South Africa & business

A guide for foreign businesses seeking to expand into South Africa

Is South Africa is a suitable base for generating investment and trade across the African continent? Yes, particularly in sub-Saharan Africa as it is the biggest and most inter-connected economy around. South Africa has well-developed infrastructure and established trade links with the rest of the region and the world. It is a suitable base for operating commercially anywhere in Southern Africa. It has a moderately safe business environment and a long history of successful (though perhaps not always so fair) cross border commercial ties.

Doing Business in South Africa

There are several options for structuring a business operation in South Africa. This guide highlights key areas a new business should consider before operating in the country. However, specific South African legal advice should be obtained before setting up. We will be happy to point you in the right directions.

South Africa has three levels of government – national, provincial and local. The National Assembly is the supreme law-making body. There are nine provinces, each with its own legislature, premier and executive council. Provinces can pass laws within the national framework tailored to their needs. Local governments comprising municipalities provide services to promote development. Then there are the three branches of government, legislative, judicial, and executive, with their respective seats in Cape Town, Bloemfontein, and Pretoria. The courts are well respected and their decisions substantive and meaningful.

The Business Environment

South Africa is a democracy with a progressive constitution that is the supreme law binding all government organs. The courts interpret laws passed by the National Assembly through application to specific cases. Roman-Dutch law is the primary source, with English law influence as a former British colony. There is a well-developed court system, with the Constitutional Court highest for constitutional matters. The Supreme Court of Appeal is highest for non-constitutional cases. High Courts serve provinces as courts of first instance. Magistrates' courts have limited jurisdiction.

South Africa is rich in minerals with a developed mining industry. It has a broad industrial manufacturing center and is a major food exporter. The sophisticated financial services sector and transport/telecoms systems make it one of the world’s top trading nations. According to official statistics Zulu, Xhosa, and then Afrikaans are the most widely spoken languages. English is generally the language used for business, although there are 11 official languages. The Department of Trade and Industry assists those interested in doing business, and each province has investment promotion agencies.

South Africa has faced some challenging times recently - from Covid-19's economic blows to the social unrest and looting in 2021 plus ongoing problems like power cuts, high unemployment and corruption scandals. Businesses have weathered these disruptions but the resilience and optimism of South Africans continues to shine through. 

The pandemic caused major supply chain strains and revenue losses but companies adapted models, pivoted offerings and acted decisively to rebound. Load shedding frays nerves with work disruptions but businesses invest in backup power solutions while pushing government for reforms. High-profile corruption cases depress trust but strengthen accountability and signal political will to clean up governance.

Years of inequality fueled social tensions but tragedy sparked greater commitment to inclusive growth. South Africa's vibrant entrepreneurial culture steadily empowers youth and women. The free press probes malfeasance while fostering transparency. 

South Africa's infrastructure, human capital strengths and gateway position for Africa trade retain powerful appeal. With pragmatic policies, energized citizens and responsible companies, South Africa can realize its immense potential. The journey to renewal has obstacles but its business spirit and national resolve will continue powering it forward.

Forming a Company 

A foreign business wanting to commence operations in South Africa can incorporate a subsidiary company or register a branch office. The latter does not create a separate legal entity. Most subsidiaries are profit companies, either private or public. Private companies cannot offer shares publicly. The board needs at least one director, or more if stated in the Memorandum of Incorporation (MOI). Public companies can offer shares publicly and seek listing on the Johannesburg Stock Exchange after meeting requirements. Most companies incorporate as private, unless planning a public offer.

Key features of South African companies include:

To incorporate, file Form CoR14.1 with CIPC with required details like MOI. Takes 3-14 days. Can also buy shelf companies. The most common corporate structure used by foreign companies entering South Africa is a private company incorporated under the Companies Act 2008. This offers limited liability for shareholders. 

To incorporate, file Form CoR14.1 with the Companies and Intellectual Property Commission (CIPC), including the Memorandum of Incorporation (MOI) and details of directors. Takes 3-14 days. Minimum requirements include one director and one shareholder. The MOI governs operations and shareholder rights. Shareholder liability is limited to any unpaid amount on shares held. Public companies can raise capital more freely but have greater compliance obligations, like needing three directors. Most incorporate as private companies unless planning a public share offer.

See Companies Act No. 71 of 2008 and Trust Property Control Act No. 57 of 1988.

Maintaining a Company

South African companies must comply with various statutory duties under the Companies Act 2008 including:

Directors also have duties under the Companies Act 2008 and common law to act with care, skill and diligence, and in good faith for the company's benefit. 

Dissolving a Company 

A South African company can be dissolved voluntarily by shareholder resolution or involuntarily via liquidation if it is insolvent. Voluntary dissolution involves lodging a special resolution with CIPC and settling debts before distributing net assets. CIPC will then issue a certificate of dissolution. Involuntary liquidation starts with an application to court, usually by creditors. The court appoints a liquidator to take control of the company and sell assets to pay off debts. Any surplus gets distributed to shareholders. This ends when CIPC deregisters the company.

