South Africa actively seeks foreign direct investment for economic growth, unemployment reduction, and technology transfer.
It has abolished unnecessary licensing and regulations.
Foreigners can fully own shares in all sectors except banking, broadcasting, telecommunications, and insurance.
Ownership over 75% bars borrowing from local financial institutions.
Banks with limited foreign ownership (15-49%) need approval.
Broadcasting's foreign ownership is capped at 20%.
Profits can be repatriated with full corporate tax payment.
Non-residents with >75% stake and local loans require Central Bank approval.
The insurance sector needs Prudential Authority permission under the 2017 Insurance Act.

Investment Incentives The South African government offers numerous incentives to investment companies.
These incentives aimed at attracting foreign investment comprise tax exemptions, cash incentives, and financial support for each investment endeavor.
Corporate tax preferential treatment and tariff rebates are forms of tax exemptions extended to investors.
Financial support is administered by the Industrial Development Corporation (IDC) of South Africa, which provides long-term, low-interest preferential financing to companies that boost employment or enhance export competitiveness through investments within the country.
Additional investment incentives include the following.

1) Black Industrialists Scheme

The system aims to foster the quantitative and qualitative growth of black manufacturing entrepreneurs, contributing to ongoing economic expansion and industrialization.
It offers financial backing ranging from 30% to 50% of facility investments, with a maximum limit of 50 million rand.

2) Support Program for Industrial Innovation

It stimulates innovation in products and production processes, offering financial assistance for travel expenses, materials, facilities, professional software, tests and prototypes, product testing, licensing, quality assurance, patents, subcontracts, consulting, and more.
Depending on the size of the applicant company, two tiered programs are available, with potential funding of up to 2 million rand for small businesses and up to 5 million rand for general companies.

3) Technology and Human Resources For Industry Program (THRIP)

Commissioned by the National Research Foundation (NRF), this incentive is a collaborative effort between the South African government and foreign-invested companies.
Its purpose is to co-invest in human resources and technological development in South Africa, fostering science and technology research.
To qualify for this incentive, an included requirement is the submission of a human resource development plan.
If the investment ratio between the South African government (NRF) and foreign companies stands at 1:2, funding of up to 8 million rand over three years is attainable.

4) Export Marketing and Investment Assistance:

This program aims to establish international export channels for South African products, attract new foreign direct investment (FDI), and involves three main support categories: manufacturing companies, domestic product trade agents, and the South African Industrial and Export Council.
Support includes up to 45,000 RAND for exhibition rental, booth installation, sample transportation, interpreters, communication expenses, meals, and round-trip airfare.
Additionally, assistance is provided for sample transportation, round-trip airfare, meals, and other marketing materials.

5) Sector-Specific Assistance Scheme:

Beneficiaries of this scheme include export councils, joint action groups, and industrial associations.
It offers cost-sharing incentives to institutions contributing to new export commercialization.
The support aids in overseas market research, consulting, advertising, and product development.
The focus is on comprehensive overseas market entry for specific industries in South Africa rather than individual companies.

6) Capital Projects Feasibility Program:

South African companies can access support for feasibility studies on overseas projects.
Foreign companies interested in participating should form a partnership with a South African founder.
Anticipation of winning overseas project orders is crucial, with the requirement that 50% of materials and 70% of professional consulting services be sourced from South African companies upon project order success.

7) Manufacturing Competitiveness Enhancement Program:

This program provides a 4% annual low-interest loan to manufacturers operating more than two years after achieving a BEE grade of 4 or higher in South Africa.
New black companies can also borrow for facility investment purposes.

8) Clothing and Textile Competitiveness Improvement Program:

Administered by the South African Industrial Development Corporation, this incentive promotes the development of production costs, quality, industrial reliability, and innovation capabilities within the clothing and textile manufacturing industry.

