Investors Handbook
Entry and residence of foreign investors and expatriate labour
Entry requirements
Visas
Permits
Guidelines to evaluate Business Plan
Foreign exchange control
Business entities and registration
Sources of finance for the foreign investor
Intellectual property and specialised licenses
Prospecting and Mining rights
Land - acquisition, rezoning, subdivision and transfer
Site development
Importing and exporting
Tax and reporting
Other relevant laws for business
Recommendation for investors
Investment promotion agencies
Entry and Residence of Foreign Investors and Expatriate Labour
The entry and sojourn of aliens (persons who are not South African citizens) are
governed by the Aliens Control Act, (Act 96 of 1991). The Department of Home
Affairs is the issuing authority for all visas and temporary residence permits.
1. Entry requirements:
- Passport requirements
Any person who wishes to enter the Republic of South Africa must be in possession of a valid
passport or emergency travel document. The passport/travel document must contain at
least two blank pages and must be valid for a period sufficient to cover the holder's
stay in the Republic of South Africa.
Passports must be submitted with all applications, but it may not be retained
by the Department of Home Affairs.
- Health requirements
A person visibly suffering from or who admits to suffering from infectious,
contagious or any other diseases may also be required to produce a medical certificate.
Immunisation for yellow fever is a requirement if the journey starts or entails
passing through the yellow fever belt of Africa or South America.
Persons with HIV or Aids are not considered to be prohibited persons.
Being severely ill, from whatever cause, is still a legal reason for prohibition.
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- Financial requirements
Funds:
The visitor must be able to prove that he/she has sufficient means to maintain
himself/herself and his/her dependants for the duration of the intended visit.
The amount of funds required depends on the duration and nature of the visit.
Return or onward air ticket:
Persons visiting or studying/working in the Republic of South Africa for
periods shorter than 12 months should hold a valid non-refundable air ticket.
Cash deposits/bank guarantees:
A cash deposit/bank guarantee is requested in order to ensure that an applicant
complies with the period of validity, purpose and conditions of his/her temporary
residence permit. If a person violates any of these, the deposit/bank guarantee is
forfeited to the Government to be used to cover deportation costs.
In the following cases, deposits/bank guarantees need not be requested at all:
- Foreign personnel employed by established companies/industries/conglomerates
in the Republic;
- Religious workers/students associated with religious institutions;
- Scholars;
- Students attending courses at tertiary educational institutions for periods
not exceeding 12 months, (They must, however, hold a valid return/onward air
ticket where applicable);
- Foreigners employed by government departments/universities/technikons
and technical colleges;
- Foreigners employed by non-governmental organisations or government-funded
organisations;
- Foreign personnel recruited in terms of Government agreements.
Refunding of the cash deposit/bank guarantee will only be considered:
a) Once the applicant finally has left the Republic of South Africa.
b) Acquired an immigration permit, provided the conditions of the temporary
residence permit have not been contravened.
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Visas:
In terms of Section II of the Act, in order to gain admission to South Africa,
any person (other than a South African citizen), must be in possession of a valid
visa unless provisionally exempted from the visa requirement. All applications
for visas must be submitted to the nearest/most convenient South African diplomatic
or consular representative abroad along with visa fees. Visa applications and
passports may be forwarded by courier services or mail. Please note that
ten (10) days are required to process visas.
Schedule
This schedule is subject to change without notice
SOUTH AFRICAN VISAS: NATIONALS OF COUNTRIES EXEMPT
Visas are not required by citizens of the following countries for the periods
and subject to the conditions indicated. The exemptions pertain to ordinary,
diplomatic and official passport holders. Official visits (on invitation of the
SA Government) and accreditation for holders of diplomatic and official passport
holders are not dealt with in this schedule.
- Holders of South African passports, travel documents and documents for travel
purposes.
- Holders of passports of:
The United Kingdom of Great Britain and Northern Ireland, including the British
Islands Ballwick of Guernsy, Isle of Mann and the Virgin Islands and
The Republic of Ireland are totally exempt from SA visa control and thus do not
require visas for any purposes regulated by visas.
Please note: Nationals of the British Dependent Territories are subject to
visa control. The Territories are Anguilla, Bermuda, British Antarctic Territory,
British Indian Territory, Cayman Islands, Falkland Islands, Gibralter, Montserrat,
Pitcairn, Henderson, Cucie and Oeno Islands, the Sovereign Base Area of
Akrotiri and Dhekelia, Turks and Caisos Islands.
- Holders of passports of the following countries in respect of bona fide
holiday and business visits only (period unspecified) and transits:
| Australia | Japan |
| Austria | Liechenstein |
| Belgium | Luxembourg |
| Canada | Netherlands (Kingdom of the) |
| Denmark | New Zealand |
| Finland | Norway |
| France | Portugal |
| Germany | Spain |
| Greece | Sweden |
| Iceland | Switzerland |
| Italy | United States of America |
NOTE
An unspecified exemption implies that in practice a temporary residence permit
exceeding a period of 90 days may be issued on arrival as long as the visit is of a
bona fide nature.
- Holders of passports of the following countries in respect of bona fide holiday
and business visits not exceeding 90 days and transits:
| Argentina | Malta |
| Brazil | Paraguay |
| Chile | San Marino |
| Ecuador | St Helena |
| Israel | St Vincent & the Grenadines |
| Jamaica | Swaziland
Uruguay
Venezuela |
- Holders of passports of the following countries in respect of bona fide holiday
and business visits not exceeding 30 days and transits:
| Antigua and Barbuda | Malaysia |
| Barbados | Maldives |
| Belize | Mauritius |
| Benin | Mexico |
| Bolivia | Namibia |
| Botswana | Peru |
| Cape Verde | Seychelles |
| Costa Rica | Singapore |
| Cyprus** | Slovak Republic |
| Gabon | South Korea |
| Guyana | Thailand |
| Hong Kong* | Turkey |
| Hungary*** | Zambia |
| Jordan | Zimbabwe (Government Officials, including police |
| Lesotho | on cross border investigation) |
| Macau**** | |
| Malawi | |
* This exemption is only with regard to holders of Hong Kong British National –
Overseas (BNO) passports, Hong Kong Special Administrative Region (HKDSAR)
passports and Hong Kong Certificates of Identity.
** Diplomatic and official passport holders visiting the RSA for holiday purposes
are exempt for 90 days in terms of the visa agreement.
*** Diplomatic and official passport holders visiting the RSA for holiday
purposes are exempt for 120 days in terms of the visa agreement.
**** This exemption is only with regard to holders of Macau Special
Administrative Region passports (MSAR)
- Agreements have also been concluded with the following countries for
holders of diplomatic and official passports and will enjoy visa exemption for
holiday and transits only, for the period indicated below:
| Czech Republic | : 90 days |
| Egypt | : 30 days |
| Malta | : 90 days |
| Moroco | : 30 days |
| Poland | : 90 days |
| Romania | : 90 days |
| Slovenia | : 120 days |
| Tunis | : 30 days |
- These arrangements are not applicable to individuals whose visa exemptions
have been withdrawn. In all cases the normal entry requirement still have to be
complied with before admission is gained.
- Visas are not issued at South African ports of entry and airline officials are obliged to
insist on visas, if required, before allowing passengers to board.
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Visa applications:
- The outcome of the applications should be awaited and no travel arrangements
must be made prior to the approval of the application.
- The processing period is a maximum of ten days.
- A non-refundable processing fee of R425.00 will be charged.
The application should be made for the appropriate period of time, for the duration
of the visit, as extensions are only granted in exceptional well-motivated instances.
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Types of visas:
- Visitors Visa
This is a multiple purpose visa. The condition for which the visa is applied
for prescribes the purpose. For example: A technician that will visit the Republic of
South Africa for a limited period of time to install machinery would be able to
apply for a visa for this specific purpose.
- Business Visa
A business visa may be granted to any person who intends proceeding to the
Republic for the following purposes (a few examples):
- To promote commerce, trade or industry between South African institutions
and institutions abroad;
- To explore investment opportunities;
- To hold business discussions or attend business meetings;
- To visit a business enterprise as shareholder or director;
- To conduct business studies for surveys with a view to promoting business
or business interest in South Africa.
