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The short answer
A loop structure arises when a South African resident owns a foreign company, such as a Nigerian one, that in turn holds South African assets. The SARB's Currency and Exchanges Manual (version of 8 October 2026) allows private individuals to acquire South African assets through such a structure if the investment is reported to an authorised dealer when finalised, an annual progress report goes to the Financial Surveillance Department and the price is arm's length. Structures created by individuals before 1 January 2021 that exceeded the 40% shareholding threshold must still be regularised.
Many Nigerian founders in South Africa own a company in Lagos and a business in Johannesburg. The question arises the moment money or shares start flowing the other way: the Nigerian company wants to buy into, lend to or set up something in South Africa. Under South African exchange control that is a loop structure, and for years it was largely prohibited. The rules have since been relaxed, but they still come with reporting duties. This guide sets out what the Reserve Bank's own manual says, and what it does not settle.
What a loop structure is
The Currency and Exchanges Manual for Authorised Dealers describes it as the case "where South African assets are acquired through an offshore structure (loop structure)" (section B.2(B)(i)(h)). In plain terms: you, a South African resident, own shares in a company outside the Common Monetary Area, and that company owns or acquires assets in South Africa.
- Not a loop
- You own a Nigerian company that trades only in Nigeria.
- A loop
- Your Nigerian company buys shares in, or sets up, a South African company.
- Also a loop
- Your Nigerian company acquires South African property or other South African assets.
How the rules changed
According to Bowmans' November 2019 update, Exchange Control Circular 18/2019 let individuals use their foreign allowances to acquire up to 40% of the equity or voting rights in a foreign entity that held South African assets, for structures created from 30 October 2019. Before that, individuals generally could not use their allowances for loop structures, outside narrow exceptions.
The current manual (version 1.1.36, issued 8 October 2026) goes further for individuals. Section B.2(B)(i)(h) allows the acquisition of South African assets through a loop structure provided:
- "the investment is reported to an Authorised Dealer as and when the transaction(s) is finalised";
- there is "the submission of an annual progress report to the Financial Surveillance Department";
- the authorised dealer verifies "that such transaction(s) is concluded on an arm's length basis, for a fair and market related price".
Section B.2(B)(i)(i) requires the authorised dealer to report to the Financial Surveillance Department, including "the name(s) of the South African affiliated foreign investor(s), a description of the assets to be acquired". And section B.2(B)(i)(k) deals with the past: "Existing unauthorised loop structures (i.e. created by individuals prior to 2021-01-01)", including those "where the 40 per cent shareholding threshold was exceeded", "must still be regularised with the Financial Surveillance Department."
Section B.2(B)(i)(j) adds that inward loans in such structures must follow the directives in section I.3(B) of the manual.
How much an individual can take out
The manual describes the single discretionary allowance as R2 million per calendar year for residents aged 18 and over, and section B.2(B)(i)(a) allows foreign investment of up to R10 million per calendar year per private individual (as at the 8 October 2026 version). See the foreign investment allowance for investing in Nigeria for how those allowances are used.
If a South African company owns the Nigerian business
Where your South African company, rather than you personally, owns the Nigerian company, section B.2(C) applies. It lets authorised dealers approve bona fide new outward foreign direct investments by South African companies "where the total cost of such investments does not exceed R5 billion per company per calendar year" (B.2(C)(i)(a)). The portions of B.2(C) we could read did not set out the company-specific loop structure conditions in full. Before the Nigerian subsidiary invests back into South Africa, ask your authorised dealer to identify the exact paragraph that applies and the reports it will need from you.
What to do in practice
- Draw the structure: who owns what, in which country, and which assets are in South Africa.
- Check when it was created. If you set it up as an individual before 1 January 2021 and hold more than 40%, plan to regularise it with the Financial Surveillance Department through your authorised dealer.
- For a new investment back into South Africa, tell your authorised dealer before you sign, and agree what evidence of an arm's length price it needs (a valuation is the usual answer).
- Diary the annual progress report.
- Keep the Nigerian side in order too: share registers, CAC filings and board resolutions approving the South African investment. See running a Nigerian company's CAC filings from SA.
Tax is a separate question
Exchange control approval does not settle tax. Dividends paid by a Nigerian company to a South African shareholder are subject to Nigerian withholding tax; under the South Africa–Nigeria tax treaty (Article 10) the rate is capped at 7.5% where the beneficial owner is a company holding at least 10% of the capital, and 10% in other cases. Claiming a treaty rate in Nigeria needs a certificate of residence and other documents under the Nigerian tax authority's treaty-benefits circular. How SARS taxes the Nigerian company's income and dividends is a matter for your tax adviser; see Nigerian dividends and SARS.
Where Pryme fits
A Pryme Business Account holds NGN, USD, GBP and EUR for the Nigerian side of a group (business multicurrency), and the Compliance agent can keep a calendar of reports and filings for a person to act on. Pryme does not give exchange control approvals; those come through your authorised dealer. Outside Nigeria, Pryme's activities are carried out through regulated partners.
Questions people ask
Is it legal for my Nigerian company to own a South African company?
As a South African resident individual, the SARB manual allows loop structures if you report to an authorised dealer, file annual progress reports and transact at arm's length. Older structures above 40% need regularising.
What is the 40% rule for loop structures?
It came from Circular 18/2019. The current manual says unauthorised loop structures created by individuals before 1 January 2021 where the 40% threshold was exceeded must still be regularised.
Does my SA company need approval to invest in Nigeria?
Authorised dealers may approve new foreign direct investments by SA companies up to R5 billion per company per calendar year under section B.2(C), as at October 2026.
What tax applies to dividends from my Nigerian company?
Nigerian withholding tax, capped by the SA–Nigeria treaty at 7.5% for a company holding at least 10% and 10% otherwise. SARS treatment is a separate question for your adviser.
Sources
- South African Reserve Bank, Currency and Exchanges Manual for Authorised Dealers (version 1.1.36, 8 October 2026) · accessed Oct 2026
- Bowmans, Exchange control update (14 November 2019) · accessed Oct 2026
- SARS, Agreement between South Africa and Nigeria for the avoidance of double taxation (signed 29 April 2000, in force 5 July 2008) · accessed Oct 2026
- FIRS Information Circular 2022/15 on claiming tax treaty benefits (11 May 2022, KPMG copy) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.