9) Global Business Services Incentives:

This incentive program promotes the off-shoring service industry, encompassing tasks like financial and accounting consulting, call centers, and administrative agencies.
Practical labor costs are supported.
Eligibility requires BEE certified corporations established in South Africa, while foreign companies must establish joint ventures with local BEE certified entities.

10) Film and Television Incentive:

This initiative supports the local broadcasting production sector by offering financial assistance for expenses related to filming within South Africa and those incurred during the second half of production via South African companies.
A subsidy of 20% of the filming budget and 5% of the second half production budget is provided for eligible items.

11) Critical Infrastructure Program (CIP):

This program provides cash support to foreign companies investing in core social infrastructure such as roads, railways, electricity, and telecommunications.
Up to 50 million rand is provided, ranging from 10% to 30% of the investment cost.
The system aims to bolster South Africa's industry competitiveness, foster economic growth, and create jobs.
Support targets encompass direct costs, labor costs, essential materials, and new capital goods.

12) Automotive Investment Scheme:

This scheme aids expansion investments in new passenger car models, existing manufacturing facilities, and major manufacturing parts facilities, including automobile molds.
Its goal is to increase overall automobile production and sustain job creation.
Companies producing 50,000 passenger cars annually or proving a capacity of 50,000 units within three years of receiving the subsidy are eligible for 20% tax-free investment facility subsidies.
This applies to firms with supply contracts for domestic and foreign OEMs at the time of application.

13) People-Carrier Automotive Incentive Scheme:

Focused on the van sector, this system supports investment in the expansion of existing and new manufacturing facilities, as well as major parts manufacturing facilities like automobile molds.
The objective aligns with the general Automotive Investment Scheme, aiming to enhance the automotive industry and job creation.

14) Section 12I Tax Allowance Incentive

Benefits of Investment Allowance and Training Allowance will be supported if the minimum qualifying assets conditions are met.

15) Aquaculture Development Enhancement Program

As a system to promote the fisheries industry in South Africa, it supports new and expanded investments in fish and aquaculture facilities, final process facilities, and incidental investments, and supports up to 30 million rand for aquaculture, process facilities, R&D, and feed manufacturing plants.

16) Strategic Partnership Program

As a program for the shared growth of small companies supplied to market leaders, leading companies and the Ministry of Commerce form a "supplier development initiative" and support facility investment and product service development costs required for the program.
The target of support is an industrial association with at least five South African companies or member companies with at least 100 million rand in annual sales for two years, with up to 15 million rand shared by leading companies and the Commerce Department.

The South African government allows foreigners to own 100% of their shares in all industries except the banking and broadcasting sectors.
However, if the foreign stake is more than 75%, it will be restricted from borrowing funds from South African financial institutions.

Banking Sector

• Foreigners' 100% equity ownership is restricted

• Approval of the Registrar of Deposit-Tracking Institution is required if foreign shares exceed 15%

• Foreign ownership exceeding 49% requires approval from the Treasury

Broadcasting

• Foreign ownership limit limited to 20%

Insurance

• Permission of Prudential Authority is required in accordance with the Insurance Act of 2017 Act 2017

Investment Location Conditions

Special Economic Zones and Free Trade Zones

The South African government has instituted and operates Industrial Development Zones (IDZs) to enhance the appeal of foreign-invested companies.
These IDZs are strategically located near airports or adjacent areas to minimize logistical expenses, making them promising hubs for foreign investments due to their well-equipped social infrastructure and duty-free advantages.

The Ministry of Industry and Trade in South Africa supervises the operations of IDZs.
Matters pertaining to their locations and functioning are managed through consultations with local governments.
IDZs provide tenant companies with customs clearance ease through the Customs Controlled Area, along with tariff-free benefits for importing raw materials and VAT exemptions on goods purchased from local South African companies.
Currently, South Africa has approved four IDZs situated in Port Elizabeth, East London, Richards Bay, and Johannesburg.