The following documentation must be submitted:
- Application form B1-84E;
- Valid passport;
- Proof of sufficient financial means to support the applicant for the
duration of the visit;
- A letter of invitation from the company;
- A non-negotiable return ticket. A cash deposit or bank guarantee for
repatriation purposes may be required (This requirement must only be met once the visa has been approved, but
before the actual visa is issued.).
- Medical Visa
- Re-entry Visa:
- Only asylum seekers require re-entry visas to enable them to return
to the RSA.
- Diplomatic, official and courtesy Visas
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PERMITS
Study Permits:
Tertiary students
The procedure to be followed by a foreign student wishing to study in the Republic
is to formally apply for a study permit at the mission in his/her country of
residence/origin and await the outcome of the application there, before finalising
travel arrangements to the Republic. The prescribed application form BI-159
[Section A (general) and Section F for study permits], duly completed, must be
accompanied by the following:
- An official letter of provisional admission from the educational institution
concerned as well as details regarding arranged accommodation;
- Proof that the applicant has sufficient funds to cover tuition fees,
maintenance and/or incidental costs;
- A cash deposit/bank guarantee in an amount equivalent to the cost of an air
ticket to the applicant’s country of origin/residence for repatriation purposes,
should this become necessary or forfeiture to the State, if study permit conditions
are not complied with. (Except in the case of students attending religious
institutions or students attending courses for periods not exceeding 12 months
whom must, however, be in possession of a valid return/onward ticket, if applicable.)
- A written undertaking (as provided for on the application form) by the applicant
that he/she will return to his/her country of residence/origin on completion of the
specific course indicated;
- A medical certificate and particulars of arrangements made regarding medical cover;
- Non refundable processing fee of R1 520 or $132.
For the extension of a study permit, the following documents must accompany the
duly completed application form BI-159, Section G:
- Proof of having paid a repatriation guarantee, in the form of a receipt
covering the initial cash deposit or a non-negotiable bank guarantee lodged
prior to admission to the Republic;
- A letter of registration from the educational institution; and,
- Non-refundable processing fee of R1 140 or $99.
Scholars/pupils
Application for a study permit BI-159: A (general) and Section F.
The declaration should also contain the following information:
- Confirmation that the candidate complies with the language requirements;
- Confirmation that the governing body is satisfied that the candidate
can pay the relevant fees (as set by the Department of Education in respect of
Government, State-aided and private schools);
- Proof that the candidate has provided a written undertaking to leave the
country on completion of his/her studies;
- The grade in which the scholar will be placed; and,
- Non-refundable processing fee of R1 140 or $99.
Additional documentation to be submitted:
An own passport, as the study permit must be affixed in the applicant’s
(minor’s) own passport. (Except where countries do not issue separate passports to
children.)
A medical certificate. This report may be submitted to the school or
directly to the mission with the application for a study permit. Should it be
submitted to the school, then the school shall confirm receipt thereof in its
declaration referred to in the paragraph above. The Department of Home Affairs’
medical certificate form BI-811 may be used or a certificate by a medical
practitioner, as provided for in item 6 of the study permit application form,
stating that the relevant scholar is not mentally disturbed or physically disabled,
does not suffer from any contagious or infectious diseases and is generally in a good
state of health.
Written permission by both parents since only minors are considered for
pre-tertiary study in the Republic. In the event of the parents being divorced, a
copy of the court order must be submitted, accompanied by a suitable letter of consent.
In respect of scholars not accompanying their parents and applying in their own
right, confirmation that satisfactory accommodation arrangements for the
scholars have been made. Such accommodation may only be an educational institution’s
boarding school/hostel or with a close relative of the applicant, e.g. grandparents,
who are South African citizens/permanent residents. It is imperative that
prospective foreign pupils and their parents be informed that they have no claim to
medical or legal services in the Republic and that the parents should make the
necessary provision for this.
A repatriation guarantee in the form of a cash deposit/bank guarantee,
equivalent to the cost of an air ticket to the country of origin or residence.
Confirmation from the Department of Education that the exchange programme is recognised:
- A letter of registration/acceptance from the relevant educational institution;
- A letter of endorsement by the sponsor;
- A letter of confirmation of the guardian in the Republic (where applicable); and,
- A return/onward ticket.
Study permits are issued for the period that the scholar is registered for study,
but shall not exceed a year.
Dependent children under the age of 21, who are admitted to the Republic with their
parents as approved immigrants, do not require any permits to study in the Republic.
(They will be in possession of immigration permits.)
Foreign scholars do not qualify for any state subsidies (except those from SADC countries and
children of accredited diplomatic personnel), with the result that these scholars are liable for the
full study fees, as prescribed by the educational authority in consultation with the governing body of
the school and in accordance with prevailing circumstances. In effect, they have to pay the prescribed
school fees plus an amount equal to the Government subsidy paid for each South African child.
Requirements for extension of study permits
- Application Form BI-159: G;
- Gr. 1 to 12: school to complete items 6 (if applicable, e.g. private schools) and
6.2 on the application form and affix the school stamp. If no stamp is available, a letter
confirming attendance must be submitted on a letterhead of the school;
- In the case of study at a university or technikon, proof of registration must be furnished; and,
- Proof of financial means to cover both tuition and subsistence costs.
Requirements for change of institution
Where a student/scholar applies to change to another educational institution, e.g. from a secondary
to a tertiary institution, the following must be submitted:
- Application BI-159: H;
- A letter from the previous institution, stating whether or not the course was completed;
- A letter of registration from the new institution;
- Motivation why the change is necessary;
- An undertaking to leave the Republic on completion of studies;
- Proof of financial means to cover both tuition and subsistence costs;
- Proof of medical cover (not applicable to scholars);
- Proof of cash deposit/bank guarantee previously submitted; and,
- Non-refundable processing fee of R1140 or $99.
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Work-Seeker’s Permit
The difference between a work permit and a work-seeker’s application is that, in the former case, the
applicant already has a firm job offer and employment contract, while in the latter case the
applicant’s appointment is still subject to negotiations and the signing of the relevant contract(s).
The following documentation needs to be submitted:
- Application form BI-159 A and BI-159 B;
- A non-refundable processing fee of R750 or $65
- Certified copies of the applicant’s educational qualifications, testimonials,
certificates of employment;
- The region in which the applicant intends to take up employment must be indicated;
- Information with regards to the prospective employer;
- Offer of employment and/or invitation to an interview (the applicant must at
least have one or more job offers); and,
- Processing period six(6) to eight(8) weeks.
NOTE: when approved, a work-seekers permit is only valid for three moths. Extensions will only
be considered in exceptional cases. Should the employment offer be finalised, the applicant may
apply for a work permit at the Department's Regional or District Office. The documentation as
indicated under the heading work permit/worker category will have to be submitted.
Work Permits
In terms of Section 26(1)(b) of the Act, a work permit may be issued to an alien who applies for
permission to be temporarily employed in the Republic, with or without reward or to temporarily
manage or conduct a business (enterprise) in the Republic, whether for his/her own account or not.
Section 26(3)(b) furthermore, stipulates that a work permit shall only be issued to an alien if
he/she is:
- Of good character; and,
- Does not and is not likely to pursue an occupation in which a sufficient number of
persons are available in the Republic to meet the requirements of the inhabitants of the Republic.
NOTE: A work permit is considered if the applicant is absorbed on the employer's establishment
in a vacant position.
Requirements for the extension of work permits
It is advisable that applications for the extension of work permits be submitted at
least eight weeks prior to the expiry of the permit. Since an expired permit cannot be extended
in the RSA, the applicant will have to leave the country and apply for a permit from his/her country
of residence. The application will be considered as a first application.
Applicants wishing to extend their work permits must submit the following documentation:
- Application form B1-159G;
- A non-refundable processing fee of R1 520 or $132.00;
- Employers must complete items 6 and 6.1 of the application form, sign the
declaration and affix the company stamp. In the absence of a stamp, the appointment must
be confirmed in a separate letter on the company’s letterhead;
- A copy of the official employment contract;
- If applicable, proof of registration with the appropriate professional body;
- Advertisements of the post, if the period of the original employment contract is to
be extended;
- An indication of the applicant’s future plans and/or status of his/her immigration
application (if the employment offer is of a permanent nature);
- A police clearance certificate (if this was not submitted when lodging the initial application); and
- A progress report confirming whether South African citizens or Permanent Residents
have been or are being trained to fill the post.
