Doing Business in South Africa
Fri, 01 Jul 2011 11:16Click on the links below to take you to the relevant Business Guide section
- About SA
- Starting a Business
- Taxation
- Labour Relations
- B-BBEE
- Incentives
- Skills Shortage
- More Information
About SA
South Africa has long been seen as an ideal trading partner for international investors. With English as the main business language and a legal system and business culture that shares many similarities with Europe; the country is noted for its ease in doing business.
First originating as a trading port between Europe and Asia, South Africa is still often used as a gateway for companies wishing to expand further into Africa. It is the continent’s economic powerhouse, with the highest GDP of any country in Africa, but as an emerging economy also remains high growth potential for investors. At the end of 2010, South Africa was invited to become a member of the BRIC group of nations, hence becoming the BRICS group. This invitation was recognition of South Africa's importance on the African continent by the other major emerging economices of the world.
From a business tourism perspective, there are a number of excellent hotels, including 6* hotels, as well as first-class business facilities and telecommunications infrastructure. It also features excellent conferencing facilities across the country.
There are a number of well-known South African multinationals including SAB, Anglo American, Investec and Old Mutual, while the country also houses a presence from international companies such as Barclays Bank, General Electric, BMW and Vodafone.
Starting a Business
Foreign companies wishing to establish a branch in South Africa usually register as an external company. To do this, a company must register with the Companies and Intellectual Property Commission (CIPC) within 21 days of establishing their office. For more information, visit CIPC's website.
In order to establish a private business in South Africa, one must be in possession of a business permit. For more information on business permits and the necessary requirements visit the Department of Home Affairs.
The most common types of business enterprises in South Africa fall under the following headings: Private companies Pty (Ltd); Public companies (Ltd); Close corporations. Most foreign investors set up as a private company, as they require the least amount of annual formalities. They must have at least one director and shareholder and membership is restricted to 50. The directors do not need not be SA residents or nationals. Public companies are formed to raise funds by offering shares to the public and there is no limit to the number of shareholders.
The Department of Trade & Industry has also published an Investor’s Handbook, which provides potential investors with a wealth of information including:
- Entry and residence of foreign investors and expatriate labour
- Foreign exchange control
- Business entities and registration
- Sources of finance for the foreign investor
- Property and licenses including intellectual property, cellular licenses and banking licenses
- Importing and exporting
- Tax Registration
- Legal matters including Competition Law, Environmental Law and Labour Laws
- Contact information for the Labour sector and National Investment Agencies
To read the Investors Handbook, visit the Dti's publications page and view the 2010 version.
Taxation in South Africa
South African residents are taxed on their worldwide income (residence based), although there are certain exemptions. South African residents may also be taxed on a proportionate amount of the net income (and capital gains) of a controlled foreign company, based on their involvement in that company.
Non-South African residents are taxed on their South African source income only, subject to double taxation agreements with different countries. Tax bands for individuals vary from between 18% and 40% depending on the annual income.
The basic rate of Value Added Tax (VAT) is 14% The basic rate of corporate tax is 29% Foreign companies with an external branch in South Africa are taxed at a slightly different rate. For more information visit SA Revenue & Customs
Labour Relations
South Africa has comprehensive labour legislation, adhered to as part of the new constitution following the 1994 elections. For more information on labour legislation and a selection of basic guides to labour relations in South Africa visit the Department of Labour.
B-BBEE
Foreign investors should also be aware of the country’s Broad-Based Black Economic Empowerment legislation. This is an initiative put in place by the government to accelerate the participation of black (which includes African, Indian and Coloured people) people in the economy.
Broad-Based Black Economic Empowerment (B-BBEE) is commonly referred to as simply BEE, and aims to increase the number of black people who manage, own and control businesses as well as encourage investment in enterprises that are black-owned or managed.
BEE is only legally binding on the State and government bodies; however investors should be aware that anyone wanting to do business with a government enterprise will have to adhere to the Codes. For further information, visit our BEE channel.
Incentives
The government has introduced a range of new incentive schemes to help attract new business, as part of its Accelerated and Shared Growth Initiative for South Africa (Asgisa) scheme. South Africa's nine provinces also offer regional incentives, including reduced interest rates, reduced rentals for land and buildings, and cash grants for the relocation of plant and employees.
To see a list of incentive schemes currently offered by the government to stimulate investment, visit our Incentive channel.
Skills Shortage
Like most countries in the world, there is a skills shortage in South Africa and the government has established a scarce skills programme to attract highly skilled immigrants from other countries.
The Department of Home Affairs has published a list of the scarce skills categories with a quota for each occupation. For more information about visas and immigration issues visit the Home Affairs website.
More Information
For more information on doing business in South Africa you can visit our Related Websites channel. This page provides links to a range of sites including the Reserve Bank, Revenue & Customs, government departments and regional investment opportunity agencies. To visit the Related Websites pages click here.