Following the establishment of these four IDZs, the Special Economic Zone (SEZ) was introduced in 2007 to address limitations and expand beyond concentrated airport and port areas for industrial development.
These special economic zones serve not only as industrial and export centers but also as science and technology hubs.
Particularly, they emphasize attracting "green field" industries and function at the level of free trade zones.

South Africa actively seeks foreign direct investment for economic growth, unemployment reduction, and technology transfer.
It has abolished unnecessary licensing and regulations.
Foreigners can fully own shares in all sectors except banking, broadcasting, telecommunications, and insurance.
Ownership over 75% bars borrowing from local financial institutions.
Banks with limited foreign ownership (15-49%) need approval.
Broadcasting's foreign ownership is capped at 20%.
Profits can be repatriated with full corporate tax payment.
Non-residents with >75% stake and local loans require Central Bank approval.
The insurance sector needs Prudential Authority permission under the 2017 Insurance Act.

Western Cape

The Western Cape region's economic development is characterized by its diverse industrial base.
Notable growth potential exists in major sectors, alongside the development of niche markets across all fields.
Recent large-scale investment attraction initiatives have yielded significant outcomes.

South Africa's export-focused industry is undergoing restructuring around port cities and coastal industrial zones in line with global trends.
This trend is particularly pronounced due to reduced import tariffs and the establishment of Saldanha Steel, a cornerstone of local heavy industry.
The Western Cape operates as an open economy, with foreign trade contributing nearly 30% to the region's gross product.
Traditional primary exports like fruits, fish, and vegetables have evolved into high-value products through processing.

Western Cape Investment and Trade Promotion Agency (WESGRO)

WESGRO is an independent organization supported by prominent development investors.
Initially established as a non-profit in 1982, it was later established by State Law No. 3 in 1996 to advance economic development and job creation in the Western Cape region.

Eastern Cape

The Eastern Cape is well-equipped with major cities, airports, and ports, and it boasts a well-developed manufacturing sector, hosting key global companies in the southern African region.
Positioned close to South Africa's main market center, it benefits from modern transportation networks like aviation, roads, and railways.
The manufacturing sector has strong global integration, with about half of the 120 large companies being linked to international firms.
Over half of these large companies export more than 25% of their production.

Eastern Cape Development Corporation (ECDC)

ECDC is an official entity responsible for executing Ministry of Economy and Environment and Tourism policies.
It receives partial financial support from the state government and is governed by a board consisting of representatives from governments, businesses, and labor.
ECDC collaborates closely with government ministries, chambers, municipalities, and agencies to nurture and support local economic activities.

Free State

Situated inland, Free State is South Africa's third-largest state, with Bloomfontaine as its capital, serving as both the state and judicial capital.
It's geographically close to ports in Durban and East London, with a mere 400 km distance from Hauteng.
Notably, Free State holds the world's largest gold reserves and is recognized for its agricultural activity, earning a reputation as the country's food repository, annually producing 100,000 tons of vegetables and 40,000 tons of fruit.

Free State Development Corporation

The Free State Development Corporation (FDC) is an official entity responsible for implementing the policies of the Ministry of Economy and Environment and Tourism.
It receives partial funding from the state government and reports to a board of directors consisting of government, business, and labor representatives.
FDC closely collaborates with government ministries, chambers, municipalities, and government agencies to provide support to companies and investors engaged in local economic activities.

Gauteng

Recognized as South Africa's financial hub, Gauteng boasts thriving transportation, technology, and telecommunications industries, making it an attractive destination for businesses aiming to establish a foothold in Africa.
Gauteng State serves not only as a driving force for southern Africa's economy but also as a pivotal business gateway for the entire African region.

Gauteng, though the smallest of the nine states in terms of land area (1.4%), contributes over 38% to South Africa's GDP and 60% of its fiscal income, producing a notable 9% of the continent's total GDP.

