Establishing a
Establishing a businessin South AfricaSouth Africa has eased the barriers to doing business for locals as well as internationalcompanies and individuals.the quality of life. In this respect, the FDC can offerspecific advice about the business environment inthe province.Business is regulated by the Companies Act andthe Close Corporation Act, which cover accountingand reporting requirements. Under new legislation,no new Close Corporations can be created but CCscan convert to companies.Registration of companyThe company must be registered with theCompanies and Intellectual Properties Commission(CPIC) in Pretoria within 21 days of the companybeing started. There are a range of administrativeprocedures that need to be fulfilled.Bank accountA business bank account must be opened in thecompany’s name with a bank in South Africa.South Africa has a sophisticated legal,regulatory and banking system. Settingup a business in South Africa is a relativelystraightforward process with assistancebeing offered by organisations such as theDepartment of Trade, Industry and Competitionand provincial investment agencies like the FreeState Development Corporation (FDC).South African law regulates the establishmentand conduct of businesses throughout the country.Tax investment incentives, regulations governingimports, exports and visas are uniform throughoutthe country.The particular environment varies from provinceto province with regard to the availability ofhuman and natural resources, the infrastructureand support services, business opportunities andRegistration with the receiver of revenue• As a Provisional Taxpayer• As a VAT vendor• For Pay As You Earn (PAYE) income tax payable onmoney earned by employees• For Standard Income Tax on EmployeesRegistration with the Department of LabourBusinesses employing staff will have to contactthe Department of Labour regarding mandatorycontributions to the Unemployment Insurance Fund(UIF). Register with Compensation Commissioner forCompensation Fund: Files with the CompensationFund (in the Department of Labour) for accidentinsurance (Workmen’s Compensation).Registration with the local authorityRelevant only to businesses dealing in freshfoodstuffs or health matters.FREE STATE BUSINESS 202524
Other procedures• Checking exchange control procedures (notethat non-residents are generally not subject toexchange controls except for certain categories ofinvestment).• Obtaining approval for building plans• Applying for industry and export incentives• Applying for import permits and verifying importduties payable• Registering as an exporter if relevant and applyingfor an export permit.Business entitiesThere are a variety of forms which businesses cantake, including private and public companies,personal liability companies, non-profit companies,state-owned companies and even branches offoreign companies (or external companies).Branches of foreign companies fall under Section23 of the Companies Act of 2008 and are requiredto register as “external companies” with the CIPC. Anexternal company is not required to appoint a localboard of directors but must appoint a person residentin South Africa who is authorised to accept servicesof process and any notices served on the company.It must also appoint a registered local auditor andestablish a registered office in South Africa.Patents, trademarks and copyrightsTrademarks (including service marks) are validfor an initial period of 10 years and are renewableindefinitely for further 10-year periods. Patents aregranted for 20 years, normally without an option torenew. The holder of a patent or trademark must payan annual fee in order to preserve its validity. Patentsand trademarks may be licensed but where thisinvolves the payment of royalties to non-residentlicensors, prior approval of the licensing agreementmust be obtained from the dtic. South Africa is asignatory to the Berne Copyright Convention.Permits for foreign nationalsWork permitsIn considering whether or not to grant a work permit,the Department of Home Affairs will first evaluate thevalidity of the offer of employment by conducting anumber of checks to confirm the following:• Has the Department of Labour been contacted?• Has the position been widely advertised?• Is the prospective employer able to prove that heor she has tried to find a suitably qualified localemployee prior to hiring a foreigner?• Is the prospective employee appropriately qualifiedand do they have the relevant experience?Business permitsForeign nationals who wish to establish their ownbusiness or a partnership in South Africa must,apart from having sufficient funds to supportthemselves and their family, be able to invest atleast R2.5-million in the business.The funds must originate overseas, be transferableto South Africa and belong to the applicant (ieemanate from the applicant’s own bank account).The business must also create jobs for South Africancitizens. After six months to a year, proof will have tobe submitted that the business is employing SouthAfrican citizens or permanent residents, excludingfamily members of the employer.Applications for work permits for selfemploymentcan only be lodged at the SouthAfrican Consulate or Embassy in the applicant’scountry of origin. The processing fee is US6. Theapplicant would also have to lodge a repatriationguarantee with the consulate/embassy equivalentto the price of a one-way flight from South Africaback to his or her country of origin.This guarantee is refundable once the applicanthas either left South Africa permanently or obtainedpermanent residence. Any application for anextension of a business permit may be lodgedlocally. The processing fee per passport holder isR425. Some countries also need to pay R108 perreturn visa.A list of countries to which this applies is availablefrom the Department of Home Affairs.The FDC assists investors in applying for therelevant work permits to conduct their business.What can the FDC do for you?The FDC will help new businesses by assisting inproject appraisal and packaging, putting investorsin touch with relevant agencies and governmentdepartments, alerting investors to investmentincentives and setting up joint ventures where itis required. ■25 FREE STATE BUSINESS 2025
