Starting a Business as a
foreigner in South Africa
Starting a business as a
foreigner in South Africa can be an arduous task without enlisting professional help. There are a
number of ‘hoops’ that must be circumvented and the process can be time
consuming and a distraction from the all important task of establishing your
business.
At Sa Migration Immigration
we have assisted hundreds of entrepreneurs with their ambition to create a
business in South Africa and are able to boast of an unrivalled track record of
success, all based on what we believe to be the most comprehensive service
available.
Below we detail the
important aspects of starting a business as a foreigner in South Africa but if
you prefer to talk to a human being to discuss your needs, feel free to call us
on any of our phone numbers
Where to begin with
starting a business as a foreigner in South Africa
Importantly and before you
commit time and money, you should have an
assessment of your circumstances and requirements carried out.
Assessments, as with ourselves, should be free of charge and carry no
obligation.
Very often, and
understandably, people source information on the obvious, in this case the
business visa. There is however a real alternative that should be considered,
if for no other reason to ensure you have made an informed decision.
Below we look at the two
routes for starting a business as a foreigner in South Africa and discuss the
merits and pitfalls of each.
The different visa’s for
starting a business as a foreigner in South Africa
In order to be able to set
up, invest into and work within a business in South Africa as an immigrant
there are two types of visa you can apply for:
-
Business visa – Traditionally, for
anyone starting a business as a foreigner in South Africa this category
has been the most recommended.
-
Independent Financial Permit – A
very underused permit category that allows for the holder to commence a
business, but also offers a host of other benefits over the business visa
route.
Who can apply?
Business visa are for those
individuals seeking to invest in a business, or an existing start up, and who
will be working within the business.
The Independent Financial
skills permit is a permit that is not restricted to a certain economic
activity. As such it allows the holder total freedom to invest into a business,
whether they will be working in it or not. There is also no obligation to
invest, or start a business. In short the holder of the Independent permit is
free to make their own decision as to whether they run a business, work or even
retire.
Must there be local
ownership?
No a business can be owned
and run with 100% foreign ownership. However for those with a local partner
this is also fine. This applies to both the business visa and independent financially
independent.
Can I buy into or outright
an existing business?
Yes, which ever permit or
visa category you select you can do either or indeed set up one from scratch.
Is there a minimum
shareholding a foreigner must own?
As a business visa holder
you will need to typically own in excess of 25% of the business. A Financially
Independent permit holder has no restrictions.
Is there a minimum amount
of investment required?
For business visa holders
you need to invest ZAR 5 million into the business unless you qualify for a
waiver.
The Act calls for
investment of R5,0 million in a business and you need to make sure you employ
60% South African citizens or permanent residents to get both a temporary
and permanent business visa, you can get these visas with less capital
investment - sometimes for as low as R600,000 investment using our
expert team at SA Migration.
Many businesses do not
require a capital investment as large as R5 million and in certain cases, you
are allowed to reduce this amount and commit to a smaller investment if your
business falls within the certain industries. The following businesses to be in
the national interest, and therefore qualifying for reduction or waiver of the
capitalisation requirements as determined to be in the national interest in
relation to a Business Visa: Many of these business owners do not have the
required investment amounts. If this is the case and the business falls in line
with one of the following industries, a capital waiver can be requested. This
would mean a reduction in the required investment amount.
There is no requirement for
the holder of the Financially Independent permit to invest any set amount into
as business, they are free to invest as little or as much as they desire. Note
however, to successfully apply for a Financially Independent permit, you need
to prove a net worth of the equivalent of ZAR12,000,000 (12 million) but these
funds do not need to be brought into South Africa.
Can my partner or children
work in the business?
Partners of the business
visa holder can work in the business but not for remuneration. Children would
not be able to work in the business unless a work visa was granted in their own
right. If you have children still in education years a study visa would be required.
Partners of Independent
Financial permit holders will need to secure residency in their own right which
would involve a spousal or life partner visa application. Dependent children
would require a study visa.
Must I employ South
Africans?
There is a requirement that
employees are at least 60% South Africans (citizens or permanent residency
holders). These must be employed on a permanent basis in the business if you
hold a business visa. There are no such requirements for the Independent
Financial permit holder.
