SOUTH AFRICA GUIDE

EMPLOY IN SOUTH AFRICA WITH EASE

  • Access and hire global talent & deploy them anywhere in the world
  • Remove restriction from only hiring from local markets
  • Enter any international market without the requirement of opening a local entity

Expanding into South Africa – which is characterised by a qualified and talented workforce, multifaceted employment and tax laws, a developing infrastructure network, and leading sectors in mining, industry, agriculture, and tourism – can bring excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws. Ensuring compliance without sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all the registration procedures that need to be done and the documentation required. Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of a Professional Employer Organisation (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilised when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

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South Africa – The Economy

The Economy of South Africa is the second largest in Africa and the most industrialized, technologically advanced, and diversified in Africa overall. South Africa is an upper-middle-income economy, one of only eight African countries.

Following 1996, after over twelve years of international sanctions, South Africa’s Gross Domestic Product (nominal) almost tripled to US$416 billion in 2011. In the same period, foreign exchange reserves increased from US$3 billion to nearly US$50 billion, creating a diversified economy with a growing and sizable middle class within two decades of ending apartheid.

Although the mining industry remains one of the largest in the country, with an annual contribution to the GDP of US$13.5 billion, the economy of South Africa has diversified since the end of apartheid, particularly towards services.

High-class business services, with comprehensive financial and auditing back-up, are among the plus points. In 2019, the financial industry contributed US$41.4 billion to South Africa’s GDP. In 2021, South Africa-based financial institutions managed more than US$1.41 trillion in assets. The total market capitalization of the Johannesburg Stock Exchange is US$1.28 trillion as of October 2021.

Growth was reflected in manufacturing, petroleum production, chemicals, food, metals, and machinery. Consumer and household purchases increased, along with growth in the hospitality sector. The nation is among the G20 and is the only African member of the group.

Small and Medium-Sized Companies

SMEs across South Africa represent more than 98 per cent of businesses, employ between 50 and 60 per cent of the country’s workforce across all sectors, contribute to 39% of the GDP and are responsible for a quarter of job growth in the private sector.

Digital and new technologies create an opportunity for SMEs to enhance their reach and efficiency at lower costs, overcoming the scale disadvantage relative to more prominent players. South Africa is a prime target for such expansion, with its highly developed business and financial services sector adding to the nation’s attraction as a ‘Gateway to Africa’.

Capital
Pretoria (administrative), Cape Town (legislative) and Bloemfontein (judicial)
No. of States/Provinces
9 - Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West and Western Cape
Principal Cities
Port Elizabeth, Bhisho, Bloemfontein, Johannesburg, Pietermaritzburg, Durban, Polokwane, Mbombela, Mahikeng, Klerksdorp, Kimberley, and Cape Town
Language
11 - English, Afrikaans, Xhosa, Zulu, Southern Sotho, Northern Sotho, Tswana, Tsonga, Venda, Swati, Ndebele
Local Currency
South African Rand (ZAR)
Major Religion
Christianity (78%, of which 58.3% of Protestantism)
Date Format
yyyy/mm/dd
Time Zone
South African Standard Time (UTC+2)
Country Dial Code
+27
Population
60.6 million
Border Countries
Namibia, Botswana, Zimbabwe (North), Mozambique, Eswatini (East and Northeast) and Lesotho (enclave).
Tax Year
1 March – 28/29 February
VAT &
15%
Minimum Wage
ZAR 23.19/h (EUR 1.29/h) since March 2022
Taxpayer Identification Numbers
13 digits number South African Revenue Service (SARS) TIN
Leading Sectors
Services 64.57%, industry and manufacturing 23.42%, and agriculture 2.53% (2021)
Main imports
Chemicals and related products, motor vehicles and parts, crude and refined petroleum, broadcasting equipment
Main exports
Natural resources, precious and base metals, agricultural goods, military equipment
Main trading partners
China, USA, Germany, Japan, India, UK, Saudi Arabia
Government Type
Constitutional and parliamentary Republic
Current President
Matamela Cyril Ramaphosa (since February 2018)

Main Sectors of the South African Economy

  1. Natural Resources – Mining is at the core of the economy through the country’s rich reserves of natural resources. In 2019, South Africa was one of the largest worldwide producers of gold, platinum, chromium, manganese, titanium, vanadium, iron ore, cobalt, phosphate, and uranium and had significant coal deposits.
  2. Vehicle manufacturing – The automotive industry accounts for about 10% of the manufacturing exports, contributes 7.5% to the country’s GDP and employs around 36,000 people. Due to trade agreements with the European Union and the Southern African Development Community, companies producing in South Africa can take advantage of the low production costs and access to new markets.
  3. Agriculture and food processing – South Africa is one of the world’s largest producers of chicory roots(4th); grapefruit (4th); cereals (5th). The dairy industry consists of around 4,300 milk producers providing employment for 60,000 farm workers and contributing to the livelihoods of about 40,000 others.
  4. Manufacturing (Others) – Electronics, clothing and footwear, and communication technology can also appear on the manufacturing landscape. There is growth in the Space industry.
  5. Tourism South Africa is a popular tourist destination, with 14.8 million persons visiting the country in 2019, contributing USD$11 billion to the national economy (3.7% of GDP). That same year, tourism directly employed 4,7% of the total workforce (773 533 persons).
  6. Financial services – South Africa has a sophisticated economic structure, with JSE Limited, the largest stock exchange on the African continent, ranking 17th in the world in terms of total market capitalisation, which is $1,005 Trillion as of August 2020.

Tax and Labour Authorities

  • The South African Revenue Service (SARS): the nation’s tax collecting authority.
  • The International Cooperation (IC): this division of the SARS is responsible for creating and enhancing relations, through contact, with international Tax and Customs authorities and international organisations.
  • The Department of Labour: it regulates the South African labour market for a sustainable economy. It plays a significant role in reducing unemployment, poverty, and inequality through a set of policies and programmes developed in consultation with social partners.
  • The Labour Relations Act (LRA) of 1995 and amended in 2002 is the leading legislation governing employment law in South Africa. The Basic Conditions of Employment Act (BCEA) deals with most categories of employment law, supplemented by specific statutes, while the LRA is more concerned with such as unfair dismissal, contracts, and workplace regulations.

Labour Contracts Law

General requirements

  • Contracts can generally be written or oral, but employees must at least receive a written agreement listing the essential aspects of their role
  • If hiring on a fixed-term contract these must be in writing for employees below a threshold set by the terms of the Basic Conditions of Employment Act (BCEA)
  • Fixed-term contracts must specify the length and the reason why they are necessary
  • Part-time or temporary employees must also have a written contract
  • Probation periods must be for a reasonable time to assess suitability for the role, generally between three and six months
  • Employers are required to ensure that the terms of a written contract or agreement are in the language understood by the employee, or subsequent disciplinary matters may be considered unfair

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