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Last Updated: Tuesday, 11 May, 2004, 23:11 GMT 00:11 UK
SA ditches foreign earnings tax
South African celebrations of the ANC's 2004 election victory
South Africa has scrapped a 30% tax on overseas corporate earnings in an effort to encourage businesses to bring more of their money home.

The move could pave the way for hundreds of millions of rand to return to South Africa, local media reported.

It was welcomed by economists who have been pushing Pretoria to lift restrictions on the flow of capital.

Many South African firms invested abroad during the 1990s as an insurance against potential instability at home.

The abolition of the tax coincides with an improvement in South Africa's growth prospects, and greater confidence in the government's handling of the economy.

"Had people realised 10 years ago where SA would be today their anxieties would have been much diminished," Brian Kantor of Investec Securities told the BBC's World Business Report.


"They would have done well to have left more of their money at home to finance growth in South Africa rather than to make acquisitions offshore which often have not proved very successful."

South Africa last month marked the tenth anniversary of the end of the apartheid regime by re-electing the African National Congress government.

The country, Africa's largest economy, faces chronic poverty and high rates of unemployment and HIV/Aids infection.

Some economists and investors have also questioned the ANC government's policy of black economic empowerment, claiming that it has slowed growth.

But the country has defied gloomy predictions of economic collapse, growing by a steady 3% a year over the past decade.

"The most important point is that the SA economy is growing moderately well and SA economic policy settings are very predictable," said Mr Kantor.

"The anxieties that the new SA would be highly populist and would tax profits and high incomes severely have not been justified at all."

Brian Kantor, Investec Securities
"Companies had some anxiety about what would happen."

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