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SA Economy

South Africa is one of the most sophisticated, diverse and promising emerging markets globally. The country is strategically located at the tip of the Africa continent and therefore a key investment location. The country joined the BRIC group of countries namely, Brazil, Russia, India and China. Known as Brics in 2011, with important roles to play namely, as a gateway to the continent and as a catalyst for African integration.

The country is ranked by the world Bank as an upper middle-income country. While most parts of the world experienced a global financial meltdown, South Africa has managed to stay on its feet, due to its prudent fiscal and monetary policies. The economy of the country is the second largest in Africa, behind Nigeria. Economists state that it remains the most important economy in the continent despite being overtaken by Nigeria. It has a marked duality with a sophisticated financial and industrial economy having grown alongside an underdeveloped informal economy.

It is this second economy which presents both potential and a developmental challenge. Furthermore, it is reasonably diversified with key economic sectors including, mining, agriculture and fisheries, vehicle manufacturing and assembly, food processing, clothing and textiles, telecommunications, energy, financial and business services, real estate, tourism, transportation wholesale retail trade.

The country is politically stable and has a well-capitalised banking system, abundant natural resources, well developed regulatory systems as well as research and development capabilities and an established manufacturing base. With a world-class and progressive legal framework, South African legislation governing commerce, labour and maritime issues is strong, and laws on competition policy, copyright, patents, trademarks and disputes conform to international norms and standards.

The country's modern infrastructure supports the efficient distribution of goods throughout the southern African region.

The country's population is estimated at around 52 million (2013 estimate) with nominal GDP of around US$ 350 billion, and income per capita of US$ 5,916. The economy shrank by 0.6 percent in the first quarter of 2014 due to the strike in the platinum sector which dragged output down.

According to the National Development plan - Vision 2030, South Africa has the potential and capacity to eliminate poverty and reduce inequality over the next two decades based on the outlined approach:

  • The active efforts and participation of all South Africans in their own development.
  • Redressing the injustices of the past effectively.
  • Faster economic growth and higher investment and employment.
  • Rising standards of education, a healthy population and effective social protection.
  • Strengthening the links between economic and social strategies.
  • An effective and capable government collaboration between the private and public sectors
  • Leadership from all sectors in society.

The constitution of South Africa comprises national, provincial and local spheres of government that are interrelated. In terms of the constitution, the country is divided into nine self-governing provinces, each with their own legislature, premier and members of executive councils. Each province features its own distinctive vegetation and climate with variances therein.

South Africa is a competitive investment destination due to the following factors:

  • 100% foreign ownership of a business is permitted
  • No government approval is required for foreign investment
  • Foreign investment is actively encouraged
  • Excellent financial services are available
  • Profits are freely remittable back to investors home country
  • South Africa is a signatory to several international investment protection agreements via the World Trade Organisation (WTO)
  • South Africa has negotiated a large number of multilateral and bilateral trade agreements

Investment Framework

South Africa has an impressive history of foreign investment, especially with European and American companies. The South African government actively encourages foreign investment which is seen through their wide range of investment grants. In 2013 South Africa was ranked in 41th position out of 189 economies for ease of doing business. Ranked particularly high were those aspects of protecting investors, paying taxes and ease of obtaining credit. The average number of days to start a business was given as 31 days. The economy is predominately based on free market principles, with some state control. Foreign investment in all areas of the economy is active in both the private and public sectors.

The only sectors in which certain restrictions apply are in banking, insurance and the broadcasting sectors. There are generally few restrictions on investment. No permits to operate business are required however work permits are required. (Please refer to the section on visas and work permits) Income from an investment by a foreign investor and the proceeds of any sale of assets in South Africa may be transferred to a non-resident seller.

There are initiatives in place for the empowerment of previously disadvantaged individuals and include increasing empowerment through employment equity and preferential procurement guidelines.

Regulatory Framework

Doing business in South Africa is similar to doing business in any other first world country and is standard throughout the whole of the country. Government policy welcomes and encourages foreign investment, which is reflected in their continual efforts to lower taxes and tariffs, budget deficits, their ongoing quest to improve infrastructure, inflation kept in check through a disciplined economic policy.

A body of legislation covers labour relations, competition law, intellectual property, copyright patents, transport, environmental and other essential matters. South Africa has well qualified domestic and international law firms, accounting firms and management consultants who can give advice on all aspects of doing business in South Africa.


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