Financing a Company

South African companies can be financed through share subscriptions and/or loans. Funding can come from parents/third parties. 0.25% Securities Transfer Tax (STT) applies on share purchases/transfers (not new subscriptions). 

No prescribed minimum share capital/loans. Buybacks allowed subject to restrictions. Exchange control laws administered by the South African Reserve Bank (SARB) apply. Non-residents can acquire shares/assets with certificate endorsement by an authorized SARB dealer. Certain sectors need specific authorizations. Income like dividends/interest is freely remittable abroad at prevailing exchange rates. Proceeds from asset sales also freely remittable. Non-resident Rands are not subject to exchange control. However, residents cannot send Rands abroad without SARB approval. Non-residents/“affected persons” have limited borrowing capacity in South Africa based on a set formula.

Opening a Branch Office

Foreign companies can establish branch offices without a new subsidiary. The branch is an extension of the foreign company which holds direct liability. Under the Companies Act 2008, foreign companies must register as an “external company” within 20 days of first conducting business. This doesn't create a new entity but subjects the foreign company to certain provisions. Requirements include continuously maintaining at least one office, appointing a local agent for legal service, filing details like directors, and preparing annual financial statements. Public securities offers require following specific rules.

Opening a Bank Account 

Accounts can be resident or non-resident. Non-residents have normal residence/registration outside the Common Monetary Area (South Africa, Namibia, Eswatini, Lesotho). It can actually be quite a hassle to deal with banks in South Africa, and exchange controls can be tight and cumbersome. Approach a bank directly with original company documents and director identity proofs. Banks must comply with anti-money laundering laws. Consent for checks may be needed. Minimum opening balances nearly always apply. There is very limited competition in the banking world because it is so highly regulated and the gatekeepers know that. This permits the bigger banks such as ABSA, Standard Bank, NedBank, and First National Bank dominate, with a few smaller rivals. The South African Reserve Bank (SARB) is responsible for banking regulation and supervision to promote financial stability. 

Key regulations include:

Adhering to SARB’s stringent supervision enables banks to operate safely and soundly. However, that comes with a pricetag as compliance with such strict procedures is cumbersome, and creates an endless bureaucracy that could be better served by the FinTech space, though its role in job creation is important as well. 

Utilizing Office Space

Property can be owned or leased. Purchasing allows establishing owned offices. No restrictions on non-residents acquiring property. Commercial leases are typically 5-10 years but any term can be negotiated. Over 10 years needs title registration. Leases tend not to allow early termination or break options. Rent is usually monthly based on square meterage with fixed annual escalation. Some leases have additional charges for utilities, taxes etc. Landlords commonly require a deposit of 1+ month’s rent as security against default. Personal sureties are nearly universally required. Consent is required before assigning/sub-letting leases. Landlords assess new tenant ability to meet obligations.

Immigration Controls

The Department of Home Affairs is one of the least trustworthy institutions in South Africa. I could go on a rant that would last for days about the ills that go on there. 

Foreign employees need work visas before starting employment, including:

Supporting documents needed depending on visa type. Availability of citizens/residents with appropriate skills is key consideration, they say. You must apply at South African consulates or Department of Home Affairs. Must be office with jurisdiction where employee will work. Actually, don't bother. If you do not hire an attorney, this will not work out for you. It is probable that during the processing you may be approached for a bribe, which you should not, under any circumstances, be tempted into paying. Hire a good attorney and follow their advice, and they will likely be able to help you navigate the process, but it is not recommended that you "go it alone" or attempt to spend too much time in South Africa without making a plan. It is not impossible, just ill-advised.

Safeguarding Intellectual Property

Robust IP protection is crucial when entering a new market. Companies should utilize legal experts to put in place an effective IP strategy aligned with their South African plans. It is no secret that the go-to firm for intellectual property rights in South Africa is well known to be Adams & Adams. Get legal help. (Reading this article alone does not count)

Here are some proactive steps you should take to secure their intellectual property (IP) rights when entering the South African market:

Key Employment Laws

Employment is regulated by statute, common law and contract. Key laws protect against unfair dismissal/labor practices, regulate collective bargaining, set minimum standards on conditions through the Basic Conditions of Employment Act 1997, and prohibit discrimination or require affirmative action. Other laws establish unemployment insurance, impose safety duties, provide workers compensation, and enable skills development through training levies.

