There are around 650,000 small businesses in South Africa, contributing over 50% of the country’s GDP. With a well developed economic infrastructure, South Africa is seen by many foreign investors as the gateway to Africa, as well as a promising market in itself.
If you're considering moving to South Africa to start a new business there, you'll need to know how. Read this guide to learn more about starting a business in South Africa.
There are several different types of corporate entity commonly used in South Africa:
- Sole Proprietorship
- Private, Public or Personal Liability Company
- Business Trust
- ‘External Company’ - used in the case of registering a foreign company branch office in South Africa
The different corporate structures come with different responsibilities and duties for the owner. The World Bank Group provides further information on how to select the right type of structure for your South African business.
A sole proprietorship is usually used only by ‘one man’ businesses, in which no other employees will join the company.
Most commonly, foreigners investing in South Africa will do so through a company structure. There are three different options here - a Private (Ltd.), Public (Pty Ltd.), or Personal Liability Company (Inc). Usually a Private company is easiest, requiring only one director and one shareholder, who doesn’t have to be resident in South Africa.
The external company structure might be useful if you already have a business and are looking to expand your operations to South Africa. If you start doing business in South Africa with a company that is registered elsewhere you must register your activities within twenty days of starting, with the Companies and Intellectual Property Commission (CIPC).
You can compare the administration needed to start a business in South Africa, with that in other countries, on the website of the World Bank's 'Doing Business' report. This helpful site summarises some of the main legal and bureaucratic steps you'll need to take when starting your new venture.
Starting a business in South Africa has several steps, and can take up to a couple of weeks to get started - or more if you'll start employing others immediately. Most requirements can be completed online, but they do take some time to process. Make sure you leave enough time to go through all of the stages, such as providing certified copies of the documents required to complete the registration with the CIPC.
There's a nominal minimum capital amount of ZAR 1 required to open a business, but other fees for registration will also apply. Because you must provide certified copies of some documents which are used to prove the ID of directors, expect to pay some legal fees too.
Registering a business in South Africa is handled largely by the Companies and Intellectual Property Commission. It's possible to complete most of the registration process online, although you also have the option of mailing in your application, using self service terminals, or processing your application through some bank branches.
The process to register your company will cost you ZAR 125.
You must first reserve the company name - usually by providing up to four variants in case your first choice is already taken. Once this process is complete, you have to complete online registration forms providing details such as the names, nationalities and addresses of directors, and information about the business including the physical address, financial year end and share capital.
Once your application has been received, you'll be asked to send certified copies of photo ID for the company directors, as well as a signed copy of the application. When everything has been received and validated you can then download the certificates of incorporation which you need to move onto the next step. This process can take up to ten days.
Once you have your documentation from CIPC, you'll need to visit the South African Revenue Service (SARS) office closest to you, in person. Here you can register for income tax, and any PAYE taxes that you must deal with on behalf of your employees.
To operate your business legally in South Africa you must also have a corporate bank account. These can be opened at any of the larger banks, and offer a varying range of perks and functionality.
If your company turnover is over ZAR 1 million, you must register for VAT. To do this you have to visit a branch of the SARS in person. Make an appointment at your local branch, and be prepared to take along a thick file of paperwork including certified copies of director IDs, recent proof of business address, and all of your company registration documentation. Call in advance for an appointment, and check out the exact list of documents needed for your particular circumstance.
If you're employing people in your South African business, you have certain responsibilities. You must register with the Unemployment Fund, and pay in contributions for your employees. This can be arranged at the same time as you register with SARS for income tax. You must also register with the Office of the Compensation Commissioner. This department takes care of compensation for accidents incurred at work.
There are various organisations in South Africa that can help you develop and grow your business.
Simodisa is an organisation who supports and promotes startups in South Africa through networking and events, as well as sharing of ideas and information. For funding, the Small Enterprise Finance Agency is tasked with supporting the growth of small businesses, while the government backed Small Enterprise Development Agency can provide information and non financial support for your growing business.
Alternatively, the National Small Business Chapter can help you connect with other business founders in your field. The South African Chamber of Commerce and Industry have over 20,000 members and can help with information and networking.
Once you’re in South Africa and ready to get going, look for local networking events on sites such as Meetup, Eventful and Eventbrite. Here you can meet like-minded people and build your customer and business contact book.
Starting a business is a demanding process, anywhere in the world. But with some planning, and a little help from your new network and friends, your new enterprise in South Africa will get off to a flying start.
When starting your business, if you find the need to send or receive money from abroad at the least possible cost, consider using TransferWise. Not only does their real mid-market exchange rates generally beat the banks, but since your money is received and sent locally in both the sending and receiving currency, all those nasty international fees magically disappear. Give it a try.