Can I apply for permanent
residency?
Starting a business as a
foreigner in South Africa, via the business visa route, would first mean
obtaining temporary residency. Once in receipt of this, permanent residency can
be applied for.
Independent Financial permit
applicants may only apply for permanent residency. This of course has its
attractions but the disadvantage can be that permanent residency takes longer
for the Department to process.
What sort of company must I
set up?
Typically a Pty Ltd would
be the appropriate company structure and you can ask us about about the various business structures here.
I am in a permanent
relationship / married to a South African – do I need a business visa?
Neither a business visa,
not an Independent Financial Permit are required if you have a South African
partner. Starting a business as a foreigner in South Africa with a South
African partner requires you to have either a spousal
visa or life partner visa
which you can then endorse to set up and run a
business.
If I am not working in the
business, just investing, do I need a business visa?
Business visa’s are
designed for the holder to work in the business. Foreign investors do not
require a business visa. Any foreigner may own a business with no restriction.
However should they intend to work within the business or come to live in South
Africa a visa would be required.
How do I prove my business
concept and my credentials?
When making a business visa
application, part of the application’s supporting evidence is the submission of
a comprehensive business plan. The business plan
purpose is twofold – one, and in the traditional sense, to prove the business
will be successful, and two, to highlight some of the home affairs
requirements.
There is no requirement for
a Financial Independent application to submit a business plan.
Would my business need to
be audited?
There are requirements for
businesses with a certain turnover to be audited and also others like estate
agents are required from a regulatory prospective. There is also an argument
for it being good practise for all businesses to be audited.
The decision, subject to
these rules, is up to the business holder.
Can I set up an NGO in
South Africa as a foreigner?
Yes, non profits are able
to set be up.
How long does the
application process take?
There are two aspects to
the application process:
- The
compilation of the visa or permit application.The compilation of the
business visa application is more time consuming as this stage involves
not only the Home Affairs requirements but also supporting documentation
such as the company registration paperwork and the memorandum of
incorporation. In addition other departments such as the Department of
Trade and Industry are involved. Compilation can therefore take 4 – 12
weeks.
- The
Financially Independent application does not involve such third parties
and can therefore be achieved much quicker.The second stage is the
submission to the Department of Home Affairs and the Departments timing
can vary from 4 weeks to 12 weeks usually for a business visa.
Here there can be a
potential drawback for applicants for the Financially Independent as these have
historically taken approx 9 months.
Is there any other
important distinctions?
But in summary, whilst the
independent financial permit is a lot more flexible and carries little
obligations with it either initially or on an ongoing basis there are 2
considerations that must be taken into account:
- The
timing of your move. Permanent residency applications (Independent
Financial Permits) take longer to process. If you plan in ample time this
can be mitigated.
- The
Department of Home Affairs levies an additional charge for successful
applicants of the Independent Financial permit of ZAR 120,000. This is
almost akin to a success fee as it is only payable if your application is
approved.
Making an Application for a
Business Visa
Making an Application for a
Business Visa
This section deals with
making an application for a business visa in South
Africa. A business visa is required by a person who is seeking to
buy into or set up a business in South Africa in which they will be actively
involved (work).
Please read on for information
how you make application for a business visa in South Africa or should you
prefer you can contact one of our team
to discuss your situation. For further information on business visa you can
also view our quick links on the left hand side of this page.
Getting assistance with
making a business visa application
- You can e-mail your business visa enquiry here to info@sami.co.za
- Use
or office Whtaspp number + 282 3738415 to contact us
NOTE: If you are
an existing company based abroad but seeking to expand your operations into
South Africa please mention this with details on the visa that may be
applicable to you.
Who should apply for a
Business Visa?
Applications for business
visa, as alluded to above, are for individuals who wish to either invest into
an existing South African business that they will work in, or set up a new
business that will work in.
Business visa versus
investor visa
A business visa should not
be confused with an investor visa. A
business visa allows you to work in the business and the visa is issued for
this purpose. An investor visa (which is not offered in South African
immigration) allows immigration through investment of a certain amount of
capital and does not require the immigrant to work.
When applying for a
business visa what are the residency options?
