Investment

  • Doing Business

Trade Opportunities

  • As the largest economy in Africa, South Africa is a major industrial power and world leader in the production and export of minerals, exhibiting convincing manufacturing strengths. Economic and social policies are ensuring the international reintegration of the economy and the creation of an environment for sustained export growth and healthy net capital inflows. South Africa is numbered in the top seven best-performing economies in the world and is placed third in terms of industrial production growth.
  • Since the dawn of democracy, South Africa's gross domestic product has been growing at almost 3% per annum. Despite the current unpredictable global environment and South Africa's categorisation as an emerging economy, the economy bounced back to 2.8% in 2010, after plunging -1.7% in 2009. The recession was the first one after 56 quarters of continuous expansion, the longest expansionary growth in the history of South Africa.
  • Key reasons behind this above-average performance are the increasing competitiveness of South African industry and an improvement in the domestic demand for goods and services. Export diversification is also a major factor that has contributed to progress, with manufacturing - a dominant and robust sector in this diversified economy - expected to retain its strength. Other strong sectors include finance and business services, commerce, mining and agriculture, while the tourism industry and its associated conferencing capabilities are playing an increasingly important role in development of entrepreneurial activities. There is additionally a superior and well-developed transportation and communications infrastructure.
  • Foreign direct investment multiplied by 21 times, compared with the previous five years.

Doing Business in SA

Banking and Financial Aspects

  • South Africa's highly competitive banking and finance industry is as technologically sophisticated as any in the world, with the high-tech first-world service sector able to accommodate the most demanding needs of business, shipping agencies and foreign investors. The country's bankers, financial advisers, lawyers, tax consultants and experienced chartered accountants are able to advise foreign banks on legal issues and guide them through regulatory requirements with ongoing auditing services.
  • The South African Reserve Bank oversees the banking services industry, while the Financial Services Board governs the non-banking financial services industry. South Africa's principle financial service markets comprise the JSE Securities Exchange, the SA Futures Exchange, and the Bond Exchange of South Africa. Once approval is obtained for foreign loans, commercial banks also monitor and report on receipt and usage of loan funds. The well-established Johannesburg Stock Exchange (JSE) is ranked among the largest in the world, providing opportunities for private investment in large South African companies, with volumes and foreign purchases having increased dramatically. It also offers opportunities to smaller, newer companies to seek investors through the Development Capital Market as well as a Traded Options Market for dealings in financial futures.
  • The financial market sees several established banking institutions, with four major groups controlling the bulk of the total banking assets. Flexible working relationships exist between local and foreign banks in this private enterprise system, and associations and alliances have continued to grow, with an increasing number of foreign banks in operation through fully active representative offices. Ideally located to service both European and southern African clients comprehensively, financial institutions are able to offer a full range of banking activities, including trade finance, foreign exchange trading, offshore banking and trust management. Commercial banks provide assistance to exporters in securing payments, while certain major financial institutions have international trade divisions offering more specialised services. The aim of small business units lies in assisting entrepreneurs, with innovative development initiatives offered.



Starting a Business - Overview

Requirements for Starting a New Business

Foreign investors starting up new businesses or expanding existing business operations in South Africa require business permits.
A feasibility study to be presented in the form of a business plan;
Capital investment of R2.5 million. This may be waivered through the Department of Trade and Industry or provincial investment agencies, such as Trade & Investment KwaZulu-Natal;
A letter from a South African-registered chartered accountant verifying the investment amount;
An undertaking to employ at least five South African citizens or residents; and
Registration with the South African Revenue Services – www.sars.gov.za

Permits for Foreign Employees

  • The movement of people into South Africa and KwaZulu-Natal is controlled by the country's Immigration Amendment Act (No. 19 of 2004). In terms of this Act, foreigners require work permits to work in the country. If, however, their skills are in high demand at the time of their application, they may apply for Quota Work Permits or Exceptional Skills Work Permits, which quickens the process of being employed in South Africa.
  • The Intra-company Transfer Work Permit allows multi-national companies to deploy employees from other countries to work in their South African offices for a period of four years.

Foreign Exchange

  • There are no restrictions on foreign companies intending to invest in share capital. Administration in terms of portfolio investment is undertaken through the South African Reserve Bank. There are also no restrictions on the removal or repatriation of investment income or capital gains by non-residents.
  • All loans to South African residents from outside the common monetary area require prior exchange control approval.
  • Royalties, licence and patent fees for non-residents, where non-local manufacturing is involved, must be approved by the South African Reserve Bank.
  • The Companies and Intellectual Property Commission (CIPC) , a unit of the Department of Trade and Industry (DTI) (www.thedti.gov.za), approves all manufacturing patents.
  • For more information, log onto www.reservebank.co.za

Registering a Business

  • Business registrations are undertaken by CIPC. The following business types may be formed by foreign investors:
Company (Proprietary Limited);
Close Corporation (CC);
Partnership;
Sole Trader;
Joint Venture;
Local branch of a foreign company; and
Business Trust.

Main functions of CIPC:

Registration of Companies, Co-operatives and Intellectual Property Rights (trade marks, patents, designs and copyright) and maintenance thereof
Disclosure of Information on its business registers
Promotion of education and awareness of Company and Intellectual Property Law
Promotion of compliance with relevant legislation
Efficient and effective enforcement of relevant legislation
Monitoring compliance with and contraventions of financial reporting standards, and making recommendations thereto to Financial Reporting Standards Council (FRSC)
Licensing of Business rescue practitioners
Report, research and advise Minister on matters of national policy relating to company and intellectual property law
Further details on the institutional arrangements and information on registering each of these business types may be obtained from CIPC.

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