Labor Relations - Termination of Employment 

The Basic Conditions Of Employment Act, 75 Of 1997 sets minimum termination notice periods depending on length of service. Contracts can have longer periods but not shorter. Employees can claim unfair dismissal if termination is substantively or procedurally unfair. Misconduct, incapacity or operational requirements are valid reasons, each with specific processes. Remedies include reinstatement or compensation. Compensation is limited to 12 months’ remuneration, or 24 months for discriminatory dismissal. You have to go through the CCMA or some similar such organization established under separate Union rules. Develop constructive labor relations. Comply with employment laws and standards. Engage with unions transparently and proactively address worker disputes through proper procedures.

Trade Unions

You should also bear in mind that trade unions have played a major role in South Africa's socio-economic landscape. They play a really outsized role in the politics and history of South Africa itself, with events like Marikana forming a part of our living memory. In some industries, trade unions might have a real impact on your business. Unions like COSATU have large memberships spanning multiple industries. Unions provide worker protections through collective bargaining but prolonged strikes in sectors like mining have disrupted production. However, unions have helped address inequality through minimum wage agreements. While union demands increase labor costs, coordinated negotiations help foster industrial relations stability. Unions also contribute to skills development. Overall, unions provide countervailing power to employers but a balance is needed between worker rights and retaining competitiveness. Constructive labor relations remain key to economic progress. We have worked with people on both sides and find that all South Africans want constructive discussions about how to make things better for everyone. If you negotiate in good faith, you can always come up with a way forward.

Leave & Remuneration

Employees get minimum paid annual leave of 21 consecutive days, 1 day for every 17 days worked, or 1 hour for every 17 hours worked. Leave must be granted within six months. Pay is equivalent to what the employee would have earned if working. There are 12 statutory public holidays. A holiday falling on Sunday gives the next Monday off. Public holidays can be exchanged by employee agreement. Sick leave entitlement equals the number of days normally worked over six weeks. Statutory maternity leave is four months unpaid. Some employers offer paid maternity benefits. Limited benefits can be claimed from the unemployment fund. Three days paid family responsibility leave per year is available after four months of employment for events like a child’s birth or family death. It does not accumulate.

Employers must pay remuneration in South African currency daily, weekly, fortnightly or monthly in cash, by cheque or direct deposit. Cash payments must be during working hours in a sealed envelope. Remuneration must be paid within seven days of the period it relates to or contract termination.

Contracting with Third Parties

General contracting principles in South Africa include:

Key laws like the Consumer Protection Act 2008 and National Credit Act 2005 regulate and prohibit certain terms in consumer and credit agreements. Home Loan and Mortgage Disclosure Act No. 63 of 2000, Insolvency Act No. 24 of 1936, National Credit Act No. 34 of 2005.

Get advice to avoid illegal/unfair terms that may be unenforceable. Implied and tacit terms derive from common intention of parties, as do warranties and exemptions. But the latter are treated cautiously by courts given their restrictive nature. Penalty clauses are enforceable but a court can reduce disproportionate penalties. The real trick to navigating the complexity is to prepare terms of service or pro forma agreements that will protect and benefit your business, and which will hold up in any court. Speak to an attorney. We recommend Natalie Lubbe. Reach out to her or Vuyani Phenduka, attorneys in Sandton, Gauteng, for advice on legal agreements.

Taxation Overview

South African residents are taxed on worldwide income, while foreign companies with local branches pay tax on South African-sourced income only. Income tax for companies is 27% (lower rates for small business corporations). South African Revenue Services (SARS) is the governing tax authority. Key taxes include Value-Added Tax (VAT) on goods/services (15% standard rate), Capital Gains Tax (CGT) on asset disposals, Donations Tax, Employees Tax (PAYE), Dividends Tax (20%), Securities Transfer Tax (0.25%) and Withholding Taxes. Seek advice on the tax implications applicable to your specific business circumstances and transactions.

Tax Compliance

You should keep meticulous tax records and ensure accurate filing and on-time payment of all applicable taxes like corporate income tax, VAT, payroll taxes, and withholding taxes. You should also comply with transfer pricing rules. 

Recommended actions include:

Proactively engage with SARS on any disputes. Seek opinions and rulings upfront where uncertain. With proper policies, technology tools and specialist support, foreign companies can effectively meet South African tax obligations.

See Income Tax Act No. 58 of 1962 and SARS.

Regulatory Compliance

Key regulators include CIPC for company law, the Takeover Regulation Panel for mergers/acquisitions, the Competition Commission for antitrust issues, the Financial Sector Conduct Authority for regulated financial entities, the National Credit Regulator for credit providers, and the Information Regulator for personal data protection under the Protection of Personal Information Act 2013 (POPIA). Maintain updated company records with CIPC. Notify material changes like director appointments or share issues as required. Keep informed of regulatory developments.

Corporate Governance 

You must ensure company governance structures like boards and shareholder meetings adhere to the Companies Act 2008 and accepted practices. Keep registrations current with CIPC and make filings on time. Stay up to date on changes to company law. Maintaining strong corporate governance is vital for foreign companies in South Africa. 

