Financial Data
Updated 21 Nov 2017


South Africa

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Business opportunities and risks

Opportunities for you to do business in South Africa

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There are many opportunities that could make investment in South Africa a viable option:

  • South Africa’s geographic location offers a gateway to investment in the African continent. The African continent has been identified as the world’s second-fastest-growing region, creating substantial new business opportunities for global businesses.
  • South Africa’s general commercial legal practices relating to transactions and the drafting of commercial agreements are, in general, globally applicable and in line with international norms and conventions
  • All foreign and domestic private entities are, in general, entitled to own business enterprises and engage in profit-making activities
  • Trade and industry take place within the framework of a free enterprise economy. South African courts are open to foreigners on the same terms and conditions as for South African citizens. Many commercial disputes are, however, resolved through arbitration by agreement between involved parties
  • The country’s stock exchange, the JSE, is regarded as mature, efficient and secure. The market has world-class regulation, trading clearing, settlement assurance and risk management capabilities. The JSE has harmonised its listing requirements and its disclosure and continuing obligations with those of the London Stock Exchange (LSE) and offers superb investor protection.
  • South Africa is an attractive market for investors, as reflected by the robust FDI inflows that the country has experienced, largely due to the favourable legal and business environment
  • There are no limitations on foreign ownership and investment. Foreign investors are allowed 100% ownership.
  • The country also has a clearly defined tax environment, which is highly favourable by regional standards. This is, in part, due to its efficient tax bureaucracy and competitive corporate tax rate (with 28% being the highest marginal corporate tax rate.
  • In South Africa, property rights, including intellectual property, are protected under a variety of laws and regulations. The country has an independent judiciary under which any threat to property rights may be enforced without political interference. It is also a signatory to most of the international conventions related to intellectual property rights.
  • Businesses benefit from good contract enforceability and intellectual property rights, which reduce operating costs.
  • South Africa has a well-developed banking and financial industry. This sector represents a major investment advantage for businesses operating in the country and fosters a high degree of access to financial services.
  • Other significant operational advantages include a high degree of protection for minority stakeholders, as well as a large presence of foreign banks in the country
  • South Africa’s large group of mega-corporates contribute generously to the fiscus. The country is also not dependent on foreign aid.
  • The country’s diverse economy makes it possible to move away from the more traditional focus on primarily minerals exports towards a competitive industrialised economy
  • There are attractive renewable energy opportunities, especially with regard to wind and solar power generation. However, institutional factors need to be addressed.
  • Inter-regional trade agreements facilitate trade flows and reduce costs
  • There is a limited threat from domestic and international terrorism.
Business opportunities
  • South Africa is an attractive market for investors, as reflected by the robust FDI inflows that the country has experienced, largely due to the favourable legal and business environment.
  • There are attractive renewable energy opportunities, especially with regard to wind and solar power generation.
  • Trade and industry take place within the framework of a free enterprise economy.
  • South Africa’s geographic location off­ers a gateway to investment in the African continent. Inter-regional trade agreements facilitate trade flows and reduce costs.
Operational risks to consider

Africa’s growth and development have attracted foreign investment to the continent. Yet there are many risks associated with doing business or operating in African countries. The following are some of the potential risks facing investors operating in South Africa:

  • Electricity shortages and higher power tariffs are constraining energy-intensive investment, including mineral processing. Efforts to rectify the power issues through the construction of the Medupi and Kusile coal-fired power plants have yet to come on full track, as construction has been delayed countless times.
  • Extensive and tight labour regulations have resulted in a rigid labour market. Employers are obliged to meet racial- and gender-based employment quotas.
  • There is a strongly unionised and regulated workforce
  • The country’s export-oriented mining and manufacturing sectors are continuously being challenged by an unpredictable exchange rate and labour issues
  • The country suffers from a high rate of crime. Besides the dangers for foreign businesses and their personnel, high security expenses increase operating costs
  • Lengthy business registration, closing and opening turnarounds make it difficult to start a new business
  • The country is dependent on one freight mode. Reliance on the country’s roads for freight transportation increases the threat of congestion and heightens logistics risks;
  • The scale of corruption in Africa is escalating, with South Africa emerging as one of the worst performers. The country’s worsening corruption profile, especially in political circles, could deter investment.
  • The country’s competitiveness is hampered by its weak economic outlook
  • There is a lack of sufficient local skills as a result of weak education levels, and a brain-drain of well-educated workers looking for better job opportunities.
Business challenges
  • Electricity shortages and higher power tariff­s are constraining energy-intensive investment, including mineral processing.
  • Extensive and tight labour regulations have resulted in a rigid labour market.
  • The country’s export-oriented mining and manufacturing sectors are continuously being challenged by an unpredictable exchange rate and labour issues.
  • Reliance on the country’s roads for freight transportation increases the challenge of congestion and heightens logistics risks.
  • There is a lack of sufficient local skills as a result of weak education levels and a brain-drain of well-educated workers looking for better job opportunities.
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