G-SPOT

Of exchange controls and other nightmares of life in SA

South Africa still has pretty harsh exchange control rules

In Summary

• Sending cash out of the country a nightmare

An investor monitors the digital board at the Nairobi Securities Exchange
An investor monitors the digital board at the Nairobi Securities Exchange
Image: FILE

I had an unexpected day off during the week, in which I decided to finally get some of my personal admin done. 

For instance, I have for quite a while now been trying to sort out a problem with my bank, but working a full day Monday to Friday means by the time I can email or call my Nairobi bank, the people who can make things happen have gone home.

In the interim, when I needed to send cash to Kenya, I’ve had to rely on what someone called “the kindness of strangers”, although in my case it was not so much kindness as trust. That’s only because South Africa still has pretty harsh exchange control rules, which make sending cash out of the country a nightmare. 

 
 

As I was sorting my stuff out, I remembered that once upon a time, and not too long ago at that, Kenya had some very serious foreign exchange controls that made life difficult for people such as students studying abroad, or even people who wanted to travel.

At one point in the early 1990s, I recall being granted something like Sh2,000 by the Central Bank to take on a week’s trip to the UAE. It was a pitiful amount to take abroad even then, and so, like many, I had to come up with a way of getting more cash in foreign currency to take with me. I don’t know how long the statute of limitations is on this issue, so I won’t say more. 

Kenya repealed all exchange control laws in 1993 and moved to a fully market-determined exchange rate system. This is after a fiscal crisis also known as Goldenberg forced the then Finance minister, Musalia Mudavadi, and Central Bank governor, Micah Cheserem, to launch what was to become the most rapid deregulation of an African economy ever seen at the time to ensure that IMF loans would be forthcoming. 

Import licences were scrapped, the Kenyan shilling was floated, restrictions on the repatriation of profits by transnational corporations were lifted, price controls were abolished, and a sweeping programme of privatisation began. But then so did an eye-watering list of public expenditure cuts.

Some say the path to hell is paved with good intentions. President Moi’s reign had begun with his initiating a series of populist measures, in particular, an expansion of education, and that was generally a good thing. However, the twin impact of falling prices for agricultural exports, coffee and tea, and rising prices for oil imports, resulted in growing indebtedness. There was also a truckload of corruption and theft from the public purse that didn’t make things any better.

Moi had played the Cold War to Kenya’s advantage, getting the West to turn a blind eye to governance issues and the like. But by the end of the era, things began to get serious and the West, which had its own problems, began acting like a Shylock who wants his money back. 

By 1991, the number of conditionalities from the Bretton Woods Institutions had reached 150, and these included liberalising the economy as well as the politics. The first brought things such as the aforementioned freedom from exchange controls. The latter brought what we Kenyans like to call “multi-party,” which came with its own problems as we have since found out.