South Africa is a country rich in cultural and mineral diversity.  It is a country that boasts a temperate climate with most of the country experiencing summer rainfall patterns and the Western Cape area experiencing a winter rainfall pattern.
 

South Africa is a developed nation amongst its peers, with its major economic hub being the inland city of Johannesburg.  Johannesburg is known as the financial powerhouse of the African continent and it is in Johannesburg where most of your corporate and industrial companies have their headquarters.

South Africa is a sea faring nation and has a good road infrastructure to its various ports.  The closest port from its inland hub of Johannesburg situated in the province of Gauteng, is Durban, KwazuluNatal, which is approximately 580 kilometres by road.  Durban is a deep water port that can handle large container vessels.  Other notable ports are Richards Bay, another deed water port, that handles a lot of ore and bulk, Saldanha Bay that handles a lot of steel exports, Port Elizabeth (or Quebeqa as it is now called, is likewise a medium to deep water port handling container, loose cargo and motor vehicle imports and exports, and then of course there is Cape Town.  Cape Town has a deep water port handling many container vessels, dry bulk vessels, perishable product vessels and passenger vessels.  The City of Cape Town is the capital of the Western Cape and attracts many international corporates to have their corporate head office there, which house the executives, while their administration work is done in Johannesburg, the country’s financial heartland.

The South African Labour Market

South Africa has a youthful labour market with the average age meridian between 18 and 25.  The levels of unemployment are however very high and therefore it is relatively easy to obtain both unskilled, semi-skilled and skilled labour in South Africa.  Labour in South Africa is organised with various trade unions operating in various sectors.

The South Africa Banking Landscape

South Africa has a very advanced banking landscape with five major banks predominantly controlling the banking landscape in South Africa with a very advanced internet and cellphone banking service.  South Africa is moving more and more to a cashless society, although the informal sector still heavily relies on cash for its day to day trading.

Ease Of Business

It is relatively easy to set up a company in South Africa.  Companies in South Africa are governed by the Companies Act of 2008 and you have various types of companies.  Your most common company would be that of a (Pty) Ltd. or Proprietary Limited company.  These are companies with an issued share capital and are privately owned.  They have a board of directors who are not necessarily the shareholders in the company.

Another common type of company is a limited company (“LTD”).  This is a company that is generally a publicly traded company on the Johannesburg Stock Exchange.  There are various other categories of companies, such as non-profit organisations (“NPO”) which are set up for specific purposes.  Companies are registered in South Africa with the Companies and Intellectual Property Commission (“CIPC”), and this can be done relatively easily by attorneys, such as Snaid & Morris Inc. or accounting officers and bookkeepers.  Most companies do not require a full audit, but merely a tax audit at the end of every financial year.  The country’s financial year is the end of February, however companies can choose a financial period.

Corporation tax in South Africa varies upon profits declared by the company, however all companies doing a turnover of above R3 million per annum will be required to register for VAT for their services.  VAT is currently charged at a rate of 15% and is payable either every second month or monthly depending on the VAT period assigned by the South African Revenue Services (“SARS”).

Economic Empowerment And Local Ownership

Whilst there is no law excluding complete foreign ownership in a South African company, South African companies would struggle to get certain licences should their directors not be permanent residents or South African citizens.  These would include licences such as a licence to acquire, possess or dispose of precious metals (“gold licence”) gold licences, and the like.  There are however certain economic empowerment regulations commonly known as BEE or Black Economic Empowerment which requires ownership of a company to be held by previously disadvantaged individuals, more especially, in order to do business with certain publicly listed companies and government institutions.  There is a BEE scorecard which is done on companies which will give a scoring level, and the level a company receives is dependent on ownership by certain previously disadvantaged groups and the procurement policies of a company.

Accounting Practises

South Africa generally ascribes to the generally acceptable accounting practises worldwide for accounting records and is a subscriber to the King IV Code for corporate governance.

It is however important to remember when thinking of setting up a company in the Republic of South Africa, that labour contracts need to be looked at carefully as well as certain other contracts, such as credit applications and the likes, as credit to private individuals are governed by the National Credit Act, as well as the sale of consumer goods which is governed by the Consumer Protection Act.  There is also a need for certain contracts to be drawn up between juristic entities when doing business and these contracts need to be specific to South Africa law.

The judiciary in South Africa is robust and independent.  It consists of the Constitutional Court being the Apex court of the country and the highest court in the land.  This constitutional court hears constitutional matters and only upon appeal and in very rare instances and upon application, as a court of first instant.  This is followed lower down in the hierarchy by the Supreme Court of Appeal which hears appeals from the various divisions of the High Court of the Republic of South Africa.  Below the Supreme Court of Appeal are the provincial divisions of the High Court together with their local divisions and below that one will find the Magistrate’s Courts which are split into district and regional magistrate’s courts, depending on the monetary value of claims in civil matters, or the voracity of a crime in a criminal matter.  Below this there are various tribunals, such as The Commission for Conciliation, Mediation and Arbitration (“CCMA”) which handles labour matters as well as various other tribunals. 

Arbitration is increasingly taking preference as a form of litigation in the Republic due to the delays in the court system.  Arbitrators are normally drawn from senior legal practitioners and/or retired judges of the High Court, Supreme Court of Appeal or Constitutional Court.

South Africa offers a robust return for any investor who is prepared to face the challenges of a developing and emerging market and Snaid & Morris is well placed to assist you with all such requirements i.e. the setting up of your company and all compliance requirements for running a company on a day to day basis as well as all legal and regulatory requirements.

By Jason Morris
Joint Managing Director
e-mail  jasonm@snaidmorris.co.za