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Africa Investment Guide: South Africa in Focus

INTRODUCTION

The economy of South Africa is the 2nd (second) largest in Africa and has a highly developed and advanced economic structure. It is the leading African economy and home to 75% (seventy-five percent) of the largest African companies. Due to its wealth of natural resources which include coal, platinum, gold, iron ore, manganese, nickel, uranium and chromium, South Africa enjoys increased attention from international exploration companies, particularly in the oil and gas sector.

Introduction

The economy of South Africa is the 2nd (second) largest in Africa and has a highly developed and advanced economic structure. It is the leading African economy and home to 75% (seventy-five percent) of the largest African companies. Due to its wealth of natural resources which include coal, platinum, gold, iron ore, manganese, nickel, uranium and chromium, South Africa enjoys increased attention from international exploration companies, particularly in the oil and gas sector.

South Africa’s Economic Climate.

The economy of South Africa is the 2nd (second) largest in Africa and has a highly developed and advanced economic structure. It is the leading African economy and home to 75% (seventy-five percent) of the largest African companies. Due to its wealth of natural resources which include coal, platinum, gold, iron ore, manganese, nickel, uranium and chromium, South Africa enjoys increased attention from international exploration companies, particularly in the oil and gas sector.

South Africa’s economy grew 0.2% in 2019, against 0.8% in 2018.[1] However, due to the outbreak of the COVID-19 pandemic the economy like every other economy is expected to fall to -5.8% in 2020 and pick up to 4% in 2021.[2]

Despite this growth, South Africa still faces a number of economic challenges such as rising public debt, inefficient state-owned enterprises and spending pressures, which have reduced the country’s global competitiveness. However, the current government’s economic policy-making and management has been generally positive.

The World Bank in its 2020 Doing Business in South Africa Report stated that South Africa has one of the easiest economies in the sub-Saharan region for doing business; with a global ranking of 84 (eighty-four), the country far outperforms the regional average of 147 (one hundred and forty-seven).[3] South Africa came 5th (fifth) among all the African countries.

Further, South Africa’s globally recognized sophisticated financial and industrial economy makes establishing a presence in South Africa very convenient for foreign investors.[4] A well-capitalized banking system and highly developed regulatory system are an incentive for foreign investors to establish a presence in the country. South Africa’s advanced banking system and developed regulatory system includes top ranked audit and accounting standards, a well-regulated stock exchange and world-class commercial legislation governing competition policy, copyright, patents and trademarks.

South Africa is also a politically stable country which is an incentive for foreign companies to establish their presence in the country. It also has an abundant supply of semi-skilled and unskilled labour, and it compares favourably to other emerging markets in terms of the overall cost of doing business. For professional jobs, labour costs are less than half of the cost of European countries. For manufacturing jobs, labour costs are around one-third the cost of Europe.

Incorporation

Types of entities

The Companies Act 71 of 2008 (‘the Companies Act’) governs Company Law in South Africa. The Companies Act is not a complete codification of the legal principles applicable to companies as various other pieces of legislation and common law principles are relevant to company law. These include judicial precedent, regulations issued by ministers and the King Code of Corporate Governance.

The Companies and Intellectual Property Commission (‘CIPC’) was established by the Companies Act to regulate the registration and incorporation of companies.

a. Private companies-

Important features of a private company include the following:

  • There must be at least 1 (one) director, and 1 (one) shareholder;
  • No restrictions on the number of shareholders;
  • There are certain restrictions on the transferability of company shares;
  • The company is prohibited from selling shares to the public or listing them on the Johannesburg Stock Exchange (‘JSE’);
  • An annual meeting must be held within 18 (eighteen) months of the company’s incorporation, and thereafter, the meetings are not to be held later than 9 (nine) months after the end of each financial year; and
  • The suffix for a private company is ‘(Pty) Ltd’.

The private company structure is by far the most common type of company registered in South Africa, due to its efficiency and simplicity. Proprietary Limited, or its abbreviation ‘(Pty) Ltd’, refers to a company that trades for profit, and such a company can exist in perpetuity, irrespective of any shareholder change.

b. Public companies-

Important features of a public company include the following:

  • There must be at least 3 (three) directors and 7 (seven) shareholders;
  • Only public companies may be listed on the JSE;
  • A public company can freely transfer its shares to any member of the public;
  • They must be audited and must produce audited financial statements;
  • The auditor cannot serve for a period of more than 5 (five) years;
  • In some instances, it is a requirement to have an Audit Committee and a Social and Ethics Committee;
  • Where a public company intends to vary its constitution, such variation can only be done by particular as well as a written, special resolution that is signed by all relevant stakeholders; and
  • The suffix for a public company is ‘Ltd’.

c. State-owned companies-

  • It is significant to differentiate between state-owned entities and state-owned enterprises. A state-owned entity, or a national government business enterprise is defined in the Public Finance Management Act 1 of 1999 as an entity which is a juristic person under the ownership control of the national executive and has been assigned financial and operational authority to carry on a business activity as its principal business; provides goods or services in accordance with ordinary business principles; and is financed fully or substantially from sources other than the National Revenue Fund or by way of tax, levy or other statutory money.
  • The term thus refers to legal entities that are created and governed by the government to undertake commercial activities on its behalf.
  • Within these state-owned entities, one finds the state-owned enterprises. A state-owned enterprise is an independent body that is either partially or solely owned by the Government of South Africa, and is listed under Schedule 2 of the Public Finance Management Act 1 of 1999.

d. Personal liability companies-

  • A personal liability company refers to a private company that trades for profit and is generally used by professional associations such as attorneys, engineers and stockbrokers who wish to utilize some of the entities’ many advantages, such as its perpetual succession and flexible profit distribution. The company’s suffix is ‘Inc and it operates on the principle of personal liability, which entails that the directors of the company are jointly and severally liable with the company for all contractual debts and liabilities incurred when they held their positions.

e. Foreign/External companies-

  • A foreign or external company is a company incorporated outside of South Africa, irrespective of whether it is a profit or non-profit company or carrying on business in South Africa. A foreign company is prohibited from offering securities to the South African public unless it follows the specific provisions of the Companies Act, 2008, relating to offers to the public.
  • A foreign company is required to register as an ‘external company’ with the CIPC if it conducts or intends to conduct business in South Africa. Section 23 of the Companies Act, 2008, lists a series of activities which will be regarded as conducting business.
  • This list includes:
    • Holding a meeting or meetings of shareholders or board of the foreign company, or otherwise conducting the internal affairs of the company;
    • Establishing or maintaining any bank or other financial account;
    • Establishing or maintaining offices or agencies for the transfer, exchange or registration of the foreign company’s own securities;
    • Creating or acquiring any debts, mortgages, or security interests in any property; and
    • Acquiring any interest in intellectual property.

