Editing Financial rand (section)

{{Use dmy dates|date=April 2022}}
{{infobox currency
| iso_code=ZAL
| obsolete=yes
}}
[[File:SA exchange controls 80s.jpg|thumb|Four exchange control stamps in a South African passport from the mid-1980s allowing the passport holder to take a particular amount of currency out of the country.  Exchange controls such as these were imposed by the South African government to restrict the outflow of capital from the country.]]
The [[South Africa]]n '''financial rand''' was the most visible part of a system of [[capital control]]s. Although the financial rand was abolished in March 1995, some capital controls remain in place. These capital controls are locally referred to as "exchange controls", although the system has since 1995 moved towards surveillance —  recording and reporting to the authorities of foreign currency transactions — rather than control.

Capital controls have been in place in South Africa in various guises on an uninterrupted basis since the outbreak of [[World War II]], when [[Great Britain]] and its dominions implemented the [[Sterling area]].

Following the 1960 [[Sharpeville massacre]], South Africa experienced significant outflows of foreign exchange on the [[capital account]] of the [[balance of payments]] and instituted an additional level of capital controls, known as the Blocked Rand system.<ref>{{cite journal |last1=Windt |first1=Peter van der |last2=Schaling |first2=E. |last3=Huizinga |first3=Harry |title=Capital Controls and Foreign Investor Subsidies Implicit in South Africa's Dual Exchange Rate System |date=November 2007 |journal=CentER Discussion Paper |volume=91 |doi=10.2139/ssrn.1047601 |ssrn=1047601 |s2cid=55021412 |url=https://pure.uvt.nl/ws/portalfiles/portal/912049/dp2007-91.pdf |archive-url=https://web.archive.org/web/20190216160334/https://pure.uvt.nl/ws/portalfiles/portal/912049/dp2007-91.pdf |archive-date=2019-02-16 |url-status=live }}</ref> This had the principal effect of blocking outflows of capital to the other countries in the Sterling Area, notably Britain.

To some extent the Blocked Rand system mirrored [[Germany|Germany's]] [[Reichsbank]] system introduced under [[Hjalmar Schacht]] in 1937, called "aski" accounts — short for ''Ausländer Sonderkonten für Inlandszahlungen'' ("foreigners' special accounts for inland payments"). In other words, creating a closed loop system that did not create a claim on the foreign exchange reserves of the Third Reich, or in this case South Africa.

The report of the De Kock Commission on Exchange Controls<ref>{{cite journal |last1=Rossouw |first1=Jannie |title=Politics and policies: Determinants of South Africa's monetary policy problems in the 1980s |journal=Economic History of Developing Regions |date=2 January 2018 |volume=33 |issue=1 |pages=51–68 |doi=10.1080/20780389.2017.1372187 |s2cid=158871677 }}</ref> tabled in November 1978, proposed a gradual easing of exchange controls. This saw the replacement of the Blocked Rand by the Financial Rand in early 1979. In line with this policy, the Financial Rand itself was abolished in 1983 and non-residents could repatriate the majority of their South African investments via the Commercial Rand.

This easing was, however, short-lived and the Financial Rand system was re-introduced on 1 September 1985. The outflows during 1984–1985 were largely the result of economic sanctions in response to [[apartheid]].<ref name="Lewis">{{cite book
|title=The Economics of Apartheid
|first=Stephen R. Jr.
|last=Lewis
|publisher=[[Council on Foreign Relations]] Press
|year=1990
|isbn=0-87609-056-0
|page=[https://archive.org/details/economicsofapart00lewi/page/76 76]
|url-access=registration
|url=https://archive.org/details/economicsofapart00lewi/page/76
}}</ref> At the same time, the government enacted the exchange controls. Investments in South Africa by foreigners could only be sold for financial rand.

The financial rand system provided for two exchange rates for the [[South African rand|rand]] — one for current account transactions and one for capital account transactions for non-residents.<ref name="Jonsson">{{cite journal
|url=https://www.imf.org/en/Publications/WP/Issues/2016/12/30/Inflation-Money-Demand-and-Purchasing-Power-Parity-in-South-Africa-3266
|format=PDF
|title=Inflation, Money Demand, and Purchasing Power Parity in South Africa
|first=Gunnar
|last=Jonsson
|year=2001
|publisher=[[International Monetary Fund]] Staff Papers
|issue=2
|volume=48
|page=244
|access-date=14 November 2017}}</ref> Investments made in South Africa by non-residents could only be sold for financial rand, and limitations were placed on the convertibility of financial rand into foreign currencies.<ref name="Roux">{{cite book
|url=https://books.google.com/books?id=XVgNi6X7L_QC&q=%22financial%20rand%22&pg=PA124
|title=Everyone's Guide to the South African Economy
|first=André
|last=Roux
|year=2005
|publisher=Zebra
|edition=8
|isbn=1-86872-925-7
|page=124
|access-date=14 November 2017}}</ref> Financial rand had the [[ISO 4217|ISO 4217 currency code]] ZAL. Financial rand had a previous life, from January 1979 to February 1983. The 1985 crisis coincided with a default (then called a "standstill") on foreign debt by the apartheid government.