For almost two decades, Healy Consultants Group assists our Clients to start a business in South Africa, including i) company registration and multi-currency corporate bank account opening and ii) accounting and tax considerations and iii) regulatory license and government grants and iv) office rental and employee recruitment.

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South Africa business setup summary

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• Advantages and Disadvantages

  Advantages of South African company registration

  1. Company registration in South Africa is straightforward because:
     • A South Africa LLC requires a minimum paid-up share capital of just US$1;
     • Incorporation is completed in just two weeks;
     • Only one director and one shareholder are needed, and they can be any nationality and non-resident;
     • It is helpful that the business language of South Africa is English.
  2. A South African company enjoys good regional and global market access through trade agreements and customs unions. Furthermore, South Africa’s transport networks (road, rail and air) connect it with regional states, facilitating trade.
  3. Government incentives available to foreign investors include:
     • Dividends and capital gains received from a foreign company are exempt from South Africa corporate tax if the South Africa LLC holds at least a 10% stake in the foreign company.
     • Companies investing in tourism and manufacturing may be eligible for grants of between 15% and 30% of the total investment amount, up to US$2.07 million.
     • R&D projects are eligible for government grants of up to US$1 million, and operating expenditure refunds. Check out the Capital Projects Feasibility Programme and SEDA Technology Programme for details of financial support for foreign investors.
     • Companies setting up Business Process Outsourcing (BPO) operations in South Africa are eligible for grants of up to US$8,550 for every job created.
     • South Africa has signed more than 100 Double Taxation Agreements and 50 Bilateral Investment Agreements to reduce withholding taxes on foreign payments and customs duties on imports/exports.
     • Incorporating in an Industrial Development Zone offers i) 100% exemption on custom duties ii) 100% exemption on VAT and iii) up to 30% grants on cost of plants, machinery, equipment, commercial buildings and vehicles.
     • Investments in construction for industrial projects are eligible for grants of between 10% and 30% of total development costs.
     • Companies moving machinery into South Africa can apply for a cash grant worth either i) 15% of the value of the equipment or ii) US$2.7 million, whichever is less.
  4. South Africa hosts the largest and best-established African stock exchange – with a market capitalisation of US$727 billion. Some successful foreign entrepreneurs list their companies on the Johannesburg Stock Exchange (JSE).
  5. The country boasts the continent’s best transport infrastructure, with good air and rail networks, and seaports located on global shipping routes. The country therefore has good access to global markets.
  6. In 2018, South Africa enacted legislation protecting foreign investments. In theory, South African courts protect foreign investments and foreign investors in the same way as a South African citizen.
  7. The financial services sector in South Africa is excellent, backed by a strong regulatory and legal system. South African banks offer multicurrency corporate bank accounts and excellent internet banking. Healy Consultants Group can assist our Clients to secure a corporate bank account without the need for travel to South Africa;

  Disadvantages of South African company registration

  1. South African taxes are high including i) 27% corporation tax ii) 15% VAT iii) 18% capital gains for companies iv) 1% asset tax v) up to 15% withholding tax vi) 19% average import duty and vii) 8% transfer duty on immovable property.
  2. Doing business in South Africa is challenging for multinational Clients because:
     • The country is considered corrupt by global standards, with weak enforcement of anti-corruption legislation. Consequently, foreign investments may not be adequately protected.
     • Repatriation of profits overseas requires Central Bank (SARB) approval.
  3. The South African economy is unstable because:
     • In 2021, the country suffered both civil unrest as well as the impacts of the Covid-19 pandemic, and has for years been running fiscal and current account deficits. In early 2020, the country was downgraded to full junk status by Moody’s.
     • The economy suffers from political instability and violent crime, thus is unattractive for foreign employees to relocate to South Africa. Unfortunately, the country has the world’s fifth highest murder rate.
     • Unemployment is currently running at almost 30%, increasing the risk of further civil unrest.
     • South Africa suffers from frequent power outages. The country’s severe electricity shortage threatens key economic sectors such as mines and manufacturing.
     • The South African rand is one of the world’s most volatile currencies. Consequently, foreign investors receiving and making payments in rand are exposed to volatile exchange rates, while the value of South African assets and investments is uncertain.
  4. Even though English language proficiency in the working population is high, multi-national Clients experience the following problems with local employees:
     • It is difficult to recruit qualified labour in South Africa. There is a shortage of local skilled IT specialists, engineers, health professionals and financial executives. Only 7% of the population holds a university degree.
     • Labour unions interfere with simple employer-employee relationships, making it harder to hire or fire employees.
     • Computer literacy and digital among the population is low. As of 2022 only one in 10 South Africans has a computer at home.
  5. A South African LLC must appoint a Public Officer who is a tax resident in South Africa. This is an additional annual expense for foreign investors. Healy Consultants’ annual Public Officer fee is US$2,950.
  6. Because of the South African energy crisis and ongoing load shedding coupled with widespread national blackouts, Government procedures are greatly affected and simple tax registration processes can take up to 2 months to complete
  7. Unfortunately, South African banks will first only approve a local currency account (ZAR) before they can issue foreign currency accounts to corporate entities. This process can delay the multicurrency corporate bank account opening by 3months;
  8. Companies making payments to foreign parties must justify why they need to remit money to a foreign party and seek approval form the Reserve Bank or their banking institution. Clients must also justify any foreign currency being injected into the bank account by i) providing the reason for receiving the payment ii) accept the South African Reserve Bank declaration.

• Best uses for a South Africa company

  1. South Africa is an excellent place to set up a manufacturing and distribution company because:
     • Incorporating in one of South Africa’s five Industrial Development Zones offers companies i) 100% exemption on custom duties ii) 100% exemption on VAT and iii) up to 30% grants on cost of plants, machinery, equipment, commercial buildings and vehicles;
     • Investments in construction for industrial projects are eligible for grants of between 10% and 30% of total development costs;
     • Companies moving machinery into South Africa can apply for a cash grant worth either i) 15% of the value of the equipment or ii) US$2.7 million, whichever is less.