Making an application for a
business visa in South Africa allows you to apply for temporary residency. Once
you are in receipt of temporary residency you can then apply for permanent
residency.
How long can I apply for on
my business visa application?
As with all temporary
visa’s, the decision as to the validity period of a business visa lies with the
Department of Home Affairs. In the case of a business visa it will not be
issued for more than 3 years.
When can you apply for
permanent residency?
Permanent residency can be
applied of at any stage but it is most normal to make an application after
receiving your business visa for temporary residency.
Where should my business
visa application be made?
First time applications
that involve a change of your via status, for example from tourist to resident,
must be made from outside of South Africa. It is only where there is no residency
status change that you can apply in South Africa, for example renewing an
existing temporary visa.
What is the main criteria
when making an application for a business visa in South Africa?
- A
completed application form
- A thorough business plan
- An appropriate company structure
- Applicable registrations or undertakings
- Investment amount for business visa
- Employment of South African citizens or Permanent residency holders
- Types of business
structures in South Africa
- Types
of business structures in South Africa
- The
Companies Act of 2008 relays the appropriate types of business
structures in South Africa pertaining to companies. Whether you are
seeking a business visa, or an endorsement to a visa you will have to
select the right business structure.
- Sa
Migration Immigration has assisted individuals / companies since 2006 with
advice on the types of business structures in South Africa and with the
setting up thereafter.
- Types
of business structures in South Africa
- Below
we give you an insight into each of the types of business structure in
South Africa you may consider for your business if setting up operations
as a foreigner. Where there is more information available on the business
type simply click on the headers below.
-
-
Sole Proprietorship
- A
sole proprietorship, which is often referred to as a sole trader, is a
business structure that is owned and run by one individual.
- It
is important to note that with a sole proprietorship there is no
separation between the owner and the business structure – the business
does not have its own legal entity. In practise this means the income of
the business is all for the owner, as are the taxes and any liabilities.
-
- Partnership
- A
partnership is akin to a coming together of between 2 and 20 people who
contractually agree to operate a profit generating business business
together. They further agree to split any profits as per their agreement
and in proportion to their interests.
- In
establishing a partnership each partner needs to make a contribution to it
and as per a sole proprietorship the partnership is not a separate legal
entity, leaving partners generally liable for debts
- .
-
Private Companies
- Typically
the choice for most foreigners setting up a business in South Africa. This
type of business structure in South Africa does not place any prohibition
on foreign shareholding and only requires one shareholder and one director.
- The
new Companies Act prohibits a Private Company (Pty Ltd) from offering
securities to the public.
- Private
companies are seen as separate legal entities and as such are taxed in
their own right and offer the shareholders protection against liabilities.
- A
Pty Ltd will require reservation of a company name, the completion of a memorandum of incorporation and written
consent of the auditors, if any, to
act for the company.
-
- Public
Companies
- A
public company is largely set up to offer shares to the general public for
the purpose of capital raising. There is a requirement for a minimum of
one shareholder and three directors.
- Public
companies are known as Ltd companies and have their own legal identity.
- Personal
Liability Companies
- If a
company incorporates under section 8(2)(c) of
the Companies Act the terms of its memorandum of incorporation
(MOI) state that the directors and past directors are jointly and
severally liable, together with the company, for any debts and liabilities
of the company, as are or were contracted during their respective periods
of office. Typically this means professions such as attorneys and
accountants that make use section 8(2)(c) of the Companies Act.
-
- State
Owned Companies
- A
State owned company is either a company defined as a “state-owned
enterprise” in the Public Finance Management
Act 1 of 1999 or a company owned by a municipality. The
majority of the provisions of a public company will apply to state-owned
companies as well.
- Non-profit
Companies (NPC)
- A
non profit company is incorporated public that is established, as an
example, for some form of cultural or social activities or communal /
group interests. Income is not distributed to any stakeholder from this
type of business structure.
-
-
Foreign and External Companies
- External
companies are foreign owned companies that are incorporated outside of
South Africa but trade in South Africa. There is a requirement for foreign
owned companies to register as an external company with the CIPC and they
may not offer securities to the South African public.
- This type of business
structure in South Africa is utilised by foreign companies wishing to set up a branch in South Africa.
