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4 December 2013
South Africa's first fully democratic national election on 27 April 1994 prompted a renewed interest in investment in the country.
The period after the election was one of uncertainty in which corporate players conducted research and undertook feasibility studies rather than placing direct investment in South Africa, and it is only recently that the renewed interest has begun to bear fruit.
One of the more important developments in South African law has been the deregulation of the Johannesburg Stock Exchange (JSE), which is the only exchange in the country.
A report commissioned in 1992 recommended a series of far-reaching changes for the deregulation of the JSE which were announced at the end of 1994. The reforms have started to be implemented and have prompted many UK merchant banks to establish a presence in South Africa.
Perhaps the most important change to the South African Stock Exchange Act and rules has been to open up membership of the exchange, to allow corporate membership of the JSE; membership used to be restricted to South African citizens over the age of 21.
The amendments to the Act and rules permit companies and non-stockbrokers to buy a 100 per cent equity stake in stockbroking companies or enter into joint ventures with them. UK merchant banks involved in such acquisitions or joint ventures include the National West- minster Bank, Merrill Lynch, Morgan Grenfell & Co, SBC Warburg and UBS.
These acquisitions have led to an expansion of the South African market and the introduction of new technology, particularly in relation to over-the-counter derivatives. However, this progress has been partly inhibited by exchange control regulations, which remain in place despite a certain degree of relaxation.
In addition to entering the stockbroking arena in South Africa, many UK banks have registered as banks in South Africa or have established a representative office there in anticipation of the potential privatisation of various state-owned assets. South African banks have undertaken a similar exercise and most of the larger ones now have a presence in London.
Hand in hand with the renewed interest in South Africa has come an increase in the demand for rand investments and a number of rand denominated eurobond issues have recently taken place. The issuers of these bonds include the majority of the UK's merchant banks.
South Africa continues to be an attractive jurisdiction for shipping claims with its innovative rules relating to associated ship arrests and security arrests. In addition, as the ports open up and additional fleets begin calling, the volume of maritime work has increased.
But as well as the country opening up for business, South Africa's legal links with the UK are also being strengthened by organisations such as the British South Africa Law Association in London and its South African counterpart, the South African British Law Association. These organisations aim to re-establish legal ties between the countries, develop relations between the professions in the UK and South Africa, and allow the easy exchange of information and ideas between the two.
The strengthening of the relationship between the UK and South Africa has not simply resulted in inward investment into South Africa. Outward investment from South Africa to the UK has also occurred as South African companies attempt to obtain a foothold in the European markets.
For example, we recently acted on the purchase of newsprint machines by Mondi and Monorco in a joint venture arrangement, worth around £320 million, and acted on Gencor Group's acquisition of Billitons Metal from Shell.
Hopefully, the next step in South Africa will be the fulfilment of the promise to abolish exchange control regulations.