How to Start a Business in South Africa | 3 Main Steps

If you're considering moving to South Africa to start a new business there, you'll need to know how. Read this guide to learn more about starting a business in South Africa.

We’ll also talk to you about the Wise Business account, which will help you manage your global business through holding, sending and receiving funds in multiple currencies.

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Establishing a Business as a Foreigner in South Africa

In order to establish a business entity in South Africa, foreigners need to get a business permit.

There are two ways to make yourself eligible for a business permit:

1. Invest a R5 million either into an existing business or provide a business plan that gives proof of a R5 million contribution.
2. Establish a business in South Africa that is crucial to national interest. This method requires no capital investment.²

Step 1: Choose your corporate entity, and Registering with CIPC

Most commonly, foreigners investing in South Africa will do so through a company structure. There are three different options here — a Private (Ltd.), Public (Pty Ltd.), or Personal Liability Company (Inc). Typically, a Private company is easiest, requiring only one director and one shareholder, who doesn’t have to be resident in South Africa.

There are several types of corporate entity commonly used in South Africa:

Let's take a look at the different

Sole Trader/Owner

A sole proprietorship is a type of business that is owned and managed by one person – no partners, no board of directors, and no shareholders to weigh in. Just one person makes all the decisions

Another thing to note is that this type of business is an unincorporated business structure, which means there isn’t a separation between the owner and the business. Certain risks accompany this business structure when you are not separated from the business you run. If legal problems arise, it means that you might be held liable for issues that occur within your business.

Private Company

If you’re running a profit making business you’ll probably opt for a company which is limited by shares. This type of business entity is legally separate to the owner and directors, holds its finances separately to your personal finances, and must have at least one named shareholder. The owners of this type of business can keep any profits after tax for themselves or to reinvest.

Partnership³

A Partnership, which can also be called an unincorporated joint venture, consists of at least two individuals conducting a business, trade, or other professional activity. A partnership is not a separate legal entity. Accordingly, you will need to pay tax on your share of the profits if you’re a partner.

Close Corporation (CC)⁴

A close corporation (CC) is similar to a private company and must register as a taxpayer. A CC doesn’t have shares or shareholders, and the owners are the members of the CC. This type of business cannot be opened any longer in South Africa.

External Company - used in the case of registering a foreign company branch office in South Africa⁵

The external company structure might be useful if you already have a business and are looking to expand your operations to South Africa. If you start doing business in South Africa with a company that is registered elsewhere, you must register your activities within twenty days of starting, with the Companies and Intellectual Property Commission (CIPC).

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Wise Business: An Account for Your Global Business

Wise Business allows you to make and receive international payments across currencies easy and transparent. Doing things like paying your employees overseas can be cheaper and faster compared to traditional providers.

Why? Because Wise Business offers the mid-market exchange rate without any mark-ups. Transfers are typically processed in 0–2 working days.

Additional benefits are:

• 1000 transfers in one go through the batch payment tool
• Receive payments with local account details in global currencies (GBP, USD, EUR, JPY, AUD, CAD, and more)
• International account - hold, send, and receive funds in one account in 40+ currencies
• Linkable to accounting software such as QuickBooks and Xero

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How long does it take to register your company in South Africa?

This process should take a few days for a basic name reservation. If you’re incorporating a subsidiary with a standard Memorandum of Incorporation (MOI) it is 10 days. For more bespoke items, it can take upwards of one month.⁶

A positive part about registering with CIPC is that you’re then automatically registered with the South African Revenue Service (SARS).

Registering with the SARS

While some other articles highlight that you should register with SARs separately, SARs will point you to CIPC first, as they will generate an income tax reference number for you automatically.⁷

Step 2: Check Legal Requirements for Employees

The legal requirements for managing and maintaining employees in South Africa has a few basic requirements. For instance, they should be registered for unemployment insurance, the skills development levy, and Compensation for Occupational Injuries and Diseases Act 130 of 1993. If your employee is earning more than R40,000 annually, then you register them for Pay As You Earn.⁸

You’ll also want to familiarize yourself with the laws for hiring employees, working visas (if hiring individuals from outside of South Africa), payroll taxes, labor laws, etc.

In many instances, foreign companies that aren’t establishing a branch office will outsource these types of measures to a local company, which allows a company to employee local staff without registering an entity. These companies are known as a Professional Employer Organization (PEO) or Employer of Record (EOR).

Step 3: Consult with Professionals

It is always important to check and consult your activities with local professionals in South Africa. This will both help you to avoid legal consequences or even missing out on ways to save money in your early days after establishing your business.

Where can I find help to start my business in South Africa?

There are various organizations in South Africa that can help you develop and grow your business.

Simodisa is an organization who supports and promotes startups in South Africa through networking and events, as well as sharing of ideas and information. For funding, theDepartment of Small Business Developmentis tasked with supporting the growth of small businesses, while the government backed Small Enterprise Development Agency can provide information and non financial support for your growing business.

Alternatively, the National Small Business Chapter can help you connect with other business founders in your field. The South African Chamber of Commerce and Industry have over 20,000 members and can help with information and networking.

Once you’re in South Africa and ready to get going, look for local networking events on sites such as Meetup, Eventful and Eventbrite. Here you can meet like-minded people and build your customer and business contact book.

Starting a business is a demanding process, anywhere in the world. But with some planning, and a little help from your new network and friends, your new enterprise in South Africa will get off to a flying start.

Will your South African business operate internationally?

Send payments across
currencies with Wise >>

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Sources:

1. Wise Trustpilot
2. Doing Business South Africa - How to Register a Business
3. South African Government - Partnerships
4. Swiftreg - Close Corporation Changes
5. CIPC South Africa - Foreign Company
6. Doing Business in Africa Guide in 2023
7. South African - Registering a Small Business
8. Go Legal - Steps to Starting a Business