Source: http://home-affairs.pwv.gov.za
- Main Considerations:
- Worker category: a South African Citizen or Permanent Resident can not perform the
employment or task.
- Own Business category: Foreign investment/Job creation.
Section 26(2)(a) of the Aliens Control Act, 1991 (Act 96 of 1991) provides that an application
for a work permit, may only be made while the applicant is outside the Republic and such applicant
shall not be allowed to enter the Republic until a valid permit has been issued to him or her.
Applications must be submitted to the South African foreign office in or the nearest such office to
the country of which the applicant is a valid passport holder or the country in which he or she
normally resides and the outcome must be awaited prior to making arrangements for departure to
South Africa. To be considered in this category, the applicant must be at least a 25%
shareholder in the company.
Documentation to be submitted:
- Application form B1-159 A and D;
- A non refundable processing fee of R1 520;
- Applicable documentation as mentioned above;
- Own business questionnaire;
- Proof of availability of funds to be transferred from abroad
(no set amount is determined, but the amount must be consistent with the type of
business, as well as to meet daily running expenses and for own subsistence);
- Proven track record and audit trail (the applicant must be able to demonstrate a
successful entrepreneurial history);
- Viability of the venture;
- Job creation for South African citizens (immediate job creation for at least two
South African citizens.);
- Number of foreign employees to be employed, capacity, duration of
employment and motivation;
- A clear, detailed business plan; PLEASE NOTE this is a key document and should include the
following:
- Executive summary
- Business description
- Market analysis (market and competition)
- Marketing and sales activities
- Product research and development
- Manufacturing/delivery operations
- Management and ownership
- Organisation and personnel
- Funds required
- Financial data
- If the need to buy equipment or furniture exists, a detailed list of
items needed, together with quotes or estimated costs, must be inserted,
- If an existing business is purchased audited past performance figures are required.
- Processing period is at least eight weeks.
NOTE: should an applicant wish to change from a temporary work permit in the worker
category to a temporary work permit in the own business category, such an application may be
lodged in the RSA at the nearest domestic office of the Department of Home Affairs. The applicant
must be in possession of a valid work permit when such an application is lodged.
- Documentation to be submitted:
Worker category:
- Application form B1-159A and C;
- A non-refundable processing fee of R1 520,00;
- Age group 18 to 51 (this requirement does not apply to senior
employees in management positions, employed for a limited period of time.);
- Decree of divorce / court order, where applicable, as well as proof of
maintenance paid to family members (also in the case of separations);
- Marriage certificate, where applicable;
- Full birth certificate(s) of children, where applicable;
- Date on which the position became vacant,
- An employment contract specifying the occupation and capacity in
which employed, maximum duration of employment and remuneration;
- A firm offer of employment commensurate with the applicant's training,
qualifications and experience;
- Qualifications (evaluated by the South African Qualification Authorities);
- Service certificates from previous employers;
- Curriculum vitae;
- Whether the vacancies were advertised and, if so, in which
national papers (e.g. Sunday Times etc.) or other suitable media/professional
gazettes (copies of advertisements must be provided and Internet is not
acceptable, as all South African citizens do not have access to the Internet.);
- The employer must indicate whether the Department of Labour, private employment
agencies, etc., have been contacted with the view of filling the post with a local
incumbent;
- Details regarding a training programme in which the skills and knowledge
of the foreign worker will be transferred to a South African citizen who will
be able to fill the position in the long run;
- Police clearance certificates;
- Medical certificate and proof of medical cover;
- English translation of all documents/certificates, if submitted in a foreign language;
- Proof of registration with a professional body, if applicable;
- Cash deposit/bank guarantee; and,
- Processing period is at least eight weeks.
Please note that work permits are issued for a period of twelve (12) months only.
The permits are extendable, but not for an indefinite period of time.
The company must train a local incumbent to take over the work/task as soon as possible.
The Department will request details of this training programme and the progress made.
Key Personnel/Transfers
International concerns with branches in the Republic may, from time to time, apply to
transfer or second key employees from the foreign branch to the Republic. Should they wish
to transfer applicants to fill existing positions or positions created by the company and at
the same time form part of the South African company, whether they will be remunerated or not,
work permits for the key personnel such as the directors, or the technicians could be applied for.
Each application will nevertheless be considered on merit, depending on the conditions
and circumstances that may be applicable at that point in time. In this category, the
documentation as set out above would be required as well as a letter from the company abroad
confirming that the applicant has been in their employ and will be transferred to the
branch/affiliated company in South Africa. Proof of the position being advertised is, however,
not required. The company must, however, indicate how many South African citizens/permanent
residents and foreigners are employed.
Secondments
Seconded employees are considered to remain in the employ of the company abroad and will,
therefore, be remunerated by the said company. The applicant will only enter South Africa for a
specific period and purpose and will return to resume his/her duties abroad after completing the
assignment.
These applicants, therefore, do not become employed by the South African company and do not
qualify for/require work permits. Visitor’s permits with the appropriate endorsement will be
issued to them on arrival in South Africa, provided the applicant does not require authorisation
(in the form of a Visitor’s visa) prior to departing for the Republic. These applicants
cannot change their initial purpose of entry or submit applications for permanent residence
whilst in South Africa
Persons wishing to be employed in the arts and entertainment industry:
NOTE: The Consultative Committee re: The Arts and Entertainment Industry is no longer
operational. Applications do not need to be referred to them any longer.
The requirement to hold a work permit is only applicable to persons wishing to establish an
own business in the entertainment industry or if the foreign artists, models and entertainers have
a fixed work offer to be employed in the vacant position on the establishment of a company.
The same documentation will have to be provided as mentioned, with the exception that application
form BI-159 E will also have to be submitted.
Own business category: Persons in this category will also need to submit the
following documentation:
- Audited financial statements so that the viability of the business can be assessed;
- Documentary evidence that, since the establishment of the business, at least two South African
citizens or permanent residents, excluding family members, have been appointed and are still in
service (names, identity document numbers, tax numbers and positions held).
Source: http://home-affairs.pwv.gov.za
INVESTMENT SOUTH AFRICA GUIDELINE DOCUMENT TO EVALUATE AN OWN BUSINESS PLAN
1. Main Criteria
1.1 The main criteria applied when determining applications in this category
are the following:
Proven track record audit trail
The applicant must be able to demonstrate a successful entrepreneurial history
in the venture he/she wishes to manage or conduct. This track record must consist of an
audit trial and the following documentation to this effect should be available on request:
- Audited financial reports indicating cash flow statements, income and expenditure
statements and balance sheets;
- Tax assessments;
- Bank statements; and,
- Any other relevant accounting records to indicate that the enterprise
is or was solvent, liquid and profitable, including proof of turnover,
deeds, writings, registration certificates, etc.
If the enterprise no longer does business, the reasons for this must be furnished as well as
the winding up orders if the business was wound–up by a court, or any other documentation
showing how the business was disposed of.
1.1.2 Availability of funds for transfer from abroad
The applicant must demonstrate that he/she has sufficient foreign capital abroad to
transfer to South Africa to finance the venture, especially during the start-up phase.
In determining the amount required, it is important to also take into account the applicant’s
subsistence costs until such time as the venture generates an income. The applicant must
submit proof of funds available in the form of bank statements and/or foreign exchange transactions.
An indication of how the funds originated must also be given so as to prevent South Africa being
used for money laundering purposes. The amount to be transferred will be determined by the
Department of Home Affairs or the Immigration Selection Board.
1.1.3 Viability of the venture and creation of employment for South Africans
One of the main purposes of allowing a foreigner to startup a venture in South Africa in
competition with South Africans is to attract foreign investment and create employment for
South Africans. For this reason, the venture must be viable and create employment for at least
two South Africans. To determine the viability of the venture, the following must be submitted.
