South Africa

Ease of Doing Business Rank: 84

Overview

 

Geographic location

The Republic of South Africa is the southernmost country on the continent of Africa.

Namibia, Botswana, Zimbabwe and Mozambique lie to the north, Eswatini lies to the east and the remainder of the country is surrounded by the South Atlantic and Indian Oceans. The country of Lesotho lies within its borders.

Spoken language

South Africa has eleven official languages: Ndebele, Northern Sotho, Sotho, SiSwati, Tsonga, Tswana, Venda, Xhosa, Zulu, Afrikaans and English. However, a further twenty-four indigenous languages are spoken within the country.

Zulu is the most commonly-spoken language (23%), followed by Xhosa (16%), Afrikaans (14%) and English (9.6%). English is understood in most urban areas and is the dominant language used in government.

Population

The 2020 population estimate is 59.31 million.

According to 2016 data, Johannesburg is the largest city (9.17 million), followed by Cape Town (4 million) and Durban (3.66 million).

Popular industries

The top industries in South Africa are manufacturing, wholesale and retail trade, financial services, transport, mining, agriculture and tourism.

Education

The Times World University Rankings includes four universities in South Africa in the top 500 in the world and a further five in the top 1,000 in the world.

The Legatum Prosperity Index ranks South Africa’s educational system 104th out of 167 countries.

Popular entity types

The most common type of business entities in South Africa are Sole Proprietorship, Partnership, Private Company and Public Company.

The majority of businesses are in the form of a Private Company.

South Africa incentives for business

South Africa offers a foreign tax credit to offset taxes paid abroad, not exceeding South African tax due.

The country also offers a 150% deduction for R&D expenses to qualifying companies. Additionally, machinery and capital assets may be eligible for 40% depreciation in the first year, and 20% for the following three years. Buildings used for R&D can be depreciated over 20 years.

South Africa also offers substantial benefits to qualifying intermediate holding companies operating in the country. This includes an exemption from controlled foreign company (CFC) rules as well as exemptions on withholding tax on dividend distributions, in some cases. Companies may also enjoy exemptions on loans and IP licensing transfer pricing.

Companies investing in industrial energy efficient manufacturing projects may also qualify for tax incentives. Companies may receive a 55% tax allowance (or total exemption when located in an industrial development zone) based on the cost of manufacturing assets.

South Africa also has many Special Economic Zones which offer a 15% reduced CIT rate and a 10% allowance on building costs. This includes improvements to existing structures and new builds. SEZs also offer an employee tax reduction, with limitations.

South African shipping companies holding shares in a South African ship may qualify for an income tax exemption.

The country does not restrict currency type and small and medium-sized businesses may enjoy a tax incentive based on shares issued through a venture capital companies.

History & Features

 

Main cities for business

Cape Town is now considered South Africa’s financial center. However, Johannesburg, Pretoria and Durban also have major business districts.

Popular historical & tourist attractions

South Africa is around twice the size of Texas and packed with amazing wildlife, stunning scenery, world-class beaches, many cultures and history.

The country has 10 UNESCO World Heritage sites, including fossil sites of several specimens of early hominids dating back between 4.5 million and 2.5 million years.

South Africa also has many game reserves including Kruger National Park, the largest on the continent. This reserve has the most mammal species of all reserves including rhinos, water buffalo, elephants, lions and leopards. Visitors can drive through the park and stay within its boundaries.

The Drakensberg, or Dragon’s Mountains, are the highest mountain range in Southern Africa. In the northern part of range the massive Amphiteatre cliff face spans 3.1 miles. Tugela Falls, the world’s second tallest, plunges 3,100 ft. off the cliff tops.

South Africa is also known for its outstanding wines. The Cape Winelands are nestled amongst majestic mountains and produce whites and reds as well sherry, port, brandy and more.

The Garden Route from Mossel Bay to St. Francis, along the Indian Ocean and inland is a tourist favorite as it winds through forests and mountains and past picturesque lakes, rivers and lagoons. Visitors can also enjoy outdoor pursuits, whale watching, shopping and dining in Knysna.

Table Mountain overlooks Cape Town, Table Bay, Robben Island and the Atlantic seaboard. Visitors can easily access the 3,563 foot outlook via a cable car which offers an unforgettable bird’s-eye view.

Within Cape Town, The Victoria and Alfred Waterfront region includes restaurants, shopping, and entertainment. Famous attractions include the Chavonnes Battery, South African Maritime Museum and the Clock Tower.

