Last updated on November 13th, 2023 at 09:14 am
South Africa is among the top three largest economies in Africa with $411.480 billion USD. One of its economic backbones is the activities of investment in former Apartheid countries.
South Africa’s economy is open for foreigners to invest in addition to the indigenous firms in the country.
If you are a non-national of the country and looking for the possibility of starting a business in South Africa, this guide provides answers to your questions.
How easy is it for a foreigner to set up a business in SA?
In South Africa, it is easy to start a business, and even foreigners won’t experience unnecessary headaches just to operate their commercial enterprises.
The government is very aware of the fact that businesses are pivotal in the general growth of the country, creating lots of jobs and driving Foreign Direct Investment (FDI) is paramount to economic growth.
If you are a foreigner looking to start a business in South Africa, you should know that aside from the standard business and work permits, you don’t need anything else to get started.
The regulations for running a business in South Africa are the same for both foreigners and locals, except for fulfilling certain immigration regulations.
Therefore, whether you are a foreigner who is running a business in the country or you are a South African, everyone must operate within the confines of the laws of the land.
Starting A Business In South Africa
You must get the relevant visa before you can have the chance to register a business in South Africa as a foreigner.
Getting a business visa works as the major business permit you need to register your enterprise in the country, and you must be in possession of this if you are to create a foreign-owned business in SA.
Generally, you must satisfy any of these two things to be eligible for a South African business visa:
1) You should invest up to R5 million into an existing commercial enterprise.
Alternatively, you can prepare to start a new business that required nothing less than R5 million, and the proof should be captured in your business plan.
2) If you don’t have up to R5 million to invest, then you can create a business that is of national interest to the country, as there is no minimum capital investment attached to this.
In South Africa, the government unit that takes care of the processing of business visas is the Department of Home Affairs.
Another ministry saddled with the responsibility of recommending businesses that are contributing reasonably well to the economy of South Africa is the Department of Trade, Industry and Competition.
Additionally, to employ foreigners to work for you, then you must apply for a work permit via VFS Global, although it is issued by the Department of Home Affairs.
You can submit applications for either a general work visa or a critical skills visa.
The general work visa can be obtained by a foreign worker when it is proven that no South African worker has the skill set for the particular job.
The critical skills visa is for those that fit into the particular critical skills list crafted by the government.
Now, to officially get your business registered in South Africa, you must do so with the Companies Intellectual Property Commission.
Bizportal simplifies the process
This is achievable via the dedicated portal created for the purpose – known as Bizportal. This is the commission’s strategy of ensuring that entrepreneurs will be able to register their businesses seamlessly without issues.
Cost: You will be able to register your business between R125 to R475 in no time.
Bizportal enables you to achieve the following:
- to register your company and its name,
- your Tax registration number,
- Compensation Fund registration,
- Business bank account
Note: Company name reservation is R50, though it is optional. All of these are mediums to ensure ease of doing business in the country.
Kind of business to register on Bizportal
It is also important to talk about the types of businesses you can register on Bizportal. You can incorporate either a Profit company or a nonprofit one, under the Companies Act 2008.
The nonprofit will include an organization that is incorporated for a public benefit purpose, whose official name should end with “NPC”.
A profit company is any commercial enterprise without restrictions on the transferability of their shares, paying tax under South African law as a separate legal entity.
Cost of Opening a company in South Africa
You will need just around R175 to start a business in SA. Definitely, South Africa is one of the cheapest places in the world to start a business, according to Business Financing UK.
In fact, according to reports, what you pay to start a business in SA is cheaper than 90 per cent of the rest of the world.
As we write, South Africa is number 6 in the Ease of Doing Business ranking in Africa by the World Bank. The registration process contributes hugely to its impressive ranking compared to Nigeria.
Aside from your capital (which can be relative, based on what type of business you want to operate), you will likely spend less than R200 to register your business name with the Companies and Intellectual Property Commission (CIPC).
Therefore, even as a foreigner eager to start a business in SA, you can be sure that it is inexpensive to get started with your venture in the country.
Legal Requirements of A Business Setup In South Africa
The legal process can be cumbersome. However, as far as the legal requirements of a business is concerned in South Africa, it is simpler when compared to several other countries on the continent.
First, you must settle CIPC Registration and make sure you register with the agency (The Companies and Intellectual Property Commission),
CIPC is the agency saddled with the responsibility of registering companies and intellectual property rights in South Africa.
The types of businesses you choose determine the legal requirements you will engage in.
You can choose a sole proprietorship if you want to operate a modest venture that doesn’t require a large workforce.
On the other hand, you can decide on a partnership if you are running it with others, and must be ready to have in place a partnership agreement.
Finally, you can opt for a Company or Pty LTD and you will have to engage the paperwork that will separate the business from your person.
Additionally, you can take a step towards protecting your intellectual property with the same agency (things like Patents, Trademarks, Designs, and so on).
In addition to all of these, you are to register your business with the South African Revenue Services for tax purposes (you can automatically get this done when you register on CIPC).
Compliance with COIDA
If you are employing employees, then they have to be registered in compliance with the Compensation for Occupational Injuries and Diseases Act (COIDA).
Compensation for Occupational Injuries and Diseases Act 130 of 1993 is designed to ensure the safety of the health of workers in the country, as well as their general safety when in the course of their employment.
Additionally, they have to be registered to the Unemployment Insurance Fund which will take care of their leave periods (maternity leave, prolonged illness, and so on).
South African agency that supports small businesses
Because of the huge contribution of small businesses to the economy, the South African government has in place an agency called Small Enterprise Development Agency (SEDA).
The main objective of the SEDA is to help small and medium-sized enterprises thrive in the country.
The agency offers non-financial support to small enterprises and cooperatives, and they have been really helpful to many entrepreneurs.
Can Foreigners Benefit from SEDA Programme?
It is an agency of the Department of Small Business Development and it has over 50 branches in different parts of the country.
The agency has programmes targeting rural folks, as well as bigger Technology Incubation Centres in cities.
Since it is a proven truth that many businesses find difficulties in sailing through for a long time, SEDA is committed to reducing the failure rate of businesses in South Africa.
SEDA doesn’t segregate provided your business is making significant contributions to the South African economy, foreign-owned businesses can benefit from SEDA’s programme.
It is not hard to start a business in South Africa even as a foreigner.
Once you have the right things in place, registering your business on Bizportal will take you just a few hours.
Of course, with less than R200 you can register your company name with the right authorities and operate legally in the country.
Therefore, South Africa is one of the most inexpensive places in the world to start a business.