Doing business in South Africa

It’s not for nothing that CNBC Business calls South Africa a “world economic powerhouse”. If latest figures are to be believed, South Africa presents a highly promising market both for foreign investors and enterprising local businessmen.

According to the International Finance Corporation and World Bank Survey, “Doing Business 2009”, South Africa ranks 32nd worldwide when it comes to the ease of doing business, being well ahead of European countries and surprisingly, even outdoing emerging markets like India, China, Brazil and Russia.

South Africa: A ripe market

The survey also indicates that South African companies are well-placed to outsmart the global recession. Some of the most successful companies include Standard Bank; ABSA Bank; Naspers, South Africa's largest media enterprise; SAB Miller, leading player in the continent's beer brewing industry; Shoprite Holdings, Africa's largest food retailer; food retailer Nasmart; and mobile phone operators MTN and Vodacom.

Many of these South African companies have witnessed as much as 40 percent annual growth in spite of the economic crisis, a factor attributed to the rise of the African consumer. The purchasing power parity (GDP per capita) ranks South Africa among the 50 wealthiest in the world. 

Dr Martyn Davies, Chief Executive of Frontier Advisory and Director of the Centre for Chinese Studies at Stellenbosch University, calls South Africa the world's “leading economy”, highlighting the many Fortune 500 companies operating successfully in the country.

"No other country of our size and economic ranking has produced as many globally successful Fortune 500 companies as we have," he says. "There is a phenomenal ability for South African companies to grow and go global from South Africa. No other comparably sized emerging market has been able to succeed in doing that; not even the Chinese, not even the Indians."

South Africa has also been gaining ground in the wider business world. Multinational investors are increasingly investing in the country; what's more, South Africa is fast becoming a net exporter of its own companies.

Advantages of South Africa

The current global recession has created but a dent in the South African economy; it is still likely to expand by 2.1 percent in 2010. Stringent banking regulations and exchange controls have helped the country weather the worst and make inroads into international markets.

Investors flock to South Africa for many reasons:

• Generous supply of natural resources
• Ease of paying taxes
• Highly developed economic infrastructure
• Solid physical infrastructure
• Straightforward investor protection regulations for properties
• Sophisticated legal systemEase of opening and closing down businesses

Steps for starting a business in South Africa

South Africa has moved from the 57th place to the 47th for the ease of starting a business. The higher ranking is probably a result of recent amendments to the Corporate Act, whereby entrepreneurs no longer need to have their incorporation documents notarised or obtain legal assistance. It also allows for electronic submission and publication of documents. The government has also eliminated the regional establishment and regional services levy, further reducing the tax burden.

If you're planning to do a business in South Africa, here are six easy steps outlined by the World Bank Group to get you started:

1. Register a company name with the Registrar of Companies and pay fees.
2. Lodge formation documentation with CIPRO in Pretoria, Gauteng Province.
3. Open a bank account.
4. Register with the office of the local receiver of revenue (SARS) for income tax, VAT, and employee withholding tax (PAYE and SITE).
5. Register with the Department of Labour for Unemployment Insurance.
6. Register with the Commissioner according to the Compensation for Occupational Injuries and Diseases Act.