f. Entering into contracts of employment Branch or Subsidiary Companies-

  • With respect to opening a branch in South Africa or establishing a South African subsidiary company it is common practice for foreign companies looking to establish a business in South Africa to incorporate a private company.
  • This is because a private company provides the benefits of limited liability, separate legal personality and perpetual existence notwithstanding changes in shareholding. Another advantage of private companies is that they have less onerous responsibilities than public companies in respect to corporate governance and financial reporting.

g. Non-profit companies-

  • A non-profit company (‘NPC’) should be formed by 3 (three) or more persons and it is formed only for lawful purposes. The purpose must be for the benefit of the people or it must have an object which relates to multiple cultural or social activities. These may also include the promotion of arts, religion, education, science or charity.
  • All the profits are applied for the promotion of the main objective of NPC. When a company winds up or dissolves or de-registers, all the remaining assets should be transferred to another NPC which has similar objectives. The decision to transfer the remaining assets lies solely with the members. If members fail to come to a mutual decision there may be intervention by the court. An NPC is considered to be different from a non-profit organization (‘NPO’). The organizations which are not companies may also register as NPOs.
  • Non-Profit Organizations in South Africa can be registered in 3 (three) ways, namely:
    • Voluntary associations, established under common law-
      • The voluntary association is the most common legal form of NPO in South Africa. No office of registry exists for voluntary associations. Forming a voluntary association requires only that 3 (three) or more people agree to achieve a common objective that is primarily not-for-profit. The agreement may be oral or written, although it is customary for the agreement to take the form of a written constitution. Voluntary associations are a product of the common law and are not regulated by statute. This can be confusing because the common law is not easily accessible.
    • Non-profit trusts, established under statutory law-
      • Trusts in South Africa are governed under the Trust Property Control Act 57 of 1988 and the common law. A trust can be established for private benefit or for a charitable purpose. To determine whether a trust qualifies as a charitable trust under South African law, a grantmaker must look to the trust deed.
      • A trust is created when property is transferred by a trust deed. The trustee then manages the property for the benefit of others or for the achievement of a particular goal. The property can be transferred by written agreement, testamentary writing or court order.
    • Non-profit companies incorporated for a public benefit objective or an objective relating to one or more cultural or social activities, or communal or group interests, established under statutory law-
      • The South African Companies Act of 2008 provides for the incorporation of a non-profit company, which is recognized as a separate category of company. The non-profit company can be established with or without members, but it must have at least 3 (three) directors (Companies Act Section 3(1)). The non-profit company is incorporated with the Companies Commission; it can be incorporated for a public benefit objective, or an objective relating to one or more cultural or social activities or communal or group interests (Companies Act Schedule 1 para 1). The non-profit company is subject to the non-distribution constraint requirement. Non-profit companies have legal personality and therefore offer limited liability to their members and directors. They can enter into contracts and sue and be sued in their own name.

The following are the steps that are required to incorporate an entity in South Africa:

 

1.Determine the legal entity

The legal entity which one selects affects the way it handles tax, legal and financial obligations. The Companies Act 2008 sets out the legal entities available in South Africa and includes private companies, trusts, non-profit companies and public companies as discussed above.

 

2.Reserve a name

Prior to registering with the CIPC, you must reserve and register a company name. You may choose to register a name as part of the company incorporation process or register your name first, and the company at a later date. The name registration process costs R50 (fifty rand) – it is worth entering a number of possible name options to ensure that at least 1 (one) is approved.

 

3.CIPC registration

Formal registration of your new business may take place in person at a self-service terminal, in one of the CIPC service centres in Johannesburg, Pretoria or Cape Town, or at an authorised bank branch. The process can also take place by email, or on the CIPC’s online portal. If you are planning to register a company and name together, the process will cost R175 (one hundred and seventy-five), while registering a company alone costs R125 (one hundred and twenty-five).

  • To complete the CIPC registration, you will need the following information:
  • Contact information for all business owners and directors;
  • Owners’ personal identification documentation, such as passports; and
  • Company information, including financial details, email address and physical address.

After initial document submission, the CIPC will request certified copies of directors’ ID documents and those of the registration applicant (if they are not a director themselves).  The CIPC will also request signed copies of the registration forms.

 

4.Open a bank account

Your company must have its own bank account in South Africa. To open an account proof of identification, original company documents, and proof of residence in South Africa should be provided. Although opening an account is straightforward, providing proof of residence can pose problems for foreign companies. Hence, ensure you meet the requirements ahead of time.

Depending on the type of business you are setting up, further information may also be required.

 

5.Register for tax and social security

Income Tax: The South African Revenue Service (‘SARS’) is linked electronically to the CIPC and will be able to access business information previously provided. However, to register for income tax, Pay As You Earn (‘PAYE’) and various other taxes, you will still need to visit a SARS branch with relevant documentation such as your registration certificate and a bank statement.

Value-Added Tax (‘VAT’): Businesses with a turnover of more than R1,000,000 (one million), will need to register for VAT by appointment at a SARS branch. SARS requires a completed VAT 101 Form, certified copies of financial and identification documents, and registration documents.

Social Security: South Africa’s social security schemes includes the Unemployment Insurance Fund (‘UIF’) and the Commissioner for the Compensation of Occupational Injuries and Diseases (‘COID’). UIF registration can take place by email, but COID forms must be downloaded and submitted to a COID office.

South Africa has an Invest One Stop Shop geared towards providing investors with most of the services they require under one roof. This is in order to fast-track projects and reduce government red tape.

The One-Stop Shop is part of the government’s initiative to become investor friendly, lower the cost of doing business as well as making the process easier.

The One-Stop Shops house government entities such as the South African Revenue Service, Home Affairs, Environmental Affairs, Eskom and the Companies and Intellectual Properties Commission under the same roof.

It further simplifies the administrative procedures for issuing business approvals, permits and licenses and thus eliminate bottlenecks that investors usually face in establishing and running businesses.

Thus far the One-Stop Shops have been rolled out in Tshwane in Gauteng (National office), Cape Town in the Western Cape and eThekwini in KwaZulu-Natal.

Foreign Participation

The Protection of Investment Act 22 of 2015 was enacted in July 2018 and regulates high levels of local and foreign investment.

The main purpose of this Act is to protect investments in accordance with and subject to the Constitution, in a way which balances the public interest and the rights and obligations of investors. The Act also affirms the Republic’s sovereign right to regulate investments in the public interest and confirms the Bill of Rights in the Constitution and the laws that apply to all investors and their investments in the Republic. The Act provides for the following:

  1. With regard to physical security of property, the Act accords foreign investors and their investments a level of physical security as may be generally provided to domestic investors in accordance with minimum standards of customary international law and subject to available resources and capacity;
  2. The Act also grants National treatment wherein foreign investors and their investments must not be treated less favourably than South African investors in similar circumstances;
  3. A foreign investor may, in respect of an investment, repatriate funds subject to taxation and other applicable legislation;
  4. Section 13 of the Act sets out the dispute resolution process to be followed by an aggrieved investor and emphasizes the need to exhaust domestic remedies first. Important to note is that an investor, on becoming aware of a dispute, is not precluded from approaching any competent court, independent tribunal or statutory body in South Africa for the resolution of a dispute relating to an investment; and
  5. In the event that domestic remedies have been exhausted, the South African government may consent to international arbitration between South Africa and the home state of the affected investor.

