The

South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring count ...

n financial rand was the most visible part of a system of

capital control Capital controls are residency-based measures such as transaction taxes, other limits, or outright prohibitions that a nation's government can use to regulate flows from capital markets into and out of the country's capital account. These measure ...

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 World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...

, when

Great Britain Great Britain is an island in the North Atlantic Ocean off the northwest coast of continental Europe. With an area of , it is the largest of the British Isles, the largest European island and the ninth-largest island in the world. It is ...

and its dominions implemented the

Sterling area The sterling area (or sterling bloc, legally scheduled territories) was a group of countries that either pegged their currencies to sterling, or actually used sterling as their own currency. The area began to appear informally during the earl ...

. Following the 1960

Sharpeville massacre The Sharpeville massacre occurred on 21 March 1960 at the police station in the township of Sharpeville in the then Transvaal Province of the then Union of South Africa (today part of Gauteng). After demonstrating against pass laws, a crowd o ...

, South Africa experienced significant outflows of foreign exchange on the

capital account In macroeconomics and international finance, the capital account, also known as the capital and financial account records the net flow of investment transaction into an economy. It is one of the two primary components of the balance of payments ...

of the balance of payments and instituted an additional level of capital controls, known as the Blocked Rand system. 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's

Reichsbank The ''Reichsbank'' (; 'Bank of the Reich, Bank of the Realm') was the central bank of the German Reich from 1876 until 1945. History until 1933 The Reichsbank was founded on 1 January 1876, shortly after the establishment of the German Emp ...

system introduced under

Hjalmar Schacht Hjalmar Schacht (born Horace Greeley Hjalmar Schacht; 22 January 1877 – 3 June 1970, ) was a German economist, banker, centre-right politician, and co-founder in 1918 of the German Democratic Party. He served as the Currency Commissioner a ...

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 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 Apartheid (, especially South African English: , ; , "aparthood") was a system of institutionalised racial segregation that existed in South Africa and South West Africa (now Namibia) from 1948 to the early 1990s. Apartheid was ...

. 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

rand The RAND Corporation (from the phrase "research and development") is an American nonprofit global policy think tank created in 1948 by Douglas Aircraft Company to offer research and analysis to the United States Armed Forces. It is financed ...

— one for current account transactions and one for capital account transactions for non-residents. 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. Financial rand had the

ISO 4217 currency code ISO 4217 is a standard published by the International Organization for Standardization (ISO) that defines alpha codes and numeric codes for the representation of currencies and provides information about the relationships between individual cu ...

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.

References

Further reading