Gauteng Growth Development Agency (GGDA)

Formed through the merger of GEDA and Blue IQ on June 1, 2012, GGDA spearheads economic growth and development efforts, providing support to investors in Gauteng Province.
Services include aiding local and foreign entrepreneurs with incentives and business permissions.

KwaZulu-Natal

KwaZulu-Natal has emerged as a center for industrial development in southern Sahara, propelled by abundant natural resources and a well-developed world-class infrastructure.
Economic activity mainly centers around Durban, eThekwini Metropole, Pietermaritzburg, Richards Bay, Empangeni, Ladysmith, Eshowe, Newcastle, Madadeni, and the southern coast, all significantly contributing to the local economy.

KwaZulu-Natal Trade and Investment Promotion Agency (TIKZN)

Promoting strategic business development in the region, TIKZN offers services to potential investors seeking opportunities in the area.

Limpopo

Limpopo is characterized by diverse mining activities and a strong presence in the state economy, accounting for 20% of its economic activity after the government services sector.
Notable mineral resources include platinum, diamonds, coal, chromium, iron ore, and copper.
Electricity generation also constitutes a major economic activity, with the Matimba power plant being a prime example of cooperative economic efforts.

Limpopo Trade and Investment Corporation (TIL)

Established in September 1996, TIL serves as the official trade and investment promotion agency of the state government.
It assists local companies in exploring new markets in Africa while facilitating overseas investors' entry into Limpopo and other African regions.

Mpumalanga

Mpumalanga is a state with a well-established business foundation and anticipated growth.
The infrastructure for roads, railways, and telecommunications is well-maintained, supported by a pool of skilled labor from reputable educational institutions.
The state encompasses various professional services, including advanced commercial and financial industries.
Favorable access to overseas markets and a pleasant living environment, along with excellent medical and social-cultural amenities, contribute to its attractiveness.

Mpumalanga Investment Plan

Mpumalanga Economic Development Essentials (MEGA) is an organization established by the Mpumalanga state government that mainly supports trade and investment promotion and smooth relocation of potential investors to the region.

Northern Cape

Northern Cape is the largest of the nine South African states and accounts for 30% of the country.
It is becoming an ideal gateway to entry into the Northern Cape West African market, bordering the Atlantic Ocean, Namibia, and Botswana as well as four other states in South Africa.
The Orange River, which flows south of Northern Cape Province, is the most important asset to provide a sound agricultural base.

The state government is making utmost efforts to promote growth in the manufacturing and service sectors.

Northwest

Northwest State is a strategic hub bordering Botswana to the west and Hauteng, the driving force of the economy and the industrial center, to the east.
Mineral resources are abundant and high levels of tourism and agriculture are developed.
Investment opportunities are endless in areas such as improving the profit-generating capacity of local industries, high value-added products in the region, and participation in international markets related to local resources.
The regional headquarters of several international companies, including BMW, Samsung, Nestle, Heinz, Firestone Tire and Bosch, are here in the Northwest.

Northwest Investment Agency

Northwest Investment Agency, a professional investment promotion agency, provides convenient and comprehensive services for investors to set up businesses.
The Northwest Investment Authority provides investors with advice on potential investment projects, seeks suitable business locations, and conducts various support activities to plan and secure appropriate funding.
It also provides incentives and information related to visa applications, and arranges suppliers and professional service companies that support the establishment of the company.

The old company law, enacted in 1973, was abolished and replaced by the New Company Act (Company Act 71 of 2008) because it no longer aligned with the evolving nature of companies and the changing times.
The Companies Amendment Act 3 of 2011 was also introduced and implemented concurrently with the New Company Act.
The implementation of these laws not only directly impacts businesses across all sectors but also led to the integration of the company's registration office, CIPRO, into CIPC.
Additionally, a "Business Rescue" system was newly established.
The Companies Regulations (2011) were enacted, leading to the introduction and implementation of new forms and procedures relating to companies.