The Act explicitly grants the South African Government the right to take regulatory measures in order to redress historical, social and economic inequalities and injustices, uphold the rights, values and principles contained in the Constitution of the Republic of South Africa and to promote and preserve cultural heritage, foster economic development, protect the environment and achieve the progressive realization of socio-economic rights.

Foreign nationals intending to work in South Africa must obtain temporary residency and a work permit. The most common work permits for those conducting business in South Africa are:

General work visa – These visas are issued to foreign nationals where it has been proven beyond reasonable doubt that, despite a diligent search, there is not a South African citizen/permanent resident who has the necessary skills or qualifications to fill the relevant position. If this is the case, the Department of Labour will issue a certificate stating this to be true and also confirming that the remuneration of the foreign national is similar to those occupying comparable positions in South Africa. Provided the process is duly completed, the work permit will be issued by the Department of Home Affairs.

Intra-company transfer work visa- This type of visa is obtained in circumstances where a multi-national company wishes to transfer an existing employee to a branch, subsidiary or affiliate based in South Africa.

Where this is the case, the foreign national can work for up to a maximum of 4 (four) years and it must be proven that skills will be transferred from the foreign national to a South African citizen or permanent resident.

The Local Content initiative was first introduced in the Preferential Procurement Framework Act 5 of 2000 in 2011, to designate certain sectors for local production and content, in line with national development and industrial policies for local production.

In terms of revised regulations to the Preferential Procurement Policy Framework Act 5 of 2000 (‘PPPFA’), all suppliers in designated sectors will have to meet the set minimum threshold requirements for Local Content when tendering.

The South African Bureau of Standards (‘SABS’) is a trusted standardization, quality assurance and verification provider. Acting on behalf of the Department of Trade and Industry (the ‘dti’), it has been appointed the Verification Agency for Local Content in South Africa in terms of the amended regulations to the Preferential Procurement Framework Act.

Regulation 8(2) of the amended Preferential Procurement Regulation 2017 prescribes that in the case of a designated sector, an organ of state must advertise the invitation to tender with a specific condition that only produced services or goods or locally manufactured goods with a stipulated minimum threshold for local production and content, will be recognised.

For instance, the designated sectors are subject to the following local content thresholds:

  1. 85% (eighty-five percent) Furniture Products and Office Furniture;
  2. 100% (one hundred percent) Textiles and Clothing, Leather and Footwear;
  3. 70% (seventy percent) Solar Water Heater Components; and
  4. 100% (one hundred percent) Steel Power Pylons.

In South Africa local content is especially pertinent to the mining sector. In September 2018, the Department of Mineral Resources issued the Broad-Based Socio-Economic Empowerment Charter for the Mining Industry (Mining Charter #3). Under this Charter, mining houses are expected to spend at least 70% (seventy percent) of their procurement on South African manufactured goods.

 

a. Sectors applicable-

  • The sectors applicable to local content are namely Rail Rolling Stock; Steel Power Pylons and Substation Structures; Bus Bodies; Canned/Processed Vegetables; Textile; Clothing; Leather and Footwear Sector; Pharmaceuticals; Solar Water Heater Components; Set-top Boxes; Furniture Products; Plastic Pipes; Bulk Material Handling; Lead Acid Batteries; MV Switchgear; Rail Per way (Track); Pumps and Medium Voltage Motors.
  • Local content policies cover a broad array of approaches, ranging from mandatory targets to soft requirements, to supportive policies in areas such as education and capacity building. The 5 (five) main policies are as follows:
  1. Increasing mining operation procurement of local goods and services;
  2. Increasing mining operation hiring of locals;
  3. Increasing the spillover benefits of mining investment into non-mining sectors;
  4. Increasing the local processing (beneficiation) of the products of mining operations; and
  5. Increasing the capacity of local actors as mining sector operators, including state-owned enterprises.

 

b. Penalty for Non-Compliance-

  • Regulation 14 of Preferential Procurement Regulations in particular deals with non-compliance on issues of local content and other conditions of the contract.
  • The public must report any incident of non-compliance on local content as the Government cannot act if there is no evidence or reports. The organ of state can cancel the contract if there is non-compliance after a due process.

Employment

  1. The Labour Relations Act 66 of 1995 (‘LRA’) – It is the most significant piece of legislation that governs employment and labour law in South Africa. The LRA applies to all employees except for members of the defence force, 3 (three) national intelligence agencies and Electronic Communications Security (Pty) Ltd (COMSEC);
  2. The Basic Conditions of Employment Act 75 of 1997 (‘BCEA’) – passed by the country’s Department of Labour to govern minimum standards of employment conditions and to regulate matters regarding working hours, leave (including annual, sick, family responsibility and maternity leave) termination of employment, remuneration and other related basic conditions of employment in the workplace; and
  3. The Employment Equity Act 55 of 1998 (‘EEA’) – enacted to deal with the prohibition of unfair discrimination by all employers and the implementation of equal opportunity plans by employers, often referred to as “affirmative action” measures.

In terms of the Code of Good Practice, Dismissal, contained in Schedule 8 to the Labour Relations Act, a newly hired employee may be placed on probation for a period that is reasonable given the circumstances of the job. This period should be determined on a case-by-case basis depending on the nature of the job, and the time it takes to determine the employee’s suitability for continued employment.

Thus, the employer has the discretion to define the duration, stating only that it should be reasonable in relation to the circumstances of the job.

The Code states further that the employee’s performance must be monitored from the onset of the employment and any inadequacies in work performance must be addressed by giving the employee necessary evaluation, counselling, instruction, training and guidance in order to assist him or her to achieve and maintain the required work performance standard.

