SIKI MGABADELI: We are talking now about how you as a South African can hold your cash in dollars. That’s through a new innovative product listed on the JSE, which will enable companies and individuals to hold unlimited quantities of cash in US dollars.
Let’s chat to Ettienne van Wyk, who is head of commodities at RMB. Ettienne, thanks for your time today. Let’s maybe just talk about what the current situation is right now, how much one is allowed to hold, and whether there would be – with this product – any issues with exchange control at all.
ETTIENNE VAN WYK: Good evening, Siki. As you rightly pointed out, individuals and companies are restricted in South Africa by exchange control regulations in terms of the amount of capital that they can export per annum. So for companies, for example, there are actually no allowances at all. If a company wants to buy offshore assets, then it can apply to the Reserve Bank to get approval to export the necessary capital to acquire whatever they need to. But apart from that, if they have excess working capital in rands, there is really no way in which they can invest it in dollars.
Individuals are allowed to export a certain amount per annum, but that is actually quite restrictive. The last amount was the equivalent of R12 million per year, and then there is a discretionary allowance of about R1 million.
So this new product that we’ve listed effectively is a dollar ETF. And specifically it’s an ETF with underlying asset US Federal government debt. Since it’s regarded as an inward-listed debt instrument, there are no restrictions that apply, either to companies or to individuals in terms of how much they can invest.
SIKI MGABADELI: Okay. So you basically are invested in US treasuries, then?
ETTIENNE VAN WYK: That’s exactly right.
SIKI MGABADELI: Okay. David made a point a bit earlier – we were talking about the rand where it is right now, at R13.33/dollar – possibly not the best time. So this is a very liquid and tradable investment?
ETTIENNE VAN WYK: Absolutely. It’s backed up by the full liquidity that exists in the US Federal debt, which by the way is the most liquid currency or liquid security on earth. So it’s perfectly liquid.
In terms of whether it’s an appropriate investment, given the rand’s appreciation recently, one has to keep in mind that US treasuries, along with gold, are regarded as very safe – traditionally the most important safe-haven assets in times of uncertainty. So, as with gold, irrespective of where the price is, there is always room in a portfolio for it because it acts as a portfolio or risk diversifier. And the same would definitely apply to these instruments.
So yes, the rand has appreciated a lot. Maybe it could appreciate a lot more, but the fact of the matter is by investing in these securities you will be reducing the volatility in your portfolio.
SIKI MGABADELI: And anyone can invest, Ettienne?
ETTIENNE VAN WYK: Anyone can invest. It buys and sells like a normal share on the JSE.
SIKI MGABADELI: We’ll leave it there. Ettienne van Wyk is head of commodities at RMB.