Current business situation
South Africa is considered the gateway into Africa thanks to its comparatively superior infrastructure, transport, telecommunications and highly developed financial and banking system. South Africa’s economy was built on the discovery of gold, minerals and base metals for export and the service industry is contributing an increasing amount to the country’s gross domestic product (GDP).
Well known for its dominance in minerals and agricultural products, South Africa has transformed into a sophisticated manufacturing and service based economy. The services industry comprises about two thirds of the country’s GDP while the mining and agricultural sectors now contribute around six per cent to GDP.
The telecommunication sector has shown excellent growth in the country and continues to grow as South African mobile operators expand their operations into Africa.
The South African Government has prioritised labour law reforms in its 20 year National Development Plan, which may create opportunities for business in the medium term. This will open the way for education providers at various levels to address the need for skilled labour in order to reduce unemployment and grow the economy.
South Africa is part of the Southern Africa Development Community (SADC).
The population of around 50 million has a median age of 25 years and the working age population is set to grow significantly over the next decade. The population is culturally and ethnically diverse and divided into four broad racial groupings:
- Black African (over 70 per cent)
- White (Afrikaner or of British descent)
- Coloured (people of mixed ethnic origin from Europe, Asia and various Southern African tribes)
South Africa is a collectivist culture and high priority is given to extended family or other community interests. It is acceptable and commonplace in South Africa to refer to groups of people by their race (i.e. ‘black’, ‘white’ and ‘coloured’).
There are 11 official languages recognised by the Constitution, while English is the language of business, it is the second language to most South Africans.
Groups within South Africa tend to live side-by-side rather than integrate. For Australians, not aware of the influence of ‘Apartheid’ on South African society, this may come as a surprise.
Appointments are necessary in South African business life. Regardless of their cultural background, most South Africans prefer a face-to-face encounter to a telephone call or email contact. Business meetings can be rather informal, but with government officials they may be more formal. Punctuality is valued and meetings will usually start with shaking hands, exchanging business cards and establishing rapport. Gift giving in a business context is not a common occurrence in South Africa.
Security in areas of South Africa must be taken seriously and visitors should remain vigilant at all times, as there are a significant number of crimes involving weapons. Visitors should check arrangements for visiting buildings and parking, as some areas can be unsafe. All government departments and many companies require visitors to pass through a metal detector and sign in and out to gain access to buildings, time should be allocated for these security procedures. All transport arrangements should be organised in advance and identification carried at all times. The company being visited may ask for the car registration numbers to aid identification and facilitate entry.
Business attire is the same as in Australia with traditional African fabrics and designs featuring particularly at social events.
It is important to be aware that deadlines are often flexible and it is recommended that due dates are clearly stated when negotiating contracts to ensure commitments are delivered on time.
Decision making is often centralised and organisation structures tend to be hierarchical, it is advisable to meet with the South African business representative who will be the decision maker.
Setting up in South Africa
Starting a business is relatively easy after the introduction of the new company law, which eliminated the requirement to reserve a company name and simplified the incorporation documents. The new Companies Act 2008 of South Africa requires the Notice of Incorporation and the Memorandum of Incorporation must be lodged at the Companies and Intellectual Property Commission (CIPC) upon registration.
Businesses with annual taxable income of more than ZAR 1 000 000 need to register for VAT. CIPC and the South African Revenue Service (SARS) are linked electronically and once a company is incorporated, the relevant South African Revenue Service office is advised and an income tax number is allocated.
Broad Based Black Economic Empowerment (BBBEE) requires locally registered companies to comply with the economic empowerment of previously disadvantaged South Africans and aims to increase their participation in the economy. BBBEE sets guidelines and targets for companies to engage people who previously did not have equal opportunities in business through increased ownership, management, procurement and development.
Australian companies are advised to use financial or legal advisory firms to facilitate setting up a representative office or registering their business in South Africa. The Australian Trade and Investment Commission’s office in Johannesburg can provide you with a list of suitable financial or legal advisory firms.
Banking and finance
The banking system is highly developed with first world standards, comprising 22 registered banking institutions, 43 local representative and 14 local branches of foreign banks.
In urban areas there is no shortage of banks, bureau de change, automatic tellers and major credit cards are accepted with a strong preference for VISA and MasterCard. Card systems CIRRUS and NYCE are used for both credit and debit cards, the latter being the preferred option.
In small towns only cash may be accepted.
The Johannesburg Stock Exchange is the largest on the continent.
Links and resources
Government, business and trade
The Australian Business Chamber of Commerce (Southern Africa)
The Department of International Relations and Cooperation
The Department of Trade and Industry
International Trade Administration Commission of South Africa
South African Chamber of Commerce and Industry
The South African Government Online
South African Revenue Service
News and media
Mail and Guardian
Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.