After the end of the probation period, if the employee does not perform in a satisfactory manner, the employer cannot merely dismiss him. The employer has a duty to show that the procedure of evaluation provided for in terms of the regulations was followed- that counselling, guidance and training has taken place, that the employee has been given a reasonable opportunity (with the assistance of a fellow employee or representative, if required) to state his case and to state what he or she thinks is the cause of the problem, and to state and implement (within reason) what measures he suggests are required to rectify the problem.

a. Annual Leave-
In terms of the BCEA, employees are entitled to a minimum number of paid annual leave days. The minimum period of paid annual leave is 21 (twenty-one) consecutive days on full remuneration for each annual leave cycle, or by agreement it can be accrued based on 1 (one) day’s annual leave accrued for every 17 (seventeen) days.

b. Statutory holidays-
Under the South African Calendar there are currently 12 (twelve) statutory holidays. Employees are thus entitled to paid leave on statutory holidays. Employees can be paid special overtime rates to the extent that an employee is nonetheless required to work on public holidays.

c. Sick Leave-
Employees are entitled to paid sick leave equal to the number of days the employee would normally work in a period of 6 (six) weeks, in every sick leave cycle. A sick leave cycle is 36 (thirty-six) months and begins on commencement of employment and on completion of every prior sick leave cycle. Nevertheless, during the first 6 (six) months of employment an employee is only entitled to 1 (one) day paid sick leave for every 26 (twenty-six) days worked.

d. Rest Periods-
The BCEA imposes certain minimum rest periods, while employees may, in the normal course, be required to work up to 45 (forty-five) hours per week as part of their normal working week. For example, employees are entitled to a minimum of 36 (thirty-six) consecutive hours weekly and 12 (twelve) consecutive hours daily rest periods.

e. Maternity Leave-
Employees are entitled, subject to conditions, to a period of 4 (four) months’ unpaid maternity leave. Some payment during maternity leave may be claimed in terms of the Unemployment Insurance Act, No 63 of 2001, and the Unemployment Insurance Contributions Act No 4 of 2002, which create an unemployment insurance fund (‘UIF’), largely funded by mandatory contributions from the employer and employee. However, this may be less than the employee’s normal remuneration and is further reduced in the event that the employer pays partial remuneration during maternity leave.

f. Family responsibility leave-
In terms of the Labour Law amendments, employees are no longer entitled to take paid family responsibility leave in the event of the birth of their children, as this is now covered by parental leave.

g. Parental leave-
All parents – including fathers, adopting parents, and surrogates are now entitled to 10 (ten) days unpaid parental leave when their children are born.

This new legislation does not apply to mothers who give birth as they are already entitled to maternity leave in terms of the BCEA.

a. Taxes-

Employees tax is a system of tax collection whereby employers are obliged by law to deduct tax from the salaries or wages that they pay to their employees. The tax so deducted is paid by the employer to the Receiver of Revenue on behalf of his employees.

Any business that employs at least 1 (one) employee must register with the South African Revenue Service (SARS) for Pay as You Earn (PAYE) and Standard Income Tax on Employees (‘SITE’).

South African employers withhold taxes owed from a non-provisional employee’s paycheck on a monthly basis using South Africa’s PAYE system. While there is no payroll tax in South Africa, there is a 15% (fifteen percent) withholding tax while employers that are corporations are taxed at a flat rate of 28% (twenty-eight percent).

There is a levy imposed by the Skills Development Levies Act 9 of 1999 to contribute towards the cost of skills development. The levy imposed is 1% (one percent) of the total of all remuneration paid or payable or deemed to be paid or payable, by the employer to all employees during any month. The levy must be paid to the education and training authority for the sector to which the employer belongs.

b. Pension fund-

Almost all retirement fund plans are subject to regulation and supervision under the Pension Funds Act 24 of 1956 (‘PFA’). In South Africa there is a pension fund and a provident fund. The main aim of a pension or provident fund is to provide benefits for its members when they retire from employment. The fund also usually pays benefits when a member dies while still working, or is unable to work because of illness, or is retrenched.

The main difference is that if a pension fund member retires, the member gets one third of the total benefit in a cash lump sum and the other two-thirds are paid out in the form of a pension over the rest of the member’s life. On the other hand, a provident fund member can get the full benefit paid in a cash lump sum.

It is usually compulsory for an employee to become a member of a fund. If the employer has a fund, it is compulsory, the worker must belong to the fund. A pension or provident fund may be established by a Bargaining Council Agreement.

A worker cannot get money back from a fund except as benefits according to the fund rules.

Generally, a fund has the following benefits:

  • Withdrawal benefits, paid to workers who resign or are dismissed;
  • Retrenchment benefits, paid to workers who are retrenched;
  • Retirement benefits, paid to workers when they retire; and
  • Insured benefits, including benefits paid to a worker who is disabled, and benefits paid to the dependents of a worker who dies.

c. Social Security Funds-

Social security in South Africa also covers benefits that pay out based on the South African social security contributions made. An employee can receive the following additional benefits through the Unemployment Insurance Fund (UIF), paid at a rate from 38–58% (thirty-eight to fifty-eight percent) of the South African Social Security Agency (‘SASSA’) payments total. This is a contributions-based social grant in South Africa available to unemployed South African citizens or permanent residents who have been working for 24 (twenty-four) hours or more per week, provided they contributed to South African social security during employment.

d. Employment-based social grants-

Benefits

  1. Maternity benefits- an employee can claim 17 (seventeen) weeks of maternity benefits in the event that she is due to have a baby. If you have a miscarriage, you can claim for 6 (six) weeks. The amount received is usually around 40–60% (forty to sixty percent) of your normal salary, depending on your SASSA payments.
  2. Illness benefits – an employee can claim illness benefits if they are unable to work for more than 14 (fourteen) days due to illness and are not receiving a full salary from the employer. The employee must be willing to undergo medical treatment. Payments are usually between 40–60% (forty to sixty percent) of your normal salary, depending on the SASSA payments, up to a maximum of 34 (thirty-four) weeks.
  3. Dependent benefits -this social security benefit pays in the event of the death of a person who contributed to UIF and was financially supporting the household. The spouse can claim even if he or she is in employment. The dependent children can make an application if the spouse does not or cannot make a claim. However, Claimants must apply within 6 (six) months of the date of death.
  4. Dependents usually receive between 40–60% (forty to sixty percent) of the deceased’s normal salary, depending on contributions.
  5. Bonus- in terms of South Africa Labour Laws employers may provide employees with a discretionary end-of-year payment known as a bonus. It is a double pay or 13th (thirteenth) cheque. It is usually paid out during December or in the employee’s birthday month.

An employment contract can be terminated in several ways either by exercising a contractual or statutory right to terminate (for cause).

The LRA requires an employer to follow a fair process prior to dismissing an employee for 1 (one) of the authorised fair reasons for dismissal such as misconduct, incapacity or operational requirements.

The procedure to be followed differs depending on the reason for the dismissal. Operational requirement dismissals are the most regulated, given that this type of dismissal usually affects more than 1 (one) employee, and therefore has the greatest societal impact.

In South Africa, both employers and employees can terminate the employment relationship by providing notice, or for the employer, making a payment in lieu of notice. The required length of notice for employment contracts is set out in the BCEA and depends on the term of the contract.

TAXES

Where the source of the income of the foreign company is regarded as being in South Africa, the foreign company will become subject to income tax in South Africa in respect of such income at a rate of 33% (thirty-three percent).

