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Doing Business
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Tips for Investors
South Africa continues to receive highly
favourable rankings among developing
countries for competitiveness and ease of doing
business. Ironically, however, the country has
become a victim of its own success.
Regulatory Framework
Mediation and arbitration are regularly
used to resolve disputes and court damages
are compensatory, not punitive. Freehold
ownership of property by foreigners is allowed
and dividends are freely remittable.
Government Policy
Government seeks to create a positive
environment for doing business. Effective
fiscal and monetary policy has brought a
decade of continuous economic growth while
substantially lowering taxes, inflation, interest
rates, government debt and the budget deficit,
although sustained growth and increased
spending forced up inflation and interest
rates in 2007. The currency has been relatively
stable for the past few years but increased by
nearly 15% in the wake of a higher current
account deficit and the energy crisis. Labour
laws have been amended to provide more
flexibility in hiring and firing practices and
foreign exchange controls have been all but
eliminated.
Black Economic Empowerment (BEE)
The Codes of Good Practice address concerns
expressed by corporate South Africa, foreign
investors and small businesses and are now
the guidelines for measuring BEE. They are
simpler and less restrictive than previous
guidelines, especially for small and medium
size enterprises:
- Small enterprises with a turnover of R5
million or less are completely exempted
from participation;
- Medium size enterprises with a turnover
of between R5 and R35 million may
choose four out of the seven elements for
calculating their empowerment scores;
- Foreign multinationals may ignore the
ownership element if head office policy
prohibits surrendering equity and may make
up the deficit through other BEE initiatives.
Taxes
Government revenue is derived primarily from
a residence-based income tax on businesses,
individuals and trusts and a 14% value added
tax (VAT) on nearly all goods and services.
There is a capital gains tax (CGT) which
taxes individuals at a maximum of 10% of
the gain and companies at the corporate tax
rate of 28% of the gain. Small and medium
enterprises meeting certain criteria pay a
reduced tax rate on the first R300,000 of profit
and 28% on profits in excess of R300,000.
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