Financial Rand

Financial and Commercial rim edge, Afrikaans Finansiële edge and Kommersiële edge, were the names of a two-tier monetary and exchange rate system for the South African rand, the national currency of South Africa that existed from 1979 to 1983 and from 1985 to 1995. Precursor of this system existed in the form of Blocked border from 1961 to 1976 and the Securities border of 1976 until 1979. The aim of these measures was the one to make foreign investment attractive, and on the other hand, restricting the outflow of capital from South Africa. In addition, the normal payment should be separated from the financial market for capital transactions to protect the goods and services trade against unpredictable effects of capital movements. The Financial Edge, which was a book monetary unit for the financial market without own cash, had the ISO 4217 currency code ZAL against ZAR for the commercial edge, which was the book and cash the South African rand for the other payments and represented the regular exchange rate.

Precursor

The triggering event for the introduction of the two-tier currency system underlying mechanisms was the Sharpeville massacre of 1960, as a result it because of its worldwide protest against the apartheid system to a decline in foreign investment in South Africa, as well as divestment and an outflow of capital from the country came. In response, the "Blocked Rand " was introduced in 1961 system, were established by the restrictions on the withdrawal of foreign capital and for the transfer of funds by South Africans abroad. Sale proceeds of foreigners in South Africa had to be invested in special Blocked Rand account with South African banks from now on.

On the other hand, were foreigners who wanted to change foreign currency in South African Rand, instead of the normal changing money at the regular rate of exchange the national currency now acquire by purchasing Blocked Rand stocks. The purchase of these Blocked edge, which expired largely informal, was cheaper than the regular exchange and was therefore used more frequently than the official money exchange. In 1976 this system was converted to the so-called "Securities edge " mechanism. This sale proceeds of foreigners as Securities edge were classified. This could be traded by currency exchange on the Johannesburg stock exchange, so that the seller could execute the proceeds in the desired foreign currency. In contrast, came by the buyer new foreign capital into the country, whereby the capital outflow was offset.

Operation and development

In 1979, the "Securities edge " system was replaced by the " Financial Margin" ( Finrand ). It was a discount on the official exchange rate, which was in contrast referred to as " commercial edge " ( Comrand ) and was located almost exclusively in the possession of the inhabitants of the land and the South African companies and institutions. The decreased Financial Edge course was focused on investment in South Africa by foreigners including the purchase of South African securities. The capital flow into the country in the form of investments and securities purchase was thus more attractive, since it was cheaper than the regular price. Secondly, dividends and interest income from such investments could be changed back to the regular commercial edge - course, which created a further incentive for investment.

On the other hand, was the Financial Rand exchange rate for the conversion of the South African rand in foreign currencies to the deduction of capital abroad, which was financially unattractive in this way. Stocks of Financial margin could therefore not be used for free purchase of goods and services. The course of the financial margin was determined by the Exchange Control Department on the basis of the ratio of the inflow and outflow of capital after or from South Africa. He was on average 25 to 40 percent and sometimes up to 50 percent below the price of the commercial margin, the difference between the two prices was seen as an indicator of the business climate in the country. Conversion of Financial edge in commercial edge or vice versa was possible only with the consent of the South African Reserve Bank.

End of Finrand system

The two-tier currency system was exposed in 1983 in favor of a unified exchange rate. After the Rubicon speech of then President Pieter Willem Botha on August 15, 1985, the South African government, however, in early September of the same year led to the financial edge again since abated by the global response to the speech, the foreign investment again strong and the outflow of capital significantly increased. The abolition of the system took place in 1995 after the end of apartheid.