However, the liability of the foreign company for tax in South Africa will be subject to the provisions of the applicable double taxation agreement (‘DTA’), if any, concluded between the foreign country and South Africa.

South Africa has entered into several double taxation agreements (DTAs) for the avoidance of double taxation with various countries. South Africa is currently party to approximately 80 (eighty) double tax treaties, including those with the US and the UK, and is currently in the process of re-negotiating and ratifying a number of other treaties.

One of the latest DTAs that South Africa has concluded is the South Africa- Brazil DTA entered into force on 10 February 2018. These treaties are aimed at regulating the taxation of income which arises in one state and is subject to tax in the other state. The principal objective of the DTA is to avoid double tax.

Where, however, the same income is taxed twice, any foreign taxes that are required to be paid by South African residents in respect of the foreign income would be credited against any South African tax payable on that foreign income. The credit cannot exceed the South African tax liability arising on such foreign income (determined as a ratio of total foreign taxable income to total South African income).

Any excess may be carried forward for a period of up to 7 (seven) years and set off against South African tax payable on foreign income in the future. In resolving tax conflicts, treaties often use the source of income as the basis for the provisions contained in the treaty.

South Africa offers various tax incentives, such as:

a. Employment tax incentive-
The employment tax incentive (‘ETI’) is an existing tax incentive designed to encourage the employment of young persons. It allows employers hiring people 18 to 29 years old to reduce the amount of employees’ tax paid on behalf of their employees whilst leaving the wage received by the employee unaffected. Effectively this creates a cost-sharing mechanism between employers and Government in respect of employee wages.

The ETI is made more attractive for employers operating their businesses within a Special Economic Zone (‘SEZ’), as there is no hiring age limitation applicable; that is, the ETI applies regardless of the age of the relevant employee. Whilst the current legislation excludes employers located within an SEZ from this age limitation, only employers, approved by the Minister of Finance in the Government Gazette, located within an SEZ can avail themselves of the age exemption.

b. Customs and excise incentive-
Goods imported into a Customs-Controlled Area (‘CCA’) situated in an SEZ are relieved from applicable import customs, excise duties and economic restrictions whilst stored and undergoing manufacturing (which includes processing, cleaning and repair) within the CCA. Goods manufactured in the CCA and subsequently supplied to the local domestic market are subject to the payment of the import customs and excise duties that were relieved at time of importation on the imported goods (raw materials). The liability for customs and excise duties, which enjoyed relief on imported goods used in manufacturing in the CCA, cease upon subsequent export. Only enterprises located within a CCA of an SEZ are eligible for the relief from import customs and excise duties on goods imported into the CCA. The relief amounts to a full rebate of import customs and excise duties on all goods imported into a CCA by a CCA enterprise.

This means that the payment of customs and excise duties on any goods imported into a CCA in an SEZ would be suspended, translating to a significant cash flow benefit. A CCA enterprise that intends to import and export goods must register with SARS as an importer and exporter. A CCA enterprise that intends to utilise rebate item 498.01 must also register with SARS as a rebate user. Application for the registration as a rebate user may be done simultaneously with the application for registration as an importer or exporter.

Application for registration must be made on Form DA 185 and its relevant annexures.

c. Value-added tax incentives-
The value-added tax (VAT) regime was amended to allow for goods and services that are acquired from the domestic market to be charged with VAT at 0% (zero percent) and to allow the import of goods to be exempt from VAT. These incentives are available to a business that is situated in a CCA of an SEZ or the operator of the SEZ operator for purposes of developing the CCA within the SEZ. Importantly, the VAT incentive applies only in the CCA of the SEZ and not to other areas within the SEZ.

The VAT incentives include:

  • Goods and services supplied by a VAT-registered vendor into the Customs Controlled Area (CCA), for the Customs Controlled Area Enterprise (‘CCAE’) or the SEZ operator, will carry a 0 % (zero percent) VAT charge, instead of a 15% (fifteen percent) VAT charge; and
  • Goods imported into the CCA, by the CCAE for purposes of the CCA, will carry no VAT charge (being an exemption from VAT upon importation), instead of carrying a VAT charge of 15% (fifteen percent).

However, goods sold by the CCAE into the domestic market will carry a VAT charge of 15% (fifteen percent); and if the import is from a country other than Botswana, Namibia, Lesotho and Swaziland, the upliftment of 10% (ten percent) on the value of the import, is also not applicable.

d. Foreign tax credit-

The South African Income Tax Act 58 of 1962 makes provision for a rebate against Corporate Income Tax (‘CIT’) in respect of foreign taxes paid on foreign-sourced income or a deduction against income of foreign taxes paid on SA-sourced income. In both instances, the taxpayer must be an SA resident, the income must be included in taxable income, and that income must have been subject to a foreign tax that is not recoverable. The rebate is limited to the total normal tax payable calculated by applying the ratio of the total taxable income attributable to the foreign tax to the total taxable income. The deduction, however, may not exceed the income on which the foreign tax was levied.

e. Rebate against CIT-

The Income Tax Act makes provision for a rebate against CIT in respect of foreign taxes paid on foreign-sourced income or a deduction against income of foreign taxes paid on SA-sourced income. In both instances, the taxpayer must be a South African resident, the income must be included in taxable income, and that income must have been subject to a foreign tax that is not recoverable. The rebate is limited to the total normal tax payable calculated by applying the ratio of the total taxable income attributable to the foreign tax to the total taxable income. The deduction, however, may not exceed the income on which the foreign tax was levied.

f. Research and Development (‘R&D’)-

In terms of Research and Development (R&D), the current costs related to certain R&D activities carried on in South Africa are 150% (one hundred and fifty percent) deductible, subject to pre-approval by a government-appointed approval committee.

The cost of machinery and other capital assets acquired for the purposes of R&D may be depreciated at 40% (forty percent) in the first year of use, 20% (twenty percent) in the second, 20% (twenty percent) in the third year, and 20% (twenty percent) in the fourth year. Buildings used in the process of R&D may be written-off over a 20-year (twenty) period.

g. A Special Economic Zones (SEZ)-

SEZ incentive has been introduced for companies carrying on business in an SEZ comprising of a reduced corporate tax rate of 15% (fifteen percent) as well as a 10% (ten percent) allowance in respect of the cost of new and unused buildings owned by a qualifying company or any new or unused improvements to any building owned by a qualifying company.

In addition, employment incentives have also been introduced for employers carrying on a trade in an SEZ that will allow for an employees’ tax reduction for the employer in respect of qualifying employees, up to a prescribed monthly amount.

