19+ Pros And Cons of Doing Business in South Africa (Explained)

South Africa fuels economic development in one of the world’s most exciting continents, but managing the dynamic climate can be a burdensome activity without the appropriate assistance on board.

As per the World Bank, economic growth in the area of sub-Saharan Africa could significantly outstrip the global average for the upcoming three years, with investment growing slightly to raise the growth of the continent to more than 5 percent.

South Africa is Africa’s powerhouse and the driving force behind this development, with Africa’s most advanced, broad-based economy having infrastructure exceeding every nation in the first world.  

Benefits of Doing Business in South AfricaThe Drawbacks of Doing Business in South Africa
Favorable DemographicsResolving Insolvency
Indigenous information and communications technology (ICT)The Enforcing Contracts
Diversified manufacturing baseGetting Credit and Protecting Investors

Advantages of Doing Business in South Africa

  • Value for Money

South Africa’s scenic elegance, beautiful outdoors, sunny environment, cultural diversity, stunning scenery, acres of golf courses, and reputation for value-for-money has made it one of the fastest-growing travel destinations in the world – and industry.

No wonder South Africa is becoming increasingly an ideal venue for congresses and international conventions.

  • Excellent Infrastructure

World-class stadiums and a welcoming environment, top international competitions, and the love for sport for South Africans combine to make the country a major draw for sports fans. More than one-tenth of international visitors or tourism visit South Africa to enjoy or take part in fun activities. 

  • Highly-Maintained Transportation System

The nation has the favorable demographics along with this the rising living standards of the middle class make it an lucrative market opportunity for both the parties, i.e. for consumer and businesses as well either of goods or services.

  • Gateway of Tactical Location

South Africa is the country that provides a gateway to the whole Africa. According to the United States, this nation constitutes six percent of the population, 18 percent of the overall gross domestic product, and 50 percent of the continent’s buying power.

  • Estimates on Commercial Service 

South Africa is the main entrance to the wider African market and it is used by most businesses to check the waters before diving deep into Africa. Large shipping lanes in the South Atlantic and Indian Oceans move through the South African coastline.

  • Reduced Tariff Rates

After the 1994 Uruguay Round of the World Trade Organization (WTO), the countries of Southern African Customs Union (SACU), led by South Africa, have modified and simplified their shared tariff structure.

Tariff prices were lowered from a simple average of over 20% to 5.8%. Despite these changes, importers have argued that the tariff schedule for SACUs remains complicated and may cause confusion.

  • Excellent Government Initiatives

The Government has formulated a number of policies and passed a number of laws aimed at alleviating the stresses on natural resources from social imbalances and fostering sustainable growth.

Also, the government has created multiple programs of housing constructions, water services, and electrification programs and the established economic growth and job creation focus areas.

  • Favorable Legal Laws and Regulations

The intellectual property laws and practices of South Africa usually correspond to those of developed countries, except where there are significant shortcomings in the field of geographical indications.

  • Booming Financial Sector

The financial services sector in South Africa is excellent, backed by a strong regulatory and legal system. A wide range of services is offered by hundreds of domestic and international institutions such as, commercial, retail, and merchant banking; mortgage lending; insurance; and investment.

International banks are well served, and there are national networks of ATMs and internet banking facilities for electronic banking. The Banks Act is based largely on similar laws in the UK, Australia, and Canada.

  • Multifaceted Culture

The multifaceted culture and history of the country pose many obstacles for growing enterprises, while recent statistics indicate a cycle of consolidation has produced a global market.

According to the latest research done by the UCT Unilever Institute of Strategic Marketing, the black the middle class of South Africa has become more than twice over the past eight years.

Disadvantages of Doing Business in South Africa

  • Commencement of Business

Starting a company in sub-Saharan Africa is a lengthy process and can cost a large proportion of the per capita income. This is partially true of South Africa, although the start-up expense is just 0.3 percent of per capita income compared to over 60 percent elsewhere on the continent.

  • Construction Constraints

In South Africa, too, the cost of managing building permits is extremely low relative to the continent as a whole.

It is also a relatively smooth process taking 13 procedures and 127 days, although many steps must be taken which may be very foreign to companies new to the region.

  • Electricity Problems

Getting electricity is a major concern for South African businesses that take 226 days and require a series of lengthy procedures.

Eskom, a public electricity provider, will take 60 days to provide an estimate after receipt of the application, and 165 days to complete external link work.

  • Registration of Property

Registration of a property takes 23 days on an average and you have to complete the six steps, but this can fluctuate considerably depending on how easily local authority gives you the clearance certificate and how long it takes for the conveyor to lodge the deed at the Deeds Registry.

  • Cultural Barriers

There are various cultures and a range of multiple languages are spoken in South Africa. If you want to set up a business in South Africa then it is essential to follow a personalized approach to different regions. The business atmosphere is pretty informal and the approach of South Africans can be very direct.

South Africa being a transactional community, people there are very personable and have deep-rooted traditions. It’s good to develop a relationship well as well as furnishing the counterparts with some backhanded information either about yourself or about the company.

  • Tax Payments

Paying taxes takes 200 hours a year to complete, which requires 9 payments. Contributions to corporate income tax and unemployment insurance (UIC) are two of the most complicated methods and the former is also one of the most costly.

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