Business Plans for South
Africa
Researching a business
plan, formulating it and ensuring the business plan is realistic and
workable are just some of the key criteria when commencing a new business.
When such a business
plan is presented as supporting evidence to immigration authorities its
importance becomes even more valid.
A business plan is a
written document that describes the business, the business objectives,
strategies, market segment, forecasts and financial resources.
The functions of a business
plan are many but include:
- Providing
a template from which to run your business
- Measuring
the success of your business
- Setting
out financial goals – short and long term
- Quantifying
expansion plans
- Raising
capital
- Supporting
immigration applications
- A
review document
- Attracting
investors, shareholders and business networking
What should a Business Plan
include?
A business plan is a
written statement of the journey your business is going to take. It should
provide details of how you intend to develop the business, who is going to play
a role in this business and how the financial side of the business will be managed.
Clarity on these issues is
particularly important if you’re looking for finance, investment or using the
business plan to support an immigration application. Your plan should at least
include:
-
An executive summaryThis is an overview of
the business you want to start. This is essential – first impressions
count! Many people will be influenced by how well the summary is presented
based on the first few pages of your plan.
-
Short description of the business opportunityThis details who you are, what product or
service you will supply and why, who you will supply the product to and
how.
-
OperationsIncluding such things
as manpower, premises, IT infrastructure, future expansion.
-
Marketing and sales strategyWho
will buy your service or product and why. How will you promote the service
in terms of product, placement and pricing.
-
FinancialsOne of the most
important aspects of the business plan. These documents and tables
translate everything form the business plan into figures.
The Exempted Industries are
:
(a) Agro-processing
- Fisheries
and aquaculture i.e. freshwater aquaculture and marine culture
- Food
processing in the milling and baking industries
- Beverages
viz. fruit juices and the local beneficiation, packaging and export of
indigenous teas
- High
value natural fibres viz., organic cotton and downstream mohair production
- High
value organic food for the local and export market
- Biofuels
production viz. bioethanol and biogas
- oils:
tea extracts, including buchu, honeybush: and other oil derivatives
(avocado, amarula etc.)
- Diversification
/ beneficiation of biomass sources i.e. sugar, maize
(b) Business Process
Outsourcing and IT Enabled Services
- Call
centers
- Back
Office Processing
- Shared
Corporate Services
- Enterprise
solutions e.g. fleet management and asset management
- Legal
process outsourcing
(c) Capital / Transport
equipment, metals and electrical machinery and apparatus
- Basic
iron and steel
- Basic
precious and non-ferrous metals
- Casting
of metals
- Other
fabricated metal products: metalwork service activities
- General
purpose machinery
- Tooling
manufacturing
- Foundries
- White
goods and associated components
- Electric
motors, generators and transformers
- Electricity
distribution and control apparatus
- Insulated
wire and cable
- Accumulators,
primary cells and primary batteries
(d) Electro Technical
- Advanced
telecommunications
- Software
development
- Software
and mobile applications
- Smart
metering
- Embedded
software
- Radio
frequency identifications
- Digital
TV and Set Top Boxes due to migration to full digital television
- Process
control, measurement and instrumentation
- Security
and monitoring solutions
- Financial
software
- Manufacturing
sensors
(e) Textile, Clothing and
Leather
- Spinning,
weaving and finishing of textiles
- Knitted
and crocheted fabrics and articles
- Wearing
apparel except fur apparel
- Dressing
and dying of fur
- Leather
skins and hides beneficiation
(f) Consumer goods
- White
goods and associated components
(g) Boatbuilding
- Boatbuilding
and associated services industry
- Engines
and engine systems
- Marine
equipment and accessories
(h) Pulp, paper and
Furniture
- Manufacture
of paper products: publishing, printing and reproduction
- Manufacture
of articles of straw and plaiting materials
- Paper
and paper products and furniture
- Manufacture
of wood and products of wood and cork
(i) Automotives and Components
- engines,
radiators, filters and components thereof
- air
conditioners / climate control systems
- alarms
and Tracking devices
- axles,
transmission shafts
- body
parts and panels
- catalytic
converters, silencers and exhaust systems and components
- wiring
harnesses, instrument panels vehicle interiors, electronic drive train
components,
- lighting
equipment
- seats
and parts thereof, seatbelts, leather covers
- suspension
and shock absorbers, springs and parts thereof
- steering
wheels, columns and boxes
- ignition,
starting equipment, gauges and instrument parts
(J) Green Economy
Industries
(jj) Power generation:
- Nuclear
Build Programmer i.e. joint ventures, consortiums and the establishment of
new companies to grow South Africa's nuclear manufacturing capability and
nuclear supply industry to supply into the nuclear build programme
- Independent
power generation, energy infrastructure and alternative energy
(jjj) Renewable Energy:
- Onshore
wind power - manufacture of turbines/blades
- Solar
PV and Concentrated Solar Power manufacture/assembly
- Biomass
- Small
hydro
- Lowering
greenhouse gas emissions from landfill sites
- Energy
efficiency and energy saving industries
- Solar
water heaters
- Waste
Management and Recycling
- Reducing
landfill
(k) Advanced Manufacturing
- Nano-materials
- High
performance materials based on natural resources (advanced bio-composites
- Advanced
materials, polymers and composites
- Medical
devices, diagnostics and composites
- Space
e.g. satellite manufacturers etc. and astronomy e.g. SKA, telescopes,
dishes etc.