In order to assist small and medium-sized businesses to raise capital to finance businesses, a tax incentive for investors in small and medium-sized enterprises through venture capital companies was introduced. A deduction is permissible from the income of a taxpayer in respect of expenditures actually incurred by that person in respect of shares issued to that person by a venture capital company.

h. Industrial policy projects-

In 2008, a ZAR 20,000,000,000 (twenty billion) incentive package for investors in energy efficient projects was announced. The incentive is available for industrial projects participating in the manufacturing sector (other than alcohol or alcohol-related products, tobacco or tobacco-related products, arms and ammunition, and biofuels, which have a negative impact on food security). Companies are divided into those with a qualifying status and those with a preferred status. The status is determined in terms of a point system.

The proposed project must either be a ‘brownfield project’ (expansion or upgrade of an existing industrial project) or a ‘greenfield project’ (a wholly new industrial project, which uses new and unused manufacturing assets). Approved projects may be granted a tax allowance known as an additional investment allowance equal to 55% (fifty-five percent) (100% (one hundred percent) if located in an industrial development zone) of the cost of any manufacturing asset used in an industrial policy project with preferred status or 35% (thirty-five percent) (75% (seventy-five percent) if located in an industrial development zone) of the cost of any manufacturing asset used in any other approved industrial policy project.

The additional investment allowance may not exceed ZAR 900,000,000 (nine hundred million) in the case of any greenfield project with a preferred status, ZAR 550,000,000 (five hundred and fifty million) in the case of any other greenfield project, ZAR 550,000,000 (five hundred and fifty million) in the case of any brownfield project with a preferred status, or ZAR 350,000,000 (three hundred and fifty million) in the case of any other brownfield project.

In addition to the above, a company may also claim a deduction known as an additional training allowance.

i. Energy efficiency savings-

The energy efficiency savings incentive provides an income tax deduction to qualifying taxpayers. The deduction equates to ZAR 0.95 for each kilowatt hour (or equivalent) saved by the taxpayer during the relevant year of assessment against a baseline from the beginning of the year.

j. International shipping incentive-

Income from international shipping of a resident company that holds a share in a South African flagged ship is exempt from income tax. Qualifying shipping companies can also use a currency other than the rand as their functional currency.

k. Venture capital companies-

In order to assist small and medium-sized businesses to raise capital to finance businesses, a tax incentive for investors in small and medium-sized enterprises through venture capital companies was introduced. A deduction is allowed from the income of a taxpayer in respect of expenditures actually incurred by that person in respect of shares issued to that person by a venture capital company.

l. Headquarter company regime-

A ‘headquarter company’ regime encourages the use of South Africa as a location for intermediate holding companies. There are benefits offered to a headquarter company which are exemptions from South Africa’s Controlled Foreign Company Rules (‘CFC’) rules, exemptions from dividend withholding tax on the headquarter company’s dividend distributions, exemptions from the withholding tax on interest in certain circumstances and exemptions from South Africa’s transfer pricing rules on back-to-back loans, outbound loans, back-to-back intellectual property (‘IP’) licensing arrangements, and outbound IP licensing arrangements.

There is also a participation exemption for dividends received from, or gains derived on the disposal of, foreign qualifying holdings. It must be noted that these exemptions are not specific to headquarter companies but are available generally to SA-resident shareholders.

The requirements for a headquarter company are as follows:

  • The headquarter company must be SA resident.
  • Each shareholder in the headquarter company must hold at least 10% (ten percent) of the headquarter company’s equity shares and voting rights. This means that a headquarter company can never have more than 10 (ten) shareholders.
  • At least 80% (eighty percent) of the headquarter company’s assets (measured on a ‘cost’ basis and excluding cash and certain bank deposits) must be comprised of certain assets related to the foreign companies in which the headquarter company holds at least 10% (ten percent) of the equity shares and voting rights. Specifically, these assets must be the equity shares in those companies, loans to those companies, and IP licensed to those companies.
  • At least 50% (fifty percent) of the headquarter company’s gross income must be comprised of dividends, interest, royalties, rentals, service fees, or proceeds from the sale of equity shares or IP from its 10% (ten percent) plus holdings, where the gross income exceeds ZAR 5,000,000 (five million).

Pension/Social security funds/benefits tax

Social security contributions by the employer are as follows:

In terms of private pension funds contributions are generally made by the employer, usually 5% (five percent) to 7.5% (seven and a half percent) to each of the employee’s salary. This is not compulsory for employers to establish.

The employee and the employer usually contribute equally to Medical aid schemes. It is not compulsory for employers to contribute.

In terms of Unemployment insurance employers contribute 1% (one percent) of the employee’s earnings to the Unemployment Insurance Fund.

a. Income tax-

Taxes on income and profits are levied by the national government in terms of the Income Tax Act 58 of 1962. The Act is administered by the Commissioner for the South African Revenue Service (SARS).

Income tax is an annual tax and represents a levy imposed on all persons who have a taxable income. Income tax is calculated by applying pre-determined rates to the taxable income of a person. For calculation purposes, a distinction is drawn between natural persons (individuals), juristic persons (such as companies) and trusts.

The Act contains provisions for the levying of different types of tax, namely, normal tax (on income and on capital gains), donations tax; and various withholding taxes, such as dividends tax and interest withholding tax.

In terms of the Act individuals are subject to income tax at a marginal rate of tax between 18% (eighteen percent) and 45% (forty-five percent), which is based on a progressive tax table. Whilst South African companies are subject to income tax at a rate of 28% (twenty-eight percent), special rules apply to gold-mining companies and long-term insurance companies.

South African branches of foreign companies are also subject to income tax at a rate of 28% (twenty-eight percent). However, this applies in respect of years of assessment commencing on or after 1 April 2012.

b. Corporate Income taxes-

Corporate Income Tax (CIT) is a tax imposed on companies resident in the Republic of South Africa that is incorporated under the laws of, or which are effectively managed in, the Republic, and which derive income from within or outside the Republic. Corporate Income Tax is payable at a rate of 28% (twenty-eight percent).

Non-resident companies which operate through a branch or which have a permanent establishment within the Republic are subject to tax on all income from a source within the Republic.

Payment of tax upon an assessment notice issued by SARS must be done within the period specified in such notice.

c. Withholding taxes-

South African Tax law provides that payments made to a non-resident are subject to withholding tax. Such withholding tax is payable to SARS by the South African resident making the payment to a non-resident.

Royalties and know-how payments made to non-residents for the use of, or right to use Intellectual Property rights in South Africa are deemed to be from a South African source. Thus, the payer of the royalty or know-how payment is obligated to deduct a withholding tax of 15% (fifteen percent) of this payment, which is a final tax payable by the recipient of such income.

Fixed Property Acquired From A Non-Resident; Any person who has to pay an amount to a non-resident in respect of the purchase of immovable property situated in South Africa, where the purchase price exceeds ZAR 2,000,000 (two million), must withhold an amount from such payment and pay it to SARS.

The rate of withholding tax was recently increased and as of 22 February 2017, it is 7.5% (seven and a half percent) of the purchase consideration if the seller is a natural person, 10% (ten percent) if the seller is a company and 15% (fifteen percent) if the seller is a trust.