Under the old company law, establishing a company necessitated the appointment of an accounting auditor.
However, the new company law no longer requires all private companies to be subjected to monitoring by auditors.
Instead, this requirement is now applicable solely to public companies and government-owned enterprises, which has resulted in enhanced transparency in accounting audits, including the establishment of Audit committees.

For individual companies, accountants may choose to conduct voluntary audits of mandatory annual accounting reports.
Alternatively, companies with a score exceeding 750 points are mandated to undergo accounting audits.
This scoring is based on criteria such as annual sales, number of employees and shareholders, and the extent of debt.
If a company is owned by a single individual or if all shareholders are directors, they are exempt from mandatory audits by an accountant and may instead undergo audits conducted by a general accountant.
Local corporations are primarily categorized into for-profit companies and non-profit companies.

If a foreign company chooses not to establish a subsidiary corporation in South Africa, it has the option to establish a branch.
To set up a branch office, you need to prepare a notarized copy of the head office's articles of association, a notarized copy of the company's registration certificate, and other required documents, along with a branch office establishment form.
Upon obtaining a registration certificate for the branch establishment, you can proceed to open a bank account, secure an office space, and notably, there is no requirement to appoint a local South African as a director for a branch.

An 'annual return' must be submitted to the CIPC (Company Registration Office) within 30 days of the registration anniversary date each year.
Failure to submit the annual report for two consecutive years will result in the cancellation of the branch office registration.

For a liaison office, it is essential to note that while any foreign company can establish a local branch in South Africa, banks and insurance businesses are not permitted to open a liaison office.
The establishment and operations of a liaison office are governed by Article 32 of the South African Company Act, specifically the External Company section.
Additionally, the liaison office must report to the South African Company Registration Office (CIPC) within 21 days of its opening in South Africa.

To establish a stock company, a minimum of one shareholder is required, and an accounting committee must be constituted.
This accounting committee should comprise a minimum of three directors.
Stock companies have the option to offer shares to the general public, with variations between listed and unlisted stock companies.
Furthermore, the company name for such entities is required to include "LTD" as part of its designation.

It belongs to a private company, but what sets it apart from other private companies is that both current and former directors are held almost unlimitedly responsible for the company's contractual debts or obligations that arose during their tenure, whether individually or jointly with the company.
Limited liability company establishment is utilized based on the regulations of professional associations to which individuals like architects, engineers, accountants, and lawyers belong.
In these cases, personal liability immunity for shareholder members is not permitted.
Limited liability companies are identified by the inclusion of "INC" in the company name.

In the case of private companies, the establishment process is straightforward, and they can be formed with minimal capital.
However, unlike a limited liability company, the personal assets of the operator and the company's assets are not separate entities.
As a result, the operator bears complete, unlimited responsibility for the company's debt.
Consequently, during company bankruptcy, a drawback arises wherein not only the individual business operator's assets but also their family assets are employed to settle the company's debts.
Additionally, it is not suitable for foreign investment companies aiming to broaden their business scope due to a lack of financial liquidity, such as through bond issuance or listing.

Upon establishment, the articles of incorporation must clearly state that the company's purpose is for the 'public interest'.
There are no constraints as long as any purpose, such as religion, culture, fellowship, or social welfare, serves the common good.
A non-profit company must establish a board of directors, requiring the appointment of at least three directors

The family company, managed by the Close Corporation, is a popular choice for small businesses investing in South Africa.
It maintains its legal status while easing the complex application conditions of the Companies Act for small enterprises.
Ownership can extend to a maximum of ten individuals, making it suitable for businesses engaged in direct operations.
Nonetheless, due to shortcomings in tax and foreign exchange management, this form may not align well with foreign investment structures.
External accounting audits are not mandatory for family companies, although accountants must be designated.
Registration of new family companies has been prohibited since May 1, 2011.
However, existing family companies remain unaffected.
The New Company Act waives costs when converting an existing family company into a private company (Pty Ltd).
Yet, as conversion is not obligatory, maintaining the family company without conversion is a viable choice.