Durban is a vibrant city with a Miami Beach vibe. Its Golden Mile is an expansive stretch of sandy beaches along the coast. Watersport, entertainment, dining and shopping are available in this year-round beach playground.

Two hours away from Johannesburg you’ll find Sun City Resort. This world famous luxury complex includes two casinos, two championship golf course and four hotels. It also has a large sanctuary with over 7,000 crocodiles.

History

Archaeological remains prove hominids lived in what is now known as South Africa for millions of years. However, its remote location meant Europeans did not notice it until the end of the 15th century.

The Portuguese mentioned the area when they sailed around the Cape of Good Hope, but the Dutch were the first to found a colony in 1652. Their new port was to supply ships sailing to the Far East. By 1658, the Dutch began importing slaves into the region.

Native peoples started fighting the Dutch shortly after their arrival. However, the colony expanded. French Huguenots arrived and a smallpox epidemic in 1713 killed many natives.

In 1795 the British captured the Dutch colony. They ceded it to the Dutch in 1803, but then retook it in 1806. Finally, the two countries signed a treaty in 1814 granting the ‘Cape Colony’ to the British.

The British established the frontier garrison of Grahamstown and British settlers arrived in 1820. However, many Dutch settlers (Boers) remained in the region and resented British rule. The British abolished slavery in 1834 which further aggravated the slave-dependent Dutch.

Eventually, the Boers migrated away from the British. They established the Orange Free State and Transvaal. In the 1850s, the British recognized them as republics.

The discovery of diamonds in 1867 and gold in 1886 led to Britain’s increased interest in area domination. They encountered the Zulu in 1879 and entered conflict. After heavy losses, the British won.

The British annexed the Transvaal in 1877 which led to the First Boer War of 1880-1881 and a Boer victory. In 1884, Basutoland (Lesotho) became a British protectorate. By 1894, the Kingdom of Swaziland was also under British protection.

British settlers moved into the Dutch Transvaal Republic. In 1896 the British Prime Minister of South Africa plotted to oust the Dutch government, but failed. The two Dutch republics unified and hostility against the British grew.

The Second Boer War erupted in 1899. Initially, the Boers fared well, but more British troops arrived the following year. The Boers surrendered in 1902 and the British annexed their republics. By 1910, the region became the Union of South Africa with its own constitution. New laws included segregation and restricted land ownership and voting rights for black peoples.

During World War I and World War II, the country supported the allies. At the end of World War II, the National Party came to power and introduced apartheid with even stricter segregation laws.

During the 1950s resistance grew which led to mass demonstrations. After a referendum in 1960, the Union of South Africa ended and the region became the Republic of South Africa. However, violence erupted and the government banned the two liberalist parties. In 1963, Nelson Mandela was sentenced to life imprisonment.

Black resentment led to riots between 1976 and 1977. In 1983, the new prime minister tried to implement a constitution, but it still excluded blacks. The international community imposed economic sanctions and apartheid resistance multiplied.

By 1989, South Africa’s leader had been forced out of office. The new official pledged to end apartheid, released Mandela and introduced a new constitution recognizing all citizens’ rights.

Elections were held in 1994 with Mandela winning the ballot representing the African National Congress.

Today, South Africa operates under a parliamentary republic. The ANC has been in power ever since that time with a majority in parliament. They have a mixed economic system.

Other relevant facts

According to the 2011 census, most South Africans identify as Black African (76.4%), followed by White (9.1%), Colored (8.9%), Asian (2.5%) and Other/Unspecified (.5%).

A 2016 Community Survey found most South Africans identify with the African Independent Church (25.4%), followed by Pentecostal and Evangelical (15.2%), Roman Catholic (6.8%), Methodist (5%), Reformed (4.2%), Anglican (3.2%), Other Protestant Church (5.3%), Other Christian denominations (8.4%), Non-denominational Christian (4.5%), Unaffiliated (10.9%), Traditional African religion (4.4%), Islam (1.6%), Hinduism (1%), Judaism (.1%), Other religions (2.7%) and Undetermined (1.4%).

Additional Information for Business

According to Forbes’ 2019 Best Countries for Business, South Africa is the 59th best country in the world for conducting business.

The 2019 Index of Economic Freedom rates South Africa 102nd globally and states, “The new government has restored macroeconomic stability but still faces rising public debt, inefficient state-owned enterprises, and spending pressures that have reduced the country’s global competitiveness. The judicial system is increasingly vulnerable to political interference, and scandals and political infighting have severely undermined government integrity and weakened the rule of law.”

World Bank’s “Doing Business” rankings rate the South Africa 84th for ease of doing business in the world.

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