With respect to interest, South Africa has introduced a 15% (fifteen percent) withholding tax on interest payable to non-residents. The withholding tax applies to interest either paid by a South African resident or paid on funds used in South Africa. Interest attributed to a permanent establishment outside South Africa will be exempt from the withholding tax.

Generally, dividends (other than foreign dividends) received by or accrued to any South African resident, whether a company or an individual, are exempt from income tax.

However, with effect from 1 April 2012, the receipt of dividends by a shareholder of a South African company is subject to dividends tax (subject to certain exemptions and the application of a relevant DTA). The dividends tax rate was initially 15% (fifteen percent), but as of 22 February 2017, the rate was increased to 20% (twenty percent). The dividends tax applies to dividends paid by resident companies and certain foreign companies that are listed locally, subject to certain exemptions.

The following are some of the most important exemptions in respect of foreign dividends:

  • received by residents holding at least 10% (ten percent) of the equity interest (share capital) and voting rights in that foreign company; and
  • in respect of a listed share that does not consist of a distribution of an asset in species.

d. Value Added Tax (VAT)-

VAT is an indirect tax on the consumption of goods and services in the economy. The government raises most of its revenue by requiring certain businesses to register and to charge VAT on the taxable supplies of goods and services. These businesses become vendors that act as the agent for government in collecting the VAT.

VAT is charged at each stage of the production and distribution process and it is proportional to the price charged for the goods and services.

VAT increased from 14% (fourteen percent) to 15% (fifteen percent) from 1 April 2018. VAT is levied on the supply of most goods and services and on the importation of goods. The VAT on the importation of goods is collected by customs. There is a limited range of goods and services which are subject to VAT at the zero percent rate or are exempt from VAT.

A vendor making taxable supplies of more than ZAR 1,000,000 (one million) per annum must register for VAT.

Employers that are corporations are taxed at a flat rate of 28% (twenty-eight percent). A levy is imposed by the Skills Development Levies Act 1999 to contribute towards the cost of skills development. The levy imposed is 1% (one percent) of the total of all remuneration paid or payable or deemed to be paid or payable, by the employer to all employees during any month. The levy must be paid to the education and training authority for the sector to which the employer belongs.

Investment Protection Mecahnisms

The South African government is stable, with the African National Congress (‘ANC’) currently holding a majority of above 60% (sixty percent) in the National Assembly. Over the past decade this majority has diminished slightly, with the official opposition, the Democratic Alliance (‘DA’), increasing its support base. The regulatory bodies are also fairly stable and efficient which allows investors to invest freely without worrying about over-regulation of bodies.

The Protection of Investment Act 22 of 2015 aims to achieve a balance of rights and obligations that apply to all investors. Thus, it provides for foreign investors and their respective investments to be treated no less favourably than South African investors in like circumstances.

The expression ‘like circumstances’ is defined as meaning the requirement for an overall examination of the merits of the case by taking into account all the terms of a foreign investment, including a host of factors specific to South Africa and not the investor.

The Act refers to investors and foreign investors interchangeably, without defining either term appropriately, the Act provides the following domestic protection to investors:

a. Physical security of property-

South Africa must accord foreign investors and their investments a level of physical security as may be generally provided to domestic investors in accordance with minimum standards of customary international law and subject to available resources and capacity.

b. National treatment-

Foreign investors and their investments must not be treated less favorably than South African investors in similar circumstances.

c. Transfer of funds-

A foreign investor may, in respect of an investment, repatriate funds subject to taxation and other applicable legislation.

The South African government does not to enter into any new BITs due to the enactment of the Protection of Investment Act. Thus, the country will not renew any BITs that come up for renewal. Instead, the Investment Act will serve as a uniform position for investor protection and a substitute for all of the country’s BITs.

However, South Africa has a bilateral Free Trade Agreement (‘FTA’) with the Southern Africa Development Cooperation (‘SADC’). It also has preferential agreements with Malawi, Zimbabwe and Croatia plus a non-reciprocal trade arrangement with Mozambique.

South Africa also has BITs that are currently in force with Nigeria, Russia, Greece, Cuba, Finland, Senegal, Iran, Mauritius, China and Korea.

Real Property Acquisition

The registration of rights in land and other immovable property is regulated by the Deeds Registries Act 47 of 1937. The transfer of ownership in land is affected by registration in a deeds registry in accordance with the provisions of the Deeds Registries Act.

South Africa boasts a highly advanced and efficient system of land registration. The system is one of registration of title as opposed to a system of registration of deeds, as is found in many European countries.

Further, the country has developed an electronic deeds registration system (‘e-DRS’) that has already commenced, and it is anticipated that it will operate in tandem, and in addition to, the pre-existing online Deeds Registration System.

The general rule in South Africa is that the owner of a property has real rights in the property and no person can successfully attack the right of ownership duly and properly registered in the Deeds Office.

In South African law, lessees are protected for a period up to 10 (ten) years by virtue of the ‘huur gaat voor koop’ rule. In essence this rule, grants real protection to lessees for 10 (ten) years in instances where the lessor has sold the property to a third party.

This means the new owner must abide by the provisions of the lease even though he was not a signatory to the original lease agreement.

The contract of sale, as it is known in South Africa today, derives its origins from the Roman consensual contract of emptio venditio.

There can be no contract of sale without a price and without a thing to be sold. In South African law, the definition of a contract of sale remains virtually the same. The full board of the Judicial Committee of the Privy Council reaffirmed the position that a sale is a contract in which one person (the seller or vendor) promises to deliver a thing to another (the buyer or emptor), the latter agreeing to pay a certain price cited.

The procedure for acquiring real estate in South Africa is as follows:

  1. Once a purchase decision has been made, an Offer to Purchase will be signed by the purchaser. The signed Offer to Purchase will be submitted to the seller. It must be noted that the South African law does not recognise verbal agreements in respect of sale and purchase of immovable property so the sale agreement must be written.
  2. A 10% (ten percent) deposit is generally required by the seller within 7 (seven) days of signature of Offer to Purchase.
  3. Once it is signed by the Seller, it becomes a Deed of Sale but it may be subject to Suspensive Conditions like raising a mortgage bond – when the suspensive conditions have been met, the contact is binding.
  4. The Deed of Sale is given to a Conveyancer who attends to the transfer of property and ensures that the financial arrangements are secure. The Conveyancer then prepares the documentation required to submit the transaction to the Deeds Office to effect transfer. He/she will then call for a Municipal Clearance Certificate for rates and taxes from the Municipality.
  5. Before the documents can be submitted to the Deeds Office, the purchaser will be required to pay the Transfer Duty and the Registration Costs.
  6. At this point, a Tax Clearance Certificate in respect of the Seller is required from the South African Revenue Service before documents can be submitted to the Deeds Office. This is to ensure that all taxes have been cleared.
  7. Generally, a bank guarantee or a cash deposit for the balance of the purchase price is required to be made into the Conveyancer’s Trust account at the time agreed in the Offer to Purchase.
  8. Should a mortgage bond be registered over a property, a Bond Attorney is appointed to cancel the bond registration.
  9. Property can be registered in the names of multiple individuals or in Companies and Trusts. The registration of transfer process usually takes about 2 (two) to 3 (three) months to complete and the Agent or Conveyancer should keep the buyer and seller informed of the progress.