- A business plan (This should cover a number of topics in detail. The business plan should
not only be a dream story but also should contain factual research and contain
specific reference of previous experience and work contacts. A full CV should also be
attached to the business plan.);
- Relevant work history;
- Relevant job experience (It is very unlikely that a person would be successful in a new venture
in a new company, if he has no previous experience of the specific sector in his country of origin.);
- A draft memorandum of association describing the purpose and nature of business
if the applicant intends establishing a company in terms of the Companies Act,
1973 (Act No 61 of 1973);
- A draft founding statement if the applicant intends establishing a close
corporation in terms of the Close Corporations Act, 1984 (Act No 69 of 1984);
- The minimum number of South Africa to be employed; and,
- If relevant, the maximum number of foreigners to be employed.
Note: An applicant who intends to engage in the day-to-day running of business may
not register a company or close corporation in the Republic, whether for his/her own account or
not, unless he/she is in possession of the necessary work permit. In terms of section 32(7)(b)
of the Act, any license or other authority to conduct a business or carry on a profession or
occupation obtained without being in possession of a work permit shall be null and void.
2. The business plan
A business plan is a critical assessment of the interdependent factors that are critical to
the success of a new business venture.
2.1 Why do we need a business plan?
There is an old saying: "If you don’t know where you are going, any road will
get you there." In crafting sensible entrepreneurial strategies you better know where
you may end up and have a good map for getting there. A business plan is the place where such
a map is drawn, for as every traveller knows, a journey is a lot less risky when you have direction.
2.2 When do we need a business plan?
We need a business plan to convince providers of capital to invest their money in our enterprise.
2.3 When do we compile a business plan?
Every time we consider investing in a new venture or project, expanding into a new market or
product or wanting to approach an investor or institution for finance, we should compile a fresh
business plan.
2.4 Who has to compile the business plan?
We should do it ourselves. For the financial part (balance sheet, income statement and
cash flow forecasts) you could use the services of an accountant, but the entrepreneur
should create the essence of the plan.
2.5 How do we compile a business plan?
A good business plan should cover four key areas:
The People
The men and women starting and running the venture as well as the outside parties providing
key services or resources for it.
The Opportunity
A profile of the business itself – what it will sell and to whom, whether it can grow
and how fast. What its economics are, who and what stands in the way of success. What is the
market sector and conditions that will facilitate success of this business.
The Context
The big picture – the regulatory environment, interest rates, demographic trends,
inflation and the like - basically factors that inevitably change but cannot be controlled by the
entrepreneur.
Risk And Reward
An assessment of everything that can go wrong and right and a discussion of how
the entrepreneur team can respond.
Questions that must be answered about the people:
- Where are they from?
- Where have they been educated?
- Where have they worked and for whom?
- What have they accomplished in the past – personally and professionally?
- What is their reputation in the industry?
- What experience do they have that is directly relevant to the opportunity?
- What skills, knowledge and abilities do they have?
- How realistic are they about the venture’s chances of success and the
tribulations they will face?
- Who else needs to be on the team?
- How will they respond to adversity?
- Do they have the mettle to make the inevitable hard choices that have to be made?
- How committed are they to this venture?
- What are their motivations?
Questions that must be answered about the opportunity:
Describe the structure and attraction of the industry in which you want to participate.
- Does the market actually allow you to make money?
- What are the competitive factors?
Describe specifically how the business will make enough of a profit for the owners,
investors, financiers, suppliers and employees to be willing to participate.
- When does the business have to buy resources?
- How does the business have to pay for them?
- How long does it take to acquire a customer?
- How long before the customer sends his cheque?
- How much capital equipment is required to support R1,00 of sales?
Describe in detail how you will build or launch your product or service in the marketplace.
- Who is the new venture’s customer?
- How does the customer make decisions about buying this product or service?
- To what degree is the product or service a compelling purchase for the customer?
- How will the product or service be priced?
- How will the venture reach all the identified customer segments?
- How much does it cost (in time and resources) to acquire a customer?
- How much does it cost to produce and deliver the product or service?
- How much does it cost to support a customer?
- How easy is it to retain a customer?
- Does the customer pay cash or credit?
Describe in detail the competition, your comprtitors.
- Who are the current competitors?
- What resources do they control?
- How will they respond to the new venture’s decision to enter the market?
- How can the new venture respond to the competitor’s response?
- Who else might be able to observe and exploit the same opportunity?
- Are there ways to co-opt potential or actual competitors by forming alliances?
Questions that must be answered about the context:
Describe the macroeconomic scene and the legal and regulatory environment
- How does it hinder or promote the venture?
- Describe how changes in the context could impact on the venture.
- What can (and cannot) the entrepreneurs do if the context turns unfavourable?
- Explain the ways (if any) in which the entrepreneurs can affect the context in a positive way.
Questions that must be answered about the risk and reward:
- Discuss the risk and how it will be managed.
- What are the risks of the people, the opportunity and the context?
- What rewards will the business deliver and to whom, when and how much?
Financial forecasts
Convert your operational activities into money and compile an estimated balance sheet,
income statement and cash flow statement. These figures should reflect the key drivers of the
venture’s success or failure. It should also reflect the break-even issue and the point at which
cash flow turns positive.
Funds required
The applicant must show the immediate and future funding that is required; how those funds
will be used; and how and from where the funds will be acquired. This section
complements the next one on financial data, and should summarise the amount of money needed
to finance the operation. The applicant must demonstrate that he/she has enough working
capital to sustain him/her and his/her dependents during the start-up period.
What should be kept in mind is that a person should have sufficient start-up capital to
sustain a manufacturing company for twelve (12) to eighteen (18) months (R1 million) and a franchise for at
least six (6) months (R400 000). This excludes funds to sustain the individual and his family.
The capital invested in the venture should be 50/50, meaning that for every R1 he/she
borrows, he/she should invest R1.
Financial data
This should contain the financial representations of all the information presented in the
other sections of the business plan. For instance, if under the Marketing and Sales
Activities section the applicant referred to the need for pamphlets to be printed,
the applicant must have included an estimate of the cost thereof. The financial forecast
should include a month-by-month forecast of what the applicant expects his/her income to be,
and related expenses. If possible, three different scenarios should be submitted – best case,
worst case and likely scenario. Items such as repayment of loans, rent, electricity and telephone
deposits should be included. Provision for unexpected expenses should also be made.
If the need to buy equipment or furniture exists, a detailed list of items needed, together
with quotes or estimates of costs, must be inserted.
If the applicant is purchasing an existing business, he/she must show audited past performance
figures.
3. Evaluation of the business plan
In the evaluation of the business plan, officials must inter alia determine the following:
3.1 Is there a need for the product or service in South Africa, i.e. will the business be
in the best interest of South Africa and its citizens? E.g. will the setting up of a bottlestore
be in the interest of South Africans in the light of the many South Africans
willing and able to open one, if the necessary liquor licenses were not limited? Determine
whether the venture will:
- Introduce new or improved technology;
- Export South African goods or services;
- Produce goods or provide services that would otherwise be imported into South Africa;
- Develop business links with international markets;
- Increase market competitiveness; and,
- Increase employment.
3.2 What is the entrepreneurial ability of the applicant, considering the applicant’s qualifications,
training and experience? Of particular importance is the success rate of the applicant’s previous
venture(s).
3.3 What is the likelihood that the business will succeed, considering the nature of the venture, the market
research done by the applicant and the proposed location of the business?
3.4 What is the long-term nature of the venture? It is preferable that the venture should be of a
permanent nature so as to prevent short-term profit taking and leaving the country with unpaid
debts and destitute employees.
3.5 What is the number of jobs that will be created for South Africans? At least two South Africans must
be employed immediately once the venture starts up. If more foreigners than South Africans will be
employed, the application does not stand a fair chance of being approved. Check that reasonable
salaries will be paid and whether exploitation of workers may take place.
3.6 Does the applicant have the necessary management skills? He/she may previously have had a
one-man business and now wishes to employ 20 persons or he/she may never have been in a management
position.
3.7 Are the funds to be transferred sufficient to start-up the venture, to cover the
living costs of the applicant and his/her family, and to remunerate at least two South African
employees? The applicant should not be likely to have to obtain a loan to float the venture.
The applicant should be able to demonstrate that the funds to be transferred have been accumulated
legally in his/her own account over a convincing period of time. Sudden large amounts deposited
should be questioned and the origin investigated. An audit trail should exist. This is
important as many applicants borrow the money or use rollover funds that leave the Republic once
a work/immigration permit has been obtained. Care must be taken to ensure that the venture is not
used to launder money obtained by illegal means.