Key focus areas should include:

Keep informed of legal/regulatory changes and King IV governance standards. Ensure governance structures and practices align with South African best practice expectations. This helps instill stakeholder trust and confidence.

Financial Reporting

Prepare annual financial statements per South African accounting standards and have them audited/independently reviewed as required. File and publish reports within stipulated periods. Foreign companies in South Africa must comply with financial reporting requirements under the Companies Act 2008. 

Key aspects include:

Non-compliance carries penalties and reputation damage. Enlist experienced accountants and auditors to ensure financial reporting meets legal standards and deadlines.

Exchange Control 

You need to understand exchange control regulations and secure SARB approvals where necessary for transactions like profit repatriation, forex dealings, and outbound investments. Unlike other hard currencies, South Africa's Rand has a number of bureaucratic controls in place around its conversion into other currencies. Really, the Rand only trades with the US dollar, and then trades are executed further on. Appoint an authorized dealer. South Africa has exchange controls administered by the South African Reserve Bank (SARB) to manage capital flows. Foreign companies must comply with regulations. Key aspects include:

Obtaining expert advice can help navigate the regulations and associated approval processes. Proactive compliance ensures foreign companies remain qualified to operate in South Africa and not run afoul of any exchange control procedures. See also, Customs And Excise Act, 1964 (Act No. 91 Of 1964).

Black Economic Empowerment

Black Economic Empowerment (BEE) is a government policy for economic transformation enabling black South Africans to substantially participate in the economy. To some this is a contentious policy, but most importantly to remember, it is not any mere policy, but the law of the land. To do business in South Africa one must understand this law, finish en klaar.

The Broad-Based Black Economic Empowerment Act 2003 provides a framework for BEE implementation. The government has published a Code of Good Practice with transformation recommendations for business. Industry stakeholders have also negotiated transformation charters in sectors like financial services, accounting, construction, forestry, property, agriculture, marketing, communications, technology, tourism and transport. Foreign companies have entered BEE equity transactions to improve chances of government procurement and enhance scores. Many mining ventures are foreign backed with local BEE partners. Government contracts legally require it. There is a need to avoid window dressing and to engage in substantive black economic empowerment in South Africa and achieve its underlying aims, so no empty directorships. Find a BEE partner who will deliver for your business, and for South Africa itself.

BEE Compliance

Ensure company policies and transactions align with Broad-Based Black Economic Empowerment objectives around ownership, management control, skills development and preferential procurement. Black Economic Empowerment (BEE) aims to increase participation of black South Africans in the economy. Foreign companies can benefit by enhancing their BEE compliance.

Steps you can take include:

An improved BEE score could make the company more competitive for state tenders, contracts with local businesses, and partnerships with empowered firms. It demonstrates commitment to South Africa's national transformation agenda. Proactive participation in BEE can strengthen the company's local reputation and license to operate.

Data Protection

Implement responsible data management practices compliant with the Protection of Personal Information Act 2013. To comply with South Africa's data protection law, the Protection of Personal Information Act (POPIA), businesses should:

Licensing Requirements

Many industries in South Africa require operating licenses that companies must hold to conduct business legally. Make sure you secure all necessary licenses, registrations and approvals to operate, including for activities like financial services provision, mining, telecommunications and healthcare services.

Steps to ensure licensing compliance include:

Staying compliant with applicable licensing regimes is essential for legally conducting business in South Africa. There are a lot of officious minor officials who use any type of non compliance as an opportunity to extract a small bribe, and one should be wary not to fall victim to any blackmail traps. Do not pay bribes. Insist official business is conducted in writing if you suspect something is wrong, and seek review before some or another judicial officer later. The threat will shrink, hopefully.

Industry Codes 

Adhere to any compulsory industry codes of conduct that have legal force such as banking, insurance, pension funds and collective investment schemes, etc. Proactive compliance practice reduces regulatory risk for foreign companies. Enlist local advisors! Certain industries in South Africa have mandatory codes of conduct that companies must adhere to:

Foreign companies must research and comply with all compulsory industry codes relevant to their business. Non-compliance poses serious legal and reputation risk. 

South Africa's business landscape is shaped by specialized regulations across key sectors. More examples include:

Useful Links

Companies and Intellectual Property Commission  

South African Revenue Services (SARS)

Johannesburg Stock Exchange  

South African Institute of Chartered Accountants

Department of Trade and Industry

South African Reserve Bank


Jeff was born and raised in Garland, Texas. Jeff served as a combat medic before pursuing higher education. Jeff's LLB is from the University of South Africa, where he gained invaluable firsthand experience with South African law and business over nearly a decade spent living there. Jeff later obtained an LLM. from the University of Washington School of Law. Now settled with his family on Mercer Island, Jeff retains his Texas roots alongside a global perspective.