Tech Start-up & Technology

The Companies Act of 2008 relays the appropriate types of business structures in South Africa. These structures are discussed in detail in the first segment of the guide, above. Start-up and technology businesses intending to register a company can register a company in any entity they desire.

South Africa is party to various international agreements and conventions relating to the protection of intellectual property including patents, trademarks, designs and copyright.

South Africa is a party to the World Trade Organisation Agreement on Trade Related Aspects of Intellectual Property Rights (‘TRIPS’) and must thus comply with the minimum standards set by that agreement for the protection of intellectual property.

The Companies and Intellectual Property Commission is the responsible body established for the registration of intellectual property rights (trademarks, patents, designs and copyright) and maintenance thereof.

South Africa supports start-up companies and has very mature legislation and regulations as well as funds for its start-up ecosystem. The South African government has enacted various policies, regulations and legislation that encourage the growth of the local start-up ecosystems.

In 2009, Section 12J was introduced into the Income Tax Act, it is a tax incentive which gives tax relief to investors for investing in qualified Venture Capital Companies (‘VCCs’). The objective of Section 12J is to create and maintain employment and to grow the economy and ultimately the tax base. Section 12J was introduced with a “sunset clause” that takes effect on 30 June 2021. It is unclear whether the incentive would be extended.

The incentive also allows investors who make investments in approved VCCs   that then invest in qualifying small companies to have a tax deduction. By operation, Section 12J, enables venture capital firms to invest in an approved venture capital company (VCC) and claim an income tax deduction in respect of the expenditure actually incurred to subscribe for VCC shares.

Tech Start-up & Technology

South Africa has attempted to bring its data protection law in line with European legislation through the Protection of Personal Information Act 2013 (‘POPIA’). The POIPA seeks to give effect to the right to privacy contained in the Bill of Rights as enshrined by the Constitution and is widely regarded as being a codification of the common-law position regarding the processing of personal data. 

The POPIA is a legislative initiative aimed at giving effect to the constitutional right to privacy as enshrined in Section 14 of the Constitution by safeguarding personal information when processed (that is, any operation or activity or any set of operations, whether or not by automatic means, concerning personal information) by responsible parties.

POPIA sets out various provisions that regulate the manner that personal information can be processed by both natural and juristic person (including employers). “Personal information” in terms of POPIA is defined as information that relates to an identifiable, living, natural person and where it is applicable, an identifiable, existing juristic person (for example, companies or trusts) and includes:

  • Information on the race, gender, sex, pregnancy, marital status, national, ethnic or social origin, color, sexual orientation, age, physical or mental health, well-being, disability, religion, conscience, belief, culture, language and birth of the person;
  • Information on the education or the medical, financial, criminal or employment history of the person;
  • Any identifying number, symbol, email address, physical address, telephone number, location information, online identifier or other particular assignment to the person;
  • Blood type or any other biometric information of the person;
  • Personal opinions, views or preferences of the person;
  • Correspondence sent by the person that is implicitly or explicitly of a private or confidential nature or further correspondence that would reveal the contents of the original correspondence; and
  • The name of the person if it appears with other personal information relating to the person or if the disclosure of the name itself would reveal information about the person.

The responsible party holding personal information must ensure compliance with all the conditions for the lawful processing of personal information under POPIA. If personal information is collected, a responsible party must take reasonably practicable steps to ensure that the person to whom it relates is aware of factors such as the following:

  • The information being collected and the source from which it is collected;
  • The purpose for which the information is being collected;
  • Whether or not the supply of the information is voluntary or mandatory;
  • The consequences of failure to provide the information;
  • Any particular law authorizing or requiring the collection of the information;
  • The fact that, where applicable, the collector intends to transfer information to any other party or country or international organization;
  • The level of protection given to the information by that third country or international organization; and
  • Any further information that is necessary, taking into account the specific circumstances in which the information is and is not to be processed, to enable processing in respect of the person to be reasonable.

Dispute Resolution

South Africa’s court system is very efficient. It is comprised of the Magistrates Courts, High Court, Supreme Court of Appeal and the Constitutional Court.

There are specialist courts which have been established for the adjudication of specific matters. These include: the Labour Court, the Labour Appeal Court, the Specialist Income Tax Court, the Electoral Court, the Companies Tribunal, the Competition Commission, the Competition Tribunal, the Competition Appeal Court, the Consumer Commission and the Consumer Tribunal. Each of these specialised courts has been established in terms of legislation governing the subject matter in question.

Section 165 of the Constitution of the Republic of South Africa, 1996 (‘Constitution’) protects the independence of the courts by providing that no person or organ of state may interfere with the functioning of the courts. Thus, the Courts are empowered to apply the Constitution and the law impartially and without fear, favour or prejudice.

Generally, the South African judicial system is thriving and it has successfully managed to maintain its independence and impartiality.

a. Enforcement of foreign judgements and arbitral awards-

The South African legal system makes it possible to enforce foreign judgements in South Africa by way of registering the judgement with a local court under the Enforcement of Foreign Civil Judgements Act 32 of 1988.

However, the scope of this Act is extremely narrow and only applies to judgements from countries designated by the Minister of Trade and Industry as published in the Government Gazette. Thus far, only Namibia has been designated (See Government Gazette Number 17881 published on 1 April 1997).

Therefore, in most instances, a claimant wishing to have a foreign judgement enforced in South Africa must apply to a local court for an order recognising the judgement and declaring it to be enforceable in South Africa. There are certain requirements that must be met for this to be successful.

In the event that the judgement has been recognised by a local court, the claimant can obtain a writ of execution and proceed to enforce the judgement.

A foreign judgement will probably not be recognised in South Africa if the foreign court exercised jurisdiction over the defendant solely by virtue of an attachment to found jurisdiction or on the basis of domicile alone.

South African courts do not enforce foreign revenue or penal laws.

The following types of alternative methods of dispute resolution are available in South African Law:

a. Arbitration –

This process usually takes place pursuant to an agreement between the parties to a dispute, referring that dispute for final determination to an independent tribunal appointed by or on behalf of the parties.

b. Mediation –

This is a dispute resolution process through which a third party acceptable to all parties to a dispute helps to bring the parties to an agreed solution. The mediator usually has no decision-making powers.