3.8 Audited statements must be cross-checked and compared with tax returns, VAT payments and
other substantiating documents. The profitability, solvency and liquidity of the venture must be
determined.
To determine the solvency of a venture and total assets: total liabilities should not exceed a
ration of 2:1.
To determine liquidity and current assets: current liabilities should not exceed a ratio of 2:1.
An acid test or quick ratio may be determined by current assets – stock: current liabilities, in
which case the ratio should be 1:1.
FOREIGN EXCHANGE CONTROL
Exchange control in South Africa is administered by the South African Reserve Bank’s (SARB)
Exchange Control Department and through commercial banks that have been designated as "authorised
dealers" in foreign exchange. Significant progress has been made in the liberalisation of
exchange controls since 1994. The financial rand mechanism was abolished in 1995, removing most
controls on non-residents. In June 1997, controls on South African residents were considerably
relaxed, and virtually all controls on current account transactions were removed. There are no
restrictions on foreign firms wishing to invest in share capital. Investors are advised to ensure
that the share certificates are endorsed "non-resident" by an authorised dealer in order
to return disposal proceeds and dividends to their country of origin. A record of funds introduced
into South Africa should be kept. For every purchase of exchange, irrespective of the amount
involved, authorised dealers are required to report to the South African Reserve Bank details of
payments received from foreign partners by South African residence.
Generally speaking, there are no controls over the removal by non-residents of investment income or
capital gains. However, repayment of foreign loans by South African residents requires prior approval.
Dividends may be paid to a non-residents without the approval of the South African Reserve Bank.
Dividends paid pursuant to a deregistration or liquidation due to non-resident are transferable
against documentation confirming this fact. All loans from outside the Common Monetary Area to
South African residents require prior Exchange Control approval. Approval is normally granted
provided the minimum tenor of the loan is for a period of at least one month and a market - related
interest rate is charged, i.e. up to prime plus 3% for South African denominated loans and up to
prime plus 2% for foreign denominated loans which are not shareholder-related funds, with
shareholder's funds restricted to prime.
A South African company that is 75% or more foreign owned is restricted in the amount that
it may borrow or access from South African lenders, and is known as an "affected company".
The borrowing or facility limit, known as local financial assistance, is based on a pre-set formula.
For companies that are 100% foreign owned, the local financial assistance limit is 100% of the
effective capital of the South African company. Effective capital includes paid-up equity capital,
preferences shares, undistributed earned profits, shareholders’ loans from abroad and, in certain
instances, the hard core shareholders’ trade credit.
The percentage of effective capital that may be borrowed is:
| 100% + | (% South African interest) | | 100% |
| ------------------------------- | X | ------- |
| (% Non-resident interest) | | 1 |
The Reserve Bank will not permit the remittance of profits or repayment of loans where,
as a result of the remittance, the local financial assistance limit will be exceeded,
and will require local financial assistance to be reduced before remittance.
For every sale of exchange, irrespective of the amount involved, authorised dealers are required to
report to the South African Reserve Bank details of payments made to foreign parties by South African
residents.
Royalties, license and patent fees to non-residents, where no local manufacturing is involved, require
the approval of the SARB. Manufacturing royalties (as opposed to sales/marketing royalties) are
subject to approval by the Department of Trade and Industry, which will communicate its decision
to the licensee or the Exchange Control Department where applicable, which will enable an approach
to a bank directly to transfer the royalty payments. Current account payments, e.g. management
fees and other fees for services provided, may be paid by authorised dealers on production of an
invoice, provided that such payments are not calculated as a percentage of sales, profits,
purchases or income.
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BUSINESS ENTITIES AND REGISTRATION
The most common business entities in South Africa follow:
- Companies;
- Close corporations;
- Partnerships and sole traders;
- Joint ventures; and,
- Local branch of a foreign company.
Companies (private and public)
These may be public (Limited) or private ((Proprietary) Limited) and are the most common
investment vehicles for foreign investors operating in South Africa. They exist as separate legal
entities from their shareholders and/or members. No distinction is made in the Companies Act
between companies that are locally owned and those that are foreign owned and, once formed, a
company has an unlimited lifespan. Both public and private companies must be incorporated and
registered with the Registrar of Companies. Companies incorporated in South Africa must have a
registered office and maintain certain statutory and accounting records in South Africa. If the
accounting records are maintained outside of the Republic, the company must receive such financial
information and returns as will enable the statutory financial statements to be prepared.
Approval of the name of the company must be obtained from the Registrar of Companies before
incorporation. (The choice of name is restricted by certain criteria, such as it cannot already
exist as a company name.)
Public companies may offer their shares for sale to the public, although they need not be
listed on the stock exchange or the public to hold an interest in their shares.
Their characteristics are that the number of shareholders is unlimited, there are no restrictions on
the transfer of their shares and they must file a copy of their annual financial statements with
the Registrar of Companies, which are available for public inspection. Private companies,
on the other hand, may not offer their shares for sale to the public. The right of transfer of
their shares is restricted and the number of members is limited to 50. Private companies are not
required to file their annual financial statements with the Registrar of Companies; thus, they are
not available to the general public. They must include the word "Proprietary" or (Pty) at the
end of the registered name immediately before the word "Limited" or "Ltd".
For both types of companies, an audit by a registered accountant and auditor is obligatory.
The Companies Amendment Act, 1999 (Act 37 of 1999) was published on 30 April 1999 and made provision
for:
- A company to acquire its own shares under certain circumstances, thereby providing a mechanism to
restructure the company’s capital and unlock shareholder value;
- Disclosure of beneficial interest in securities to enable companies to ascertain who its
shareholders are; and
- The mandatory appointment of a company secretary for all public companies, excluding a
share block company.
In order for the company to buy back its own shares, the following conditions must be met:
- The company’s articles of association must permit share buy-backs;
- Shareholders must be circularised regarding the proposed buy-back and a special resolution
must be passed by the shareholders authorising the buy-back;
- The company should be solvent and liquid (otherwise the directors will be jointly
and severally responsible); and,
- Following the buyback, the company’s share capital should not consist wholly of redeemable shares.
The amendments came into effect on 30 June 1999.
Registration requirements
All required registration forms may be purchased from a stationer dealing in statutory forms for
approximately R100.
To reserve a name, a CM5 application form (duplicate copy no longer required), stamped with R50
in revenue stamps, must be submitted to the Registrar’s office. In order to save time and
costs, it is recommended that three to four alternative names be furnished in order of preference.
A preliminary search can be done on the website. Following approval, the name will be reserved
for a period of two months. Within this period, the documents for incorporation should be submitted.
An extension of one month may be granted with the submission of the CM6 form, stamped R20 in revenue stamps.
The application for extension must be received by the Registrar before the end of the first
two-month period.
Legal and other professional fees relating to the registration of a company depend on the
complexity of the individual application. For ordinary applications, without complications,
legal costs start at about R4 500.
Standard versions of a memorandum and articles of association are included in the Companies Act.
A company may choose to submit its own version. However, this may slow down the approval process,
as they would require close examination by the Registrar’s office.
All companies must have an independent auditor to produce annual financial statements. At the time
of incorporation, the auditor is required to sign an acceptance of the office.
Registration applications must be submitted by hand to the Office of the Registrar in Pretoria.
If no errors or omissions are made, the application will be processed in three (3) to five (5) business
days. A complete application includes:
- Copy of approved CM5;
- Power of attorney (if attorney is used or if more than one subscriber exists);
- CM22 (notice of postal address and registered office address), in duplicate;
- Memorandum and articles of association, in duplicate (one copy bound in book form
and certified by a notary public);
- CM1 certificate of incorporation;
- CM2 (first page of memorandum of association), stamped with a minimum
registration fee of R350, plus R5 per R1 000 of share capital or part
thereof and/or R5 per 1 000 shares if no-par-value shares;
- CM44c (signature page for subscribers);
- CM46 (certificate to commence business), stamped R60;
- CM47 for each director;
- CM29 (return of Register of Directors);
- CM27 (notice of Company Secretary), if a public company; and,
- CM31 (notice of Appointment of Auditor) in duplicate.