- Composites
(intelligent textiles used in medical, building and construction
industries)
- Continuous
fibre reinforced thermoform composites
- Biochemical
and biologics for applications in agriculture, industry and health/medical
sectors
- Electricity
demand Site Management Solutions to improve electricity efficiency usage
- Lasers
and laser-based additive manufacturing various applications
- Advanced
Robotics Mobile Intelligent Autonomous Systems
- Applications
in the mining industry, data collection and analysis
- Bio
- manufacturing - Biochemical and biologics for applications in
agriculture, industry and health/medical.
- Fuel
cells and Technology
(l) Tourism infrastructure
- Accommodation
- hotels, boutique hotels, lodges and resorts
- urban
integrated tourism/ entertainment precincts
- adventure,
- eco-, sport-, conference- and cultural tourism
- infrastructure
developments
- leisure
complexes and world class golf courses
- harbour
and waterfront developments
- trans
frontier conservations areas
- Tourism
transport - aviation, rail, cruise liners etc.
- green
building and green technologies for tourism
- attractions
and activity - based tourism.
- museums
and heritage
(m) Chemicals, plastic
fabrication and pharmaceuticals
- basic
chemicals
- water
treatment chemical products
- man-made
fibres
- plastic
products: polypropylene and polyvinculchloride
- medical
(drips and syringes), manufacture of active pharmaceutical ingredient
- (APIs)
for key anti-retrovirals (ARVs)
- Manufacture
of reagents for AIDS/HIV diagnostics
- Production
of vaccines and biological medicines
(n) Creative and Design
Industry
- Film
studios, treaty film co-production ventures, distribution infrastructure
- Servicing
of foreign productions
- Production
of film and documentaries, commercials, stills photography and
- Multi-media
- Post-production
- Design
- Jewellery
manufacturing and design
- Fashion
design
(o) Oil and Gas
- Maintenance
ship and rig repair
- Fabrication
- equipment and specialised components
- Specialised
services - training and accreditation
- Specialised
services - non-descriptive testing, inspection services, SHEQ services
- Exploration
- technical services: seismic surveys, logging, environmental impact
assessments, etc.
- Exploration
- offshore
- Exploration
- onshore shale gas
- Exploration
- onshore coal bed methane and underground coal gasification
- Infrastructure
- refineries (Oil and GTL)
- Infrastructure
- terminals LPG/LNG import, storage and distribution
- Infrastructure
- ports and associated infrastructure
- Infrastructure
- storage
- Logistics
- pipeline
(p) Mineral beneficiation
- Downstream
processing and value addition
(q) Infrastructure
Development
(r) ICT
- Geoamatics
and Digital media
- Wireless
and Telecom
- Electronics
- IT
- Software
Development
- Advanced
programming
List of undesirable
Business in South Africa;
- Businesses
that import second hand motor vehicles into the Republic of South Africa
for the purpose of exporting to other markets outside the Republic of
South Africa
- The
exotic entertainment industry
- Security
Industry
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