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South Africa could potentially repatriate as much as R10 trillion currently invested abroad by local citizens if proposed reforms to create a \u201csynthetic financial centre\u201d succeed.<\/p>\n
This, says JSE CEO Leila Fourie, could transform South Africa\u2019s capital markets and restore lost competitiveness as a regional financial hub.<\/p>\n
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\u201cThe funds currently managed offshore are estimated at around R10 trillion, which is almost half of the JSE\u2019s R24 trillion market,\u201d Fourie said in an interview with Moneyweb after the bourse\u2019s full-year results posting on Monday.<\/p>\n
The concept of a synthetic financial centre featured prominently in the 2026 Budget Review, where National Treasury outlined plans to expand the so-called \u201cHoldCo framework\u201d to asset managers.<\/p>\n
\nThe objective is to enable the management of foreign assets and foreign-currency instruments from within South Africa, and promote the country as a competitive financial and investment hub for the African continent.<\/p>\n<\/blockquote>\n
Unlike traditional financial centres, the proposed model would not involve a physical location but rather a legal and regulatory framework.<\/p>\n
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According to Fourie, the reforms aim to restore competitiveness, noting that South Africa\u2019s ranking in the Global Financial Centre Index has slipped.<\/p>\n
\u201cWe\u2019ve now slipped from 92nd position globally in the Global Financial Centre Index to 94th, and Mauritius, Casablanca, and Kigali have risen to 52nd, 56th, and 65th [respectively].\u201d<\/p>\n
Not a physical hub<\/strong><\/p>\n
Fourie emphasises that the proposed centre would exist purely as enabling legislation rather than a physical hub.<\/p>\n
\u201cA synthetic financial centre is rather a policy of legal construct that is enabling legislation. And the very first enabler is going to allow our local asset managers to trade and to manage non-ZAR-funds.\u201d<\/p>\n
Currently, South African companies that wish to manage foreign-currency funds must establish operations offshore.<\/p>\n
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\u201cRight now, if you want to manage non-ZAR fund, you have to have an offshore office. You can\u2019t do it locally.\u201d<\/p>\n
\nBy allowing such funds to be managed domestically, the reforms aim to relocate associated jobs, tax, systems and expertise back onshore.<\/p>\n<\/blockquote>\n
\u201cAnd so the whole idea behind our competitiveness initiative is not only to position ourselves competitively, but also to create an environment where job creation happens onshore, [so] that those fund managers and the systems attract those funds back into the country.\u201d<\/p>\n
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She cautions that the changes will not eliminate exchange controls.<\/p>\n
\u201cIt doesn\u2019t necessarily mean that exchange control is going to become a thing of the past. It just means that you will be able to manage these global funds onshore.\u201d<\/p>\n
Multicurrency listings and derivatives reform<\/strong><\/p>\n
Beyond fund management, the JSE and industry stakeholders are advocating additional reforms.<\/p>\n
\u201cNow, the next very big step that we would like to see as the private sector \u2013 and we\u2019ve been working under the leadership of National Treasury \u2013 is the enablement of listings in non-ZAR currency.\u201d<\/p>\n
\nAccording to Fourie, allowing companies to list securities denominated in dollars or other hard currencies on the JSE could bring substantial macroeconomic benefits.<\/p>\n<\/blockquote>\n
\u201cWe believe that will have far-reaching macroeconomic growth potential.\u201d<\/p>\n
Another priority is enabling the derivatives market to accept non-rand collateral.<\/p>\n
\u201cRight now, if an international investor wants to invest in our local environment, they have to post rand collateral, and that rand collateral carries activity risk,\u201d she says.<\/p>\n
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Permitting hard-currency collateral could reduce both risk and transaction costs.<\/p>\n
\nFourie also points to sovereign borrowing as an example of lost opportunity.<\/p>\n<\/blockquote>\n
\u201cRight now, if the National Treasury wants to raise government bonds in dollars, they go to Luxembourg. There is no reason why those bonds could not be issued on the JSE and that investors within the construct of their exchange control limits would be able to still invest.<\/p>\n
\u201cEven more so, international investors could then invest in those dollar bonds on the JSE.\u201d<\/p>\n
She argues that South Africa\u2019s market infrastructure is capable of supporting such activity.<\/p>\n
\u201cWe are a world-class exchange. Our settlement assurance, our margining and risk management processes are world class.\u201d<\/p>\n
Legislative and technical hurdles<\/strong><\/p>\n
Implementing the framework would require substantial legislative work, particularly around anti-money-laundering controls and exchange-control compliance.<\/p>\n
\u201cBasically, what would be required is a legislative framework that our National Treasury would develop outlining the construct of the synthetic financial system.\u201d<\/p>\n
A shift to multicurrency listings would also necessitate extensive operational changes across the market.<\/p>\n
\u201cAll of our participants would have to switch to a multicurrency system. We would have to have rules around valuation, timing, frequency, et cetera.<\/p>\n
\n\u201cThere is a lot of plumbing and a lot of work that would be required to enable any multicurrency market.\u00a0But it\u2019s urgent,\u201d she says.<\/p>\n<\/blockquote>\n
\u201cOur market sentiment is shifting. South Africa has an opportunity to position itself on the global stage. We were one of the best-performing markets last year in the equity market.\u201d<\/p>\n
Industry view<\/strong><\/p>\n
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Separately, Omri Thomas, director at Abax Investments, told Moneyweb the proposed framework would fundamentally alter how South African asset managers handle offshore investments.<\/p>\n
\nAccording to Thomas, managing global funds currently requires establishing vehicles in jurisdictions such as Ireland, which shifts employment and administrative activity offshore.<\/p>\n<\/blockquote>\n
Allowing foreign-currency portfolios to be managed domestically could reduce costs and complexity.<\/p>\n
Although he doubts that it would lead to large immediate inflows of foreign capital, it could make locally launched dollar-denominated funds more competitive and improve access for domestic investors to global assets at lower cost.<\/p>\n
\u201cSouth Africa historically served as a gateway for capital into Africa, but has lost ground to places like Mauritius, which offers favourable tax conditions and has attracted listings away from Johannesburg. The reforms could help recapture some of that activity.\u201d<\/p>\n
Senior market participants involved <\/strong><\/p>\n
Fourie told Moneyweb a broad coalition of senior market participants is already working on the initiative, and that the process will continue after she departs from the JSE at the end of March.<\/p>\n
\u201cThere are a number of very senior people involved in the committee tasked with this. I chair that committee now, but I\u2019ll hand that baton to Valdene [Reddy].\u201d<\/p>\n
Reddy, currently director of capital markets, has been appointed as the JSE\u2019s new CEO from 1 April.<\/p>\n
Read: Valdene Reddy to become JSE CEO when\u00a0Leila Fourie retires<\/p>\n
Asked whether she would remain involved, Fourie indicated she would step back after handing over leadership but remain supportive.<\/p>\n
\u201cI will sit on some boards and to the extent that I\u2019m required. I\u2019m always very happy to support, but I\u2019ll probably be cheering from the sidelines.\u201d<\/p>\n<\/p><\/div>\n