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Close corporations
A close corporation is a common form of business entity for smaller businesses and is
created under the Close Corporations Act, 1984. A close corporation does not have directors,
its business being conducted by the members, who must be natural persons (i.e. individuals).
A close corporation cannot, therefore, be owned by a company, another close corporation or a trust.
In a close corporation, the members have the rights and obligations of both shareholders and
directors, and consequently, ownership and management of the corporation are not separated.
Close corporations may have up to 10 members. In general, few formal requirements are imposed on
close corporations.
The capital of close corporations is called a "contribution". A close corporation is not
subject to the stringent capital maintenance rules applicable to share capital in companies.
The interest of a member of a close corporation is represented by a percentage, which is established on
registration of the founding statement, and which may be changed by the registration of an
amended founding statement.
Members of a close corporation enjoy limited liability, which may be lost if they violate
certain provisions of the Close Corporations Act.
The Companies Act and the Close Corporations Act both allow the conversion of a company to a close
corporation and the reverse. They also provide that the legal entity continues after the conversion.
Reporting requirements for close corporations are not as onerous as those for companies.
A statutory audit is not required; however, the close corporation must have an accounting officer
who must report that the annual financial statements are in agreement with the accounting records.
Registration requirements
Close corporations are required to register with the Registrar of Close Corporations.
The reservation of a name is similar to that of a company. No auditors are required for the
registration of Close Corporations and lawyers are not necessary. The corporation will need to
appoint an accounting officer.
Due to the great number of applications received by the Registrar’s office - up to 650 daily -
approval takes five (5) business days. Applications may be submitted either by mail or by hand and
should include the founding statement application, the CK1 form in duplicate and an approved CK7 form, and an
original letter of consent from the accounting officer.
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Partnerships and sole traders
Partnerships and sole traders are subject to few statutory requirements, but the partners
and the traders generally do not have the protection of limited liability. However, in an en
commandite partnership (in which not all the names of the partners are disclosed), the
undisclosed partners may limit their liability to third parties to the amount of their
contribution to the partnership.
Under the Companies Act, any unincorporated company, association or partnership may not
consist of more than 20 persons, except in the case of certain professional partnerships,
where there is no limitation on the number of partners. Registration is not required and
there are no statutory reporting requirements, except that for tax purposes financial statements
must be produced in sufficient detail to enable tax assessments to be made by the Receiver of Revenue.
Joint ventures
A joint venture is a contractual relationship between two or more enterprises engaged in a trade
or business that does not qualify as a partnership.
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Local branch of a foreign company
With the exception of banking and insurance companies, any foreign company may establish
a place of business and carry on its activities in South Africa without forming a separate
locally incorporated company. The establishment of a branch requires registration with the
Registrar as an "external company" under Section 32 of the Companies Act within twenty-one (21)
days after the establishment of a place of business in the Republic.
Registration requirements
The application requirements to establish a branch include:
- A completed application form;
- A certified copy of the memorandum and articles of association of the company and a
certified translation in one of the official languages of the Republic;
- A notice specifying the registered office and postal address of the company;
- The consent and name and address of the auditor in South Africa;
- A notice of the financial year-end of the company;
- Details of the local manager and secretary of the company as well as details
of the directors and their consent to act in that capacity; and,
- A notice of the name and address of the person authorised to accept service on behalf of the company.
The legal costs should be less expensive than for incorporating a South African company.
A registered office must be established in South Africa and the company must appoint a South
African resident to act as its legal representative. A local auditor must be appointed and
audited financial statements in respect of the South African branch, together with a certified
copy of the most recent financial statements prepared under the requirements of its country of
incorporation, must be filed with the Registrar of Companies. In certain circumstances, an
exemption may be granted in respect of these filing requirements.
Local equity participation
There are no local equity requirements, except for major banking institutions where local
control is required by government policy. However, in the case of business entities with
non-resident ownership equal to or greater than 75%, restrictions exist in relation to local
borrowings and debt: equity ratios.
Contact information:
Office of the Registrar of Companies and Close Corporations
Department of Trade and Industry
PO Box 429
Pretoria 0001
Telephone: 0861 843 384
Website: http://www.cipro.gov.za/
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SOURCES OF FINANCE FOR THE FOREIGN INVESTOR
The main sources of short-, medium- and long-term financing for companies are the
commercial banks. Funding an investment by way of a loan is tax efficient, because if the
funds are used for the purposes of a trade and in the production of income, the interest paid
on the loan should be tax deductible subject to the transfer pricing and thin capitalisation
provisions.
A South African company in respect of which 75% or more of its capital, assets or earnings
may be paid to the benefit of a non-resident of South Africa, or of which 75% or more of its
voting power, power of control, capital assets or earnings are vested in or controlled by or on
behalf of a non-resident of South Africa, is restricted in the amount that it may borrow from South
African lenders, and is known as an "affected company". Local borrowing for these purposes is
widely defined and includes virtually all forms of borrowing and financing facilities, e.g. bank
loans, overdrafts, facilities and finance leases, but does not include normal trade credit
extended by suppliers of goods or services. The borrowing limit is based on a pre-set formula.
For companies 100% foreign owned, the local borrowing limit is 100% of the effective capital of
the South African company. Effective capital includes share capital, share premium, retained
earnings, shareholders' loans to the extent that these are in proportion to shareholding,
deferred tax and the minimum trade credit granted to the local company by its overseas affiliates,
to the extent it can be viewed as a permanent intra-group facility.
The percentage of effective capital that may be borrowed is (100% + (% local participation
divided by % foreign participation x 100)). Affected companies applying for local finance
must complete the MP79(a) form, which discloses the assets and liabilities of the applicant
company prior to the granting of the financial assistance. On application, the assets and
liabilities of a number of South African companies under common control can be aggregated for the
purposes of establishing the maximum level of local borrowings that may be granted to the group,
such that an individual company may be "over borrowed", provided that the group as a whole is in
aggregate within the borrowing limit for the group.
The Reserve Bank will not permit the remittance of profits or repayment of loans where, as a
result of the remittance, the local borrowing limit will be exceeded and will require local
borrowings to be reduced before remittance.
Mortgage loans
Each commercial bank applies its own policy in the granting of a mortgage over a
commercial property. The factors that it takes into account include the value of the buildings,
based on a professional valuation undertaken by the bank, and where they are situated. Normally,
South African banks lend about 70 per cent of the value of a commercial property, but this can
vary from one bank to another.
Unsecured loans
The most common way for a business to finance its working capital is through an overdraft facility.
A commercial bank might be prepared to grant this on an unsecured basis depending on the financial
standing of the company, taking into account, for example, whether the business has sufficient assets
and cash generation ability to service the overdraft. Alternatively, the bank might require
security for the loan in the form of, for example, personal guarantees by the directors, physical
security such as a bond over an unbonded property, or a cession of the book debts of the company.
Discounting and factoring
South African banks will also, in some cases, be prepared to discount, for example, foreign bills,
trade bills, bankers’ acceptances or promissory notes. There are also a number of institutions,
many associated with the banks, that undertake factoring, where the institution will advance money
against the client’s debtors’ book. Normally, factoring gives a better rate than a normal bank
cession over a debtors’ book, but that also depends on the quality of the book.
Corporate finance
The commercial divisions of the major banks offer standard lending products to medium-sized companies.
There are also corporate finance divisions in the major banks, or specialised corporate finance
institutions, which offer tailor-made solutions for larger or more complex needs, such as the financing
requirements of multinationals or listed companies.
Export finance and guarantees
Commercial banks will assist with export credits, guarantees and letters of credit. The Credit
Guarantee Insurance Corporation of South Africa administers an export credit insurance scheme on behalf
of the Department of Trade and Industry.
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The state-owned Industrial Development Corporation provides financing to the private
sector to facilitate commercially sustainable industrial development and innovation to the benefit
of South Africa and Southern Africa. Finance is in the form of equity, quasi equity and medium-term
loan finance. Interest rates are competitive and risk related and are based on the prime
bank overdraft rate.
