There is a great article published in today’s Business Day about the self-inflicted harm capital controls does to this country and economy. It was written by Stuart Theobold, who is a director of businesses both in SA and in London. He writes that:
I run businesses in South Africa and the UK. The business in London does work all over Africa and has clients around the world. It would be next to impossible to run it in South Africa. In the UK, it is easy. The banks are geared to help companies transact across borders — I can do payments to anywhere in the world through online banking without filling in a single form or submitting any documents. In contrast, the South African business once had to pay R3,000 to a supplier in Taiwan who translated a document for us. We paid him three months late after we had jumped all the hurdles thrown up by our bank and the Reserve Bank. I no longer do international business from South Africa.
Large companies get around exchange controls by setting up subsidiaries or holding companies outside South Africa. MTN, Standard Bank and others hold their international operations through Mauritian entities. Mauritius, Botswana and other countries with smaller and less sophisticated economies than ours provide better environments from which to operate international companies. Those jobs, capital and taxes could be in South Africa.
Now, this is stuff that economic theory teaches, but most of the time you cannot win an argument this way because it takes too long to educate economic illiterates about all the negative unintended consequences of capital controls. What Stuart does well in this article is to show the real life examples of how capital controls are harming SA.
Read the full must-read article on BDlive, here.