Reserve Bank set to relax IP export controls

Policy documents in national treasury’s 2020 budget review suggest government will soon significantly relax controls over the export of South African-owned intellectual property (IP) in what could be a boon to local innovators and technology companies.

This is according to law firm Webber Wentzel, which said this week that the controls are restrictive and that the latest development is to be welcomed.

The controls, which require South African residents to get approval for transfers and licences of IP to non-residents, have hindered and discouraged cross-border transactions involving local IP, the firm said.

This, in turn, has restricted the ability of South African residents to maximise the potential of their intellectual creations.

“Over the last five years, Webber Wentzel has collaborated with a number of industry stakeholders in ongoing engagements with the Reserve Bank and national treasury to draw their attention to the unintended negative consequences of the IP exchange controls; and propose alternative, less restrictive approaches which would still achieve the relevant policy goals,” it said.

“In particular, we have emphasised both the administrative burden that these controls place on IP-intensive industries (particularly South Africa’s burgeoning technology sector) and the deterrent effect they have in respect of foreign investment in South African IP.”

Requires approval

Although some relaxations in the rules have taken place in recent years – for example, an announcement in the 2017 budget review that the Reserve Bank’s approval would no longer be required for “standard IP transactions” — the current position laid out in the Currency and Exchanges Manual is that both the licensing and transfer of South African-owned IP to a non-resident, whether related or not, requires approval from either an authorised dealer or the Bank (depending on the circumstances).

“The new policy statement in the 2020 budget review represents a welcome shift toward a far less restrictive regime. In the context of an announcement of broader reforms of the exchange control regime, national treasury expressly notes that the ‘export of intellectual property for fair value to non-related parties will not be subject to approval’.

“This statement suggests that one of the key changes for which we have been motivating — cutting the red tape that currently holds up low-risk IP transactions between unrelated parties — will soon be implemented,” Webber Wentzel said.

The policy statement is not yet law, however. It will still need to be officially implemented, which is usually done through circulars issued by the Bank’s financial surveillance department.

“National treasury has indicated that the exchange control reforms will be rolled out over the next 12 months. Only once the official implementation has occurred will we know how this new policy will work in practice.” — © 2020 NewsCentral Media