The IDC offers specific financing products:
- Bridging Finance:
for entrepreneurs who have secured firm contracts - except for
construction contracts - with government and/or the private sector and which have short-term
financing needs;
- Financing for empowerment:
for emerging industrialists/entrepreneurs who wish to
acquire a stake in formal business by way of management buy-ins or buy-outs, leveraged buy-outs or
strategic equity partnerships;
- Financing for small-and medium-sized mining and beneficiation:
is aimed at small-and
medium-sized mining and beneficiation activities and jewellery manufacturing activities;
- Financing for the development of the techno-industry:
is aimed at entrepreneurs in
the IT, telecommunication, electronic and electrical industries wanting to develop or expand
their business;
- Financing for the development of agro-industries:
for entrepreneurs in the
agricultural, food, beverage and marine sectors wanting to expand and develop their businesses;
- Financing for the development of the tourism industry:
is aimed at commercial
projects in the medium to large sectors of the tourism industry;
- Financing for the expansion of the manufacturing sector:
is aimed at entrepreneurs
wishing to develop or expand their manufacturing business and create new or additional capacity;
- Wholesale finance:
for intermediaries looking for wholesale funding to lend to
individual entrepreneurs;
- Financing for the export of capital goods:
for manufacturers and providers of
exported capital goods or services. The aim is to provide competitive US dollar and rand financing to
prospective foreign buyers of equipment;
- Import credit facilities:
for local importers of capital or services requiring
medium- to long- term import credit facilities;
- Short-term trade finance facilites:
for exporters looking for short-term working
capital facilities to help them facilitate export orders; and,
- Project finance:
is aimed at large projects in the Metals, Petro and Chemical,
Manufacturing, Agriculture, Minerals and Mining, and Energy market segments.
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INTELLECTUAL PROPERTY AND SPECIALISED LICENSES
Intellectual property
South Africa has a developed system of intellectual property law covering patents,
industrial designs, copyright and trademarks. It is also a signatory to most of the international
conventions in this field.
Patents:
Patents are granted for inventions that have not been previously known and that differ
adequately from what was previously done along the same lines and are protected and registered in
terms of the Patents Act, No. 57 of 1978. An application for a temporary patent, with a duration
of one year, can be made by an individual, the cost of which is R60.00. Before the expiry of a
temporary patent, a patent attorney/agent must file a complete patent application, which costs R266.00.
It takes twelve (12) to eighteen (18) months to obtain a patent in South Africa. Patents last
for twenty (20) years from the date of application. Subject to payment of prescribed renewal fees.
Patent Cooperation Treaty (PCT):
PCT is an international patent filing system. This treaty allows an individual of a
member state to lodge an application by filing one international patent application and
simultaneously seeking protection for an invention in each of a large number of countries.
Any national or resident of a PCT contracting state (e.g. South African national or resident)
can file an international application at the Receiving Office: South African Patents Office
and seek protection in all other countries that are members of the treaty.
Benefits of the PCT System:
- No representation required (attorney/agent is optional);
- There is no multiple search;
- One month to pay filing fees;
- Protection will be granted in 109 member states;
- Filing one single application in triplicate; and,
- Nationals and residents of South Africa are entitled to a reduction of 75% of the international fee.
For more information on filing fees, please contact the South African Patents Office.
Designs:
Designs incorporating the visual or aesthetic appearance of an article are protected
and registered in terms of the Designs Act, No. 195 of 1993, provided that it is new in comparison
to that previously known on articles of a similar nature. Designs are divided into aesthetic and
functional designs. Any individual may file for a design; an attorney is not required.
The cost of a design application is R110.00. The duration of registration is fifteen (15) years
for aesthetic designs and ten (10) years for functional designs, both renewable at a prescribed renewal fee.
Copyright:
Artistic works and other works containing intellectual content such as literary works,
music, cinematographic films, sound recordings, drawings (including engineering drawings), plans,
computer programmes, pictures of all forms and numerous other two-dimensional and three-dimensional
articles having intellectual content are protected by copyright under the Copy Right Act, No. 98
of 1978. Copyright is different from other forms of intellectual property in that it exists
automatically and no steps need to be taken, in South Africa, to register it, although in the
exclusive case of video recordings and cinematographic films, the copyright can be registered.
Copyright endures for fifty (50) years. Cost for cinematographic films is R231.00.
Trademarks:
Trademarks may be registered under the Trademarks Act, No. 194 of 1993. After an
initial term of ten (10) years, a trademark may be renewed for a further 10-year period.
Being registered as a trademark protects the name or logo in association with which an article
is marketed, or a service is rendered, and even the shape of a special container.
An attorney is not required to file for a trademark. A thorough preliminary trademark search, conducted by
an experienced individual, can ensure against possible conflicts, thereby preventing the prolonging
of an already lengthy process. The office of the registrar will, on request, do an in-depth search
as to possible conflicts for a fee of R85.00.
The application fee is R266.00. On average, approval requires at least two (2) years, but a business
may trade during that period.
All applications may be lodged by hand or by post with the registrar and fees are
payable in revenue stamps, excluding the PCT patent applications.
Contact information:
Office of the Registrar
Patents, Trademarks, Designs and Copyright
Department of Trade and Industry
Private Bag X400
Pretoria 0001
Telephone: 0861 843 384
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Cellular licenses
All wireless transmission, ranging from cellular to VHF two-way radio to datapacket, is
regulated by a newly formed regulatory body, the Independent Communications Authority of
South Africa (ICASA), which was formed through the merging of the Telecommunications and
Broadcasting regulators. ICASA’s Telecommunications functions were previously administered by the
South African Telecommunications Regulatory Authority of South Africa (SATRA) since 1997, and prior
to that by the Ministry of Posts and Telecommunications, which also managed Telkom, the nation’s Public
Switched Telecommunications Network (PSTN) operator.
The Telecommunications Act 103 of 1996 determines the procedures for the application of specialised
licenses, e.g. cellular licenses, but application for these types of licenses can only be made
on invitation from the Minister for Communications.
The procedures for licensing PABX systems and VHF radios remain the same as in the past.
In almost all cases, the equipment supplier handles licenses for small-scale communications tools.
Contact information
ICASA – Independent Communications Authority of South Africa
Physical address:
Blocks A, B, C&D, Pinmill Farm, 164 Katherine Street, Sandton
Postal address:
Private Bag X10002,Sandton, 2146
Telephone: +27 (11) 321-8200
Fax Number: +27 (11) 444-1919
Communications Tel: +27 (11) 321-8434
E-mail address: info@icasa.org.za
Website: http://www.icasa.org.za
Banking licenses
A company wishing to conduct banking operations in South Africa has three alternatives.
All of these require the approval of the Registrar of Banks, who heads up the Banking Supervision
Department of the Reserve Bank.
The three options are:
- A separate banking company;
- A branch of an international bank or banking group; and,
- A representative office of an international bank.
To establish a separate banking company, the investor must begin by incorporating a
public company with the Registrar of Companies. The greater of R250 million or 8% of risk-weighted
assets is required as capital to establish a bank (this percentage could be amended in line with
international practice). The investor must then supply the information required by the Banks Act
with the application form DI 002 for a banking licence. The following information must be included:
- Details of the applicant and the proposed bank, including notice of registered office and
postal address of company;
- Memorandum and articles of association;
- Certificate of incorporation;
- Business plan (including predominant business activities planned, schematic
representation of group structure, dividend policy, auditors, risk management policy
and names of directors and executive directors);
- A number of Banks Act Returns, referred to as "DI Returns", to forecast the position for
the ensuing year are required. The forecast DI Returns required are those dealing
with the balance sheet, off-balance sheet activities, income statement, liquidity risk,
capital adequacy, trading risk, and restriction on investments, loans and advances;
- Curriculum vitae of proposed directors and executive officers;
- Application for approval of appointment of auditors;
- A report from a public accountant on funds received from anticipated shareholders and
held in trust;
- Planned internal audit activities; and,
- Application for permission to acquire share in a bank.
Should a foreign bank seek to establish a subsidiary or a branch in South Africa, the procedures
are similar to those for other investors set out above. However, foreign banks are also required to
include the following with their application:
- Foreign bank holding company resolution approving proposed formation of a bank;
- Letter of comfort and understanding from foreign bank holding company;
- Letter from the foreign bank's home regulatory authority to the effect that it has no
objections to the application and that it will comply with certain minimum standards of
supervision; and,
- Board minutes from the holding company empowering an official to sign all documents
relating to the application.
