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National Treasury and the South African Reserve Bank (SARB) have published a draft regulatory framework for the establishment of a Synthetic Financial Centre (SFC), which is open to public comment.

The establishment of an SFC would strengthen South Africa’s position as a leading African financial and investment hub, Treasury says, referring to the annoucement in the 2026 Budget Speech,

The aim is to bring a bigger share of the global investment-management business to South Africa by enabling qualifying institutions to manage approved foreign portfolios from within the country, as Moonstone Information Refinery reports.

As the SARB describes it, an SFC facilitates a financial hub through legal, regulatory and tax arrangements that allow transactions to be conducted in a particular jurisdiction, in this case South Africa, even though the investors or assets are located elsewhere.

The first phase would enable approved institutions to manage qualifying foreign portfolios and related foreign currency investment activities from South Africa.

Stephen Grootes asks Stuart Theobald, executive chairperson of consulting firm Krutham, why the word synthetic features in the definition.

That is simply because what the Synthetic Financial Centre refers to is not a geographic zone but a regulated zone, Theobald explains.

“Some financial centers – and we think typically of Dubai, define a geographic area, and firms operating within that are subject to their own unique set of laws and regulations.”

The South African approach now, he says, is to use a regulatory definition.

That means companies registered within the SFC are subject to a different exchange control regime which effectively allows them to run international financial services from South Africa.

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“Over the years, as exchange controls have been relaxed, South Africans have been able to take assets offshore and place them with financial institutions around the world to manage. In the process, we’ve lost out on assets that could have been managed by local firms, were they given the regulatory space to do so.

What the SFA allows, he says, is for local companies to become specialist international financial services providers.

“They can be fund managers running purely global mandates… so anybody running a hedge fund out of New York would be able to do the equivalent thing from South Africa within the SFC; just as any South African firm currently running infrastructure in Bermuda or London and many other financial centres will now instead be able to conduct that activity from a base subject to the SFC designation.”

Written comments on the draft SFC framework can be submitted to the SARB’s Financial Surveillance Department with a deadline of 30 November.

For more detail, listen to the interview audio at the top of the article

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