Business Startup as a foreigner South Africa -

Business Startup as a foreigner 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 our contact 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 . 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 ’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 you can apply for:

Business – Traditionally, for anyone starting a business as a foreigner in South Africa this category has been the most recommended.
Independent Financial Visa – A very underused Visa category that allows for the holder to commence a business, but also offers a host of other benefits over the business route.

Who can apply?

Business 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 Visa is a Visa 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 Visa 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 and independent financially independent.

Can I buy into or outright an existing business?

Yes, which ever Visa or 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 holder you will need to typically own in excess of 25% of the business. A Financially Independent Visa holder has no restrictions.

Is there a minimum amount of investment required?

For business holders you need to invest ZAR 5 million into the business unless you qualify for a waiver.

You can read more about the minimum investment amount below .

Investment Waiver Business Application

The normal requirement for a business dictates a cash investment of R5 million rand or capital equivalent (in the form of new machinery or equipment.

Certain business types can however apply for a waiver to reduce this stipulated investment amount.

The process for applying for a business waiver will mean the formation and presentation of a business plan. The business waiver application will be judged on the various factors in this business plan including:

Contribution to economy.
Feasibility of business.
Jobs created for South African citizens or permanent residency holders.
Desirability of the business.

Most importantly, the business waiver application, will have to demonstrate that the business fits into one of the below categories.

Business waiver applications that may apply for a waiver (by category)

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 indigenousteas
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
Processing of seed oils: tea extracts, including buchu, honeybush: and other oil derivatives(avocado, amarula etc.)
Diversification / beneficiation of biomass sources i.e. sugar, maize

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

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
Electric motors, generators and transformers
Electricity distribution and control apparatus
Insulated wire and cable
Accumulators, primary cells and primary batteries
White goods and associated components

Electro Technical

Advanced telecommunications
Software development
Software and mobile applications
Smart metering
Embedded software
Radio frequency identifications
Process control, measurement and instrumentation
Security and monitoring solutions
Financial software
Manufacturing sensors
Digital TV and Set Top Boxes due to migration to full digital television

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
Consumer goods
White goods and associated components

Boatbuilding

Boatbuilding and associated services industry

Engines and engine systems
Marine equipment and accessories

Pulp, paper and Furniture

Manufacture of wood and products of wood and cork
Manufacture of articles of straw and plaiting materials
Manufacture of paper products: publishing, printing and reproduction
Paper and paper products and furniture

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
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
Lighting equipment
Wiring harnesses, instrument panels vehicle interiors, electronic drive train components,
Body parts

Green Economy Industries

Power generation:

Independent power generation, energy infrastructure and alternative energy
Nuclear Build Programme 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

Renewable Energy:

Onshore wind power – manufacture of turbines/blades
Solar PV and Concentrated Solar Power manufacture/assembly
Biomass
Small hydro
Energy efficiency and energy saving industries
Solar water heaters
Waste Management and Recycling
Reducing landfill
Lowering greenhouse gas emis
sions from landfill sites

Advanced Manufacturing

Nano-materials
High performance materials based on natural resources (advanced bio-compositesAdvanced 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/medicalsectors
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, industryand health/medical
Fuel cells and Technology

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

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

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

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

Mineral beneficiation

Downstream processing and value addition

Infrastructure Development

ICT

IT
Wireless and Telecom
Electronics
Geoamatics and Digital media
Software Development
Advanced programming

There is no requirement for the holder of the Financially Independent Visa 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 Visa, 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 holder can work in the business but not for remuneration. Children would not be able to work in the business unless a work was granted in their own right. If you have children still in education years a study would be required.

Partners of Independent Financial Visa holders will need to secure residency in their own right which would involve a spousal or life partner application. Dependent children would require a study .

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 . There are no such requirements for the Independent Financial Visa holder.

Can I apply for permanent residency?

Starting a business as a foreigner in South Africa, via the business route, would first mean obtaining temporary residency. Once in receipt of this, permanent residency can be applied for.

Independent Financial Visa 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 read more about the various business structures below .

I am in a permanent relationship / married to a South African – do I need a business ?

Neither a business , not an Independent Financial Visa 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 or life partner 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 ?

Business ’s are designed for the holder to work in the business. Foreign investors do not require a business . 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 would be required.

How do I prove my business concept and my credentials?

When making a business 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 or Visa application.The compilation of the business 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 .

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?

You can see here below for a summary breakdown of the business versus the Independent Financial Visa. But in summary, whilst the independent financial Visa 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 Visas) 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 Visa of ZAR 120,000. This is almost akin to a success fee as it is only payable if your application is approved.

Starting a Business as a foreigner in South Africa

Starting a Business as a foreigner in South Africa