South Africa: Country and Foreign Investment

South Africa History, Population, Language and Culture

The Dutch established a stop-over point on the southern tip of South Africa in the 1650s, as part of the spice route between the Far East and The Netherlands. This was to become Cape Town, on the Cape of Good Hope. The British seized the area in 1806, forcing the Dutch settlers northwards. The discovery of diamonds and gold in the latter half of the 1800s brought wealth to the region.

After the Boer War, the British and the Afrikaners together ruled South Africa from 1910. In 1948, apartheid was introduced by the ruling National Party, which led to the rise of the African National Congress and the anti-apartheid movement. Protests and insurgency within the country, and sanctions imposed by other countries against South Africa, raised the movement’s profile until Nelson Mandela, an ANC leader who became a worldwide focus in a campaign to release him from prison, was freed in 1990. Multi-racial elections were held in 1994, and brought apartheid to an end and ushered in majority black rule.

The population of South Africa, as at July 2009, is estimated to be around 49.32 million. The various ethnic groups (as at July 2009) are African (79.3%), White (9.1%), Coloured (9%), and Indian/Asian (2.6%). According to the 2001 census, the predominant religion is Christianity (82.6%, including Zion Christian (11.1%), Pentecostal/Charismatic (8.2%), Catholic (7.1%), Methodist (6.8%), Dutch Reformed (6.7%), and Anglican (3.8%)), with 1.5% of the population describing themselves as Muslim, and 2.3% as “other”.

South Africa has 11 official languages: Afrikaans, English, isiNdebele, isiXhosa, isiZulu, Sepedi, Sesotho, Setswana, siSwati, Tshivenda, and Xitsonga. English and Afrikaans are the main languages used for business purposes.

Under the 1996 Constitution, equality is extended to all citizens, regardless of race, colour, sex, or sexual orientation, and same-sex marriage became legal in 2006. Discrimination, though, continues to be an issue that the government is attempting to address – for example, Black Economic Empowerment projects subsidise and favour Black Woman Owned companies in an effort to redress sex discrimination.

Culture is wide-ranging, reflecting the various racial groups in South Africa. Musicians such as Ladysmith Black Mambazo and the Soweto Gospel Choir have found worldwide fame. The main sports are soccer, rugby union and cricket.

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South Africa Government

The government of South Africa comprises a bicameral parliament.

The National Council of Provinces (NCP) has 90 seats – 10 for each of the nine provinces – to which members are elected for five-year terms. The NCP has special powers to protect regional interests, including safeguarding cultural and linguistic traditions among ethnic minorities.

The National Assembly has 400 seats; members are elected by popular vote to serve a five-year term. Voting is under a system of proportional representation.

The last elections were held in April 2009. The current president is Jacob Zuma, who is both chief of state and head of government.

The judicial branch consists of the Constitutional Court, the Supreme Court of Appeals, the High Courts, and magistrates’ courts. The legal system is based on Roman-Dutch law and English common law.

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South Africa Economy and Currency

South Africa is an emerging market that has recently encountered some difficulties in light of the world recession; GDP fell by around 1.9% in 2009, following growth in 2007 of 5.1% GDP and in 2008 of 3.1% GDP. The country has well-developed financial and legal sectors, and an abundant supply of natural resources. Its stock exchange is in the world’s top 20 largest exchanges. GDP per capita was estimated to be USD10,000 in 2009.

Industries include automobile assembly, chemicals, mining, textiles, iron and steel, oil, and commercial ship repair. South Africa is the world’s largest producer of chromium, gold and platinum. The country’s main export partners (based on 2008 figures) are Japan, the US, Germany, the UK, China and The Netherlands; main import partners are Germany, China, the US, Saudi Arabia and Japan. Exports were estimated in 2009 to be around USD68m; imports in the same period were estimated to be over USD70.2m.
The currency is the Rand (ZAR).

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South Africa Entry and Residence

Citizens of certain countries may require a visa to visit South Africa, which can be obtained from South African embassies and missions. The tariff for a visa is ZAR425, USD47 or EUR43, and is usually processed within 10 days. The applicant must have a passport valid for no less than 30 days after expiry of the visit; other requirements are listed on the South African Department of Home Affairs website. A list of countries whose citizens do not require a visa is also available on that website. There is no requirement for a visa for persons in transit.

Foreign individuals wishing to reside in South Africa must apply for a temporary residence permit, which can be extended where required, subject to additional tariffs. Such individuals may also require a business permit, a work permit or a study permit.

Those wishing to establish themselves permanently in South Africa must apply for permanent residence; however, there is limited scope for foreigners who are unskilled or semi-skilled gaining permanent residence, as the country protects the interests of its own citizens in this regard. Skilled foreign workers and entrepreneurs who are able to contribute to the broadening of South Africa’s economic base are particularly welcomed.

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South Africa Business Environment

Telecommunications are the best developed on the continent, with mobile phone use (45m in 2008) far outnumbering fixed lines (4.426m in 2008). There were around 4.2m Internet users in 2008.

Ports and shipping handle around 96% of the country’s exports, and are a transit hub for trade between the Americas, Europe and Asia, as well as for Africa’s east and west coasts. Durban is Africa’s largest container port; Richard’s Bay is the world’s largest bulk coal terminal. Other major ports in South Africa include East London, Port Elizabeth, Saldanha, Mossel Bay, and Ngqura.

The main road network is generally well maintained, with some 73,500 km of surfaced roads. The country has an extensive passenger and freight railway network, much of it state-owned, which connects to other networks in the sub-Saharan region.

There are 10 main airports: Cape Town, Durban and Johannesburg are the three major international airports, plus Bloemfontein, East London, George, Kimberly, Pilansberg, Port Elizabeth and Upington.

There are a large number of banks in South Africa, the largest of which include ABSA Bank, The Standard Bank of South Africa, Nedcor Bank, The First National Bank of Southern Africa, and Boe Investment Bank. Johannesburg is home to many international bank branches, including Barclays, ABN AMRO, Banque Paribas, Bayerische Vereinsbank and ING Barings.

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South Africa Investment Incentives

South Africa is in the process of introducing industrial development zones (IDZs) to attract foreign investment. IDZs are purpose-built industrial estates linked to international air and sea ports, offering duty suspension on imports for production-related raw materials, including machinery and assets used in production with the aim of exporting the finished products, as well as VAT exemption under certain conditions. So far, there are IDZs at Richard’s Bay, East London and Coega.

Individuals are eligible for a 100% deduction of the amount invested in an approved Venture Capital Company (VCC) (see under Tax-efficient Regimes and Sectors) in exchange for newly issued shares, subject to either an annual deduction limit of ZAR750,000, or a cumulative lifetime deduction limit, adjusted for recoupments, of ZAR2.25m. Listed companies and their group subsidiaries are eligible for a 100% deduction of amounts invested in a VCC on condition that the investment does not exceed 40% of the VCC’s equity shares. Investments in excess of the 40% limit are not tax deductible.

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