Approval time for a banking company, a foreign subsidiary or a
branch depends on the quality of the application. Banking licenses are not transferable.
The requirements for establishing a representative office are less onerous and it takes considerably
less time to obtain approval for a representative office. Representative offices cannot take deposits,
but can merely act as information conduits to the parent company.
Contact information:
The Registrar of Banks
Bank Supervision Department
South African Reserve Bank
P O Box 8432
Pretoria, 0001
Telephone: +27 (12) 313-3770
Facsimile: +27 (12) 313-3758
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PROSPECTING AND MINING RIGHTS
The mineral industry in South Africa is mainly regulated by three acts.
The Minerals Act, 1991, regulates prospecting for and optimal exploitation of minerals and the
rehabilitation of the surface of land during and after prospecting and mining operations.
The Diamonds Act, 1986, controls the possession, purchase, sale, processing and export of diamonds.
The Mine Health and Safety Act, 1996, provides for the protection of the health and safety of
employees and other persons at mines. The Minerals Act and the Mine Health and Safety Act are
administered by the Department of Minerals and Energy, while the Diamonds Act is administered by the
South African Diamond Board.
The concept of mineral rights, as is known in South Africa, can be regarded as an indigenous
development as a result of the mineral wealth of the country and the need which arose to exploit
minerals and to grant rights in respect of minerals.
It is defined as a limited real right in property which entitles the holder thereof or the person who
has acquired the consent of such holder to go upon the land and search for minerals, remove and dispose
of them.
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Mineral Rights
Registration particulars in respect of mineral rights can only be obtained from
the relevant deeds offices.
Under Section 5 of the Minerals Act, the holder of minerals rights,
or any person who has acquired the consent of such holder, has the right to conduct prospecting or
mining operations subject to being granted the necessary prospecting permit or mining authorisation
from the Department of Minerals and Energy. If the State is the holder of the mineral rights, the
prospective applicant is required to obtain the requisite consent from the Minister of Minerals and
Energy by concluding a contract (prospecting contract or mineral lease agreement) with the State.
Procedures
The Department of Minerals and Energy has regional offices in each province, headed by a Director of
Mineral Development.
Once the permission of the mineral rights holder has been obtained, an application for a prospecting
permit or mining authorisation may be lodged with the Director of Mineral Development at the Department
of Minerals and Energy. The director evaluates the application, giving special attention to the manner
in and scale on which it is intended to prospect or mine the mineral concerned, and to the manner in
which the applicant intends to rehabilitate the land involved.
The Minerals Act requires that the holder of a prospecting permit or mining authorisation shall
submit an environmental management programme (EMP) to the aforementioned director for approval, and no
operations may be commenced until such approval is obtained. In order to speed up the approval process,
the EMP is usually submitted at the same time as the application for a prospecting permit or mining
authorisation.
To ensure that all aspects of the environment are considered, the Act stipulates that before the
director approves the EMP, he is required to consult with each department charged with the administration
of any law relating to the environment. Approval of an EMP may therefore take a considerable period of
time. However, the legislation does provide for the granting of temporary permission to proceed with
prospecting mining operations, but such permission will only be granted after consultation with other
departments and under stringent conditions.
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Export of Minerals
The export of minerals is not prohibited by the Minerals Act. However, the export of diamonds is
controlled in terms of the Diamonds Act. The export of tiger's eye and sugelite (also known as lavulite
or lazulite) is controlled by export control regulations promulgated under the Import and Export Control
Act, 1963. In terms of the said regulations, as amended in 1992, only properly processed tiger's eye
articles, as defined in the regulations, may be exported without an export permit being obtained.
An export permit in respect of tiger's eye or sugelite is issued on the recommendation of the Department
of Minerals and Energy. Although the Department of Trade and Industry issues such export permits, the
permission of the Department of Minerals and Energy, as controlling authority, must be obtained
beforehand. Any queries regarding the export of a particular mineral may be directed to the
Department of Trade and Industry.
Contact Information
Department of Trade and Industry
Tel: 0861 843 384
Directorate: Mining Rights
Department of Minerals and Energy
Private Bag X59
Pretoria 0001
Telephone: +27 (12) 317-9029
Facsimile: +27 (12) 322-8955
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LAND - ACQUISITION, REZONING, SUBDIVISION AND TRANSFER
Investors face a wide array of possibilities when choosing land for development in
South Africa. Private, state, provincial, municipal, and parastatal landholdings are all
potentially available for commercial development - each with their own application process.
In practice, the specific details of this process are determined and administered by the relevant
municipality concerned.
Acquiring and disposing of land
Commercial real estate is well developed in South Africa, with private landholdings in both urban
and outlying areas. The availability of industrially zoned and serviced land varies by location.
Property owners, brokers, managers and developers who are members of the Property Council of South
Africa are available to assist investors in locating, leasing, buying and selling private property.
Any of these bodies can be contacted through the Property Council of South Africa.
Should any service providers be required, please contact the address given below.
Alternatively, peruse the website for further information.
Contact information
Property Council of South Africa
Managed by Avian Management Services (Pty) Ltd
P O Box 78544
Sandton, 2146
Telephone: +27 (11) 883-0679
Facsimile: +27 (11) 883-0684
E-mail: ceo@procsanet.org.za
Website: http:\\www.procsanet.org.za
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Acquiring publicly held land
The process of acquiring publicly held land tends to be significantly slower than with private
landholdings. Efforts are under way throughout much of South Africa to make more public land
available for private purchase.
State Land
All purchases or leases of State land are subject to tender. Two scenarios exist for the acquisition of
State land:
- The application by an investor or developer for the use of a particular plot of State
land; and,
- A response by an investor to an invitation by government for bids to develop land.
If an investor identifies a plot of land belonging to the State, he must provide a detailed proposal
as to how the land will be used. The proposal should include:
- A description of the land (available from the deeds office);
- Context of the land (within a municipality, town, etc.);
- A description of the investment and how it would facilitate development in the region;
- Time frames for development; and,
- Participation of South African citizens in ownership, management, and/or marketing.
Upon receipt of the proposal by the Department of Public Works, the following occurs:
- The land is evaluated to determine whether a freehold sale or long-term lease would
be more appropriate;
- The property is advertised for six weeks for competing developers to respond;
- A valuation by an independent valuer is carried out;
- The proposal (and any others received from the advertisement) is evaluated by the
evaluation committee; and,
- The sale is then signed by the Minister of Public Works.
The process will usually take from three to six months to complete.
"Legal requirement" i.s.o. accepted practice.
Investors should note that land belonging to many agencies and institutions is subject
to a fallback clause. Should any land that is owned by an institution, such as a university, be used for
any purpose other than intended, title reverts back to the State. This can cause delays for an investor
to acquire land from government organisations.
The Department of Public Works has begun identifying land for development. This land is advertised and
responses are invited from the development community. The tender will have a specific form in addition to
the information listed above. The process will take three (3) to six (6) months to complete.
Contact information:
Department of Land Affairs
Room 138, Old Building
Cnr Jacob Mare & Bosman Street
Pretoria
Telephone: +27 (12) 312-8911
Facsimile: +27 (12) 312-8066
Provincial Land
In most cases, any sale of provincial land requires a tendering procedure.
An investor may identify a site and apply for the use of the site. The application should be made by
letter, and the investor must identify the use of the land; the background of the company; the
shareholding of the company; and, the company’s financial projections. The land is then advertised
for tender, and a provincial committee evaluates the responses. Responses are usually judged on project
viability, social impact, environmental impact, and best use of the land, although there are no set
criteria. The process can take between six (6) and eighteen (18) months, depending upon the province.
Municipal Land
Local authorities are major holders of public land. Land development falls under the jurisdiction
of the relevant municipal council. Municipalities vary greatly in their approach to development - in
terms of governing legislation, attitudes and processing systems.
In terms of legislation, some municipalities permit the direct negotiation of land sales, while
others require tendering in some or all cases. Tendering typically requires a period of twelve (12)
to eighteen (18) months, although the process can be completed in as little as six (6) months. Direct negotiation tends to be
significantly quicker, though such agreements may also be subjected to a p | 
