reinsurer to conduct insurance business in South Africa, subject to that foreign reinsurer being granted a licence, and establishing both a trust (for the purposes of holding the prescribed security) and representative office in South Africa. The requirements for a Lloyd's underwriter conducting insurance business in South Africa are similar to those applicable to a foreign reinsurer, save that a Lloyd's underwriter is not required to establish a representative office in South Africa. In addition, to qualify for a licence as a branch of a foreign reinsurer or a Lloyd's underwriter, an applicant's proposed licensing must not be contrary to the interests of prospective policyholders or the public interest. Public interest is not defined in the Insurance Act.Broadcasting and telecommunications sector
The Electronic Communications Act of 2005 (ECA) imposes limitations of foreign control of commercial broadcasting services. The ECA provides that a foreign investor may not, whether directly or indirectly (1) exercise control over a commercial broadcasting licensee; or (2) have a financial interest or an interest in voting shares or paid-up capital in a commercial broadcasting licensee exceeding 20 per cent. The ECA further caps the percentage of foreigners serving as directors of a commercial broadcasting licensee at 20 per cent. In terms of the regulations issued under the ECA, the Independent Communications Authority of South Africa (the electronic communications regulator) may refuse to transfer a licence where the transferee's ownership and control by historically disadvantaged persons is less than 30 per cent. The ECA further regulates cryptography. In terms of that Act, a foreign cryptographer must be registered with the Department of Communications as such prior to rendering cryptography services and supplying cryptography products in (or to persons in) South Africa. This registration obligation applies to foreign cryptography providers rendering their services, or selling their products, in South Africa irrespective of whether they have a physical presence in the country.ii Additional information
There are restrictions on foreign investors rendering business services (such as legal and investment brokerage services) without due authorisation. There are no explicit prohibitions against foreign state-owned enterprises making foreign investments in South Africa. However, such transactions could be blocked in terms of the Competition Act or public interest considerations embedded in various legislation, some of which has been discussed above.