Starting a Business in South Africa
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New questionNeed help with opening an office in South Africa
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Why Start A Business In South Africa?
Long before money, it was gold that made the world go round. Mining was the first industrial job known to civilisation, and the epicentre of mining is South Africa. The rainbow nation, indeed. A paragon of heterogeny and diversification. Yet things weren't always this way. There was a time where people's defining features were colour, shade, tint and tone; none of which were gold, so they got over it. Multiculturalism 1 - Apartheid 0.
Today, the mining industry has faltered, yet this hasn't affected South Africa's economic athleticism. On the contrary, it is acknowledged as one of the highest growth markets in the world, and many famous British companies have already made the investment plunge, including Cadbury's, Barclays, Vodafone, Virgin, and Rolls Royce. South Africa offers stability, all the opportunity that comes with an excitable emerging market and a welcoming cultural environment that encourages expression and growth.
South Africa has a long chapter in the history books. It's all Brits, Bantus, Bushmen, Boers, and Burghers. South Africa's history with the Brits, in particular, though, is a long, entwined affair. What started as conflict is now synergy. South Africa eagerly invites investment and innovation from the UK, namely in the areas of agriculture, education, environment, energy, technology, sports and leisure.
The colour gold universally symbolises success and wealth and is the most revered substance known to man. Like all rewarding things, it takes time, patience and effort to mine these materials. Business is no different: it takes diligence and determination. So, if you feel ready to follow the rainbow of opportunity, then read on to find out what the spectrum can provide for you.
What are the currency and the exchange rate?
The currency of South Africa is the South African Rand.
What's the climate and weather like in South Africa?
Compared to many other countries at the same latitude, South Africa's temperatures are milder. This is as a result of the Bengula current on the West Coast, and the altitude of the Central Plateau. In winter temperatures on the plateau can drop quite low, therefore, the coasts are the warmest place to be in the winter. The East Coast is warmer than the West Coast due to the warm Agulhas Current. South Africa does not get a lot of rain. Average rainfall is about 464mm per year.
The main economic sectors in South Africa are; finance, real estate and business services; manufacturing; hotel and restaurant trade; government services; transport, storage and communications; mining and quarrying. South Africa has become a lot more focused on foreign trade in recent years. South Africa has been working to gradually decrease trade restrictions and decrease many of its protectionist tariffs and quotas.
One of South Africa's driving forces at the moment is the desire for dynamic growth. They want to encourage industrial and commercial development as well as training to encourage employment and economic growth. One of the ways that they have highlighted for achieving this growth is through international investment. Therefore, South Africa is encouraging fixed investment in their increasingly expanding economy (at the moment they are exceeding their target of 10% growth in fixed investment).
However there are still challenges for business in South Africa; employment issues resulting from the 'Broad-based Economic Empowerment' regulations can be complicated, and there are issues with crime, power and water sources, skilled labour, and red tape.
The South African government are aware of the problems of bureaucracy and red tape. Small business is a sector identified as key in helping South Africa to achieve growth targets. As a result the government has set up a special unit to try to help reorganise the regulations that they have decided hamper small businesses. Cabinet has adopted a plan to remove some 'unnecessary regulatory obstacles' hampering small business; tax, labour regulations and bylaws are some of the things mentioned.
Some of the growth industries or industries with opportunities are:
- education and training
- infrastructure - water, power, sanitation, telecommunications, road, rail, airports
- sports / leisure
- healthcare - manufacture / administration and management tourism
What are the essentials to know?
Broad Based Black Economic Empowerment (B-BBEE)
B-BBEE is becoming a key element in doing daily business in South Africa. It aims to accelerate the participation of 'Black' people in the economy. This is done through encouraging change in: ownership; management control; employment equity; skills development; preferential procurement; enterprise development; corporate social investment etc. The B-BBEE Act is only legally binding on State and Government bodies, but if you want to do business with a government enterprise, you will have to comply. You will gain 'points' on your scorecard and even things like your suppliers will affect your 'scorecard'. For further information see www.businessmap.org.za
Labour and workforce
Unemployment is quite high in South Africa, at around 25%.
One of the possible problems in South Africa for new business is the shortage of skills in specific fields. The Government has introduced ASGISA (Accelerated and Shared Growth Initiative of South Africa), which is a set of interventions and policies to combat issues in South Africa - one of these being employment creation. This means fast-tracking development and acquisition of skills, including their importation. Applications for immigration by skilled workers in skill-shortage areas are encouraged. If you wish to employ a foreigner, they will need an employment contract in order to apply for permanent residence. An employee can also apply for a temporary visa.
Employment law is based around the Basic Conditions of Employment Act, 1997. This gives information on hours, overtime, meal breaks, public holidays etc, as well as a section on written particulars of employment which must be given to the employee.
A working week in South Africa is no more than 45 hours.
A working day is no more than 9 hours.
Annual leave entitlement is 21 days.
Minimum wage rates (these vary between jobs, sectors, town and country, provinces etc) for the various sectors can be found by contacting the Department of Labour, or some information is available on their website: www.labour.gov.za.
Organisations that can assist with Starting a Business
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Sovereign offers a range of advisory and support services to assist companies of all sizes to establish successful business operations in foreign markets.