South Africa: Executive Summary

South Africa Executive Summary

South Africa is an economy emerging from the shadow of turmoil and sanctions in the latter part of the period of apartheid. Multi-racial elections held in 1994 ended both minority white rule and apartheid, and ushered in a new political era.

But with it has come new challenges. Despite an equal rights policy for all citizens – regardless of race, creed, sex or sexuality – inequality remains an issue that can bring tensions to a head, as was highlighted by the poverty riots of 2009. Yet South Africa had until recently experienced solid economic growth, which continued into the world recession in 2008 (at 3.1% GDP); however, this reversed in 2009, with the economy shrinking by 1.9% – so far, a mere hiccup compared to the difficulties other countries have experienced.

What South Arica has in its favour is an abundant supply of natural resources, good rail and road networks connecting to other parts of southern Africa, ports that serve as transit hubs between the Americas, Europe and Asia, an established stock exchange and banking network, and a glut of unskilled and semi-skilled workers.

There are investment incentives available, although these are generally in early-stage development. There are currently three industrial development zones (IDZs), established around the ports of Richard’s Bay, East London and Coega, aimed at attracting foreign investment through duty suspension on certain imports and VAT exemption. Also, both individuals and companies can benefit from tax deductions by investing in an approved venture capital company (VCC); however, as of March 1, 2010, only one VCC has so far been approved.

Other tax incentives are available to businesses involved in scientific and technological research and development, and to film-makers. Certain small businesses can choose a simplified Turnover Tax method that replaces value added tax, income tax, provisional tax, capital gains tax and Secondary Tax on Companies.

The government has introduced new mining royalties of between 0.5% and 7% on gross sales, less allowable deductions. The new royalties regime applies from March 1, 2010.

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