Starting a Business as a foreigner in 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 of our phone 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 visa. 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 visa’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 visa you can apply for:
- Business visa – Traditionally, for anyone starting a business as a foreigner in South Africa this category has been the most recommended.
- Independent Financial Permit – A very underused permit category that allows for the holder to commence a business, but also offers a host of other benefits over the business visa route.
Who can apply?
Business visa 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 permit is a permit 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 permit 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 visa and independent financially independent.
Can I buy into or outright an existing business?
Yes, which ever permit or visa 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 visa holder you will need to typically own in excess of 25% of the business. A Financially Independent permit holder has no restrictions.
Is there a minimum amount of investment required?
For business visa holders you need to invest ZAR 5 million into the business unless you qualify for a waiver.
The Act calls for investment of R5,0 million in a business and you need to make sure you employ 60% South African citizens or permanent residents to get both a temporary and permanent business visa, you can get these visas with less capital investment – sometimes for as low as R600,000 investment using our expert team at SA Migration.
Many businesses do not require a capital investment as large as R5 million and in certain cases, you are allowed to reduce this amount and commit to a smaller investment if your business falls within the certain industries. The following businesses to be in the national interest, and therefore qualifying for reduction or waiver of the capitalisation requirements as determined to be in the national interest in relation to a Business Visa: Many of these business owners do not have the required investment amounts. If this is the case and the business falls in line with one of the following industries, a capital waiver can be requested. This would mean a reduction in the required investment amount.
There is no requirement for the holder of the Financially Independent permit 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 permit, 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 visa holder can work in the business but not for remuneration. Children would not be able to work in the business unless a work visa was granted in their own right. If you have children still in education years a study visa would be required.
Partners of Independent Financial permit holders will need to secure residency in their own right which would involve a spousal or life partner visa application. Dependent children would require a study visa.
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 visa. There are no such requirements for the Independent Financial permit holder.
Can I apply for permanent residency?
Starting a business as a foreigner in South Africa, via the business visa route, would first mean obtaining temporary residency. Once in receipt of this, permanent residency can be applied for.
Independent Financial permit 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 ask us about about the various business structures here.
I am in a permanent relationship / married to a South African – do I need a business visa?
Neither a business visa, not an Independent Financial Permit 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 visa or life partner visa 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 visa?
Business visa’s are designed for the holder to work in the business. Foreign investors do not require a business visa. 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 visa would be required.
How do I prove my business concept and my credentials?
When making a business visa 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 visa or permit application.The compilation of the business visa 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 visa.
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?
But in summary, whilst the independent financial permit 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 Permits) 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 permit of ZAR 120,000. This is almost akin to a success fee as it is only payable if your application is approved.
Making an Application for a Business Visa
Making an Application for a Business Visa
This section deals with making an application for a business visa in South Africa. A business visa is required by a person who is seeking to buy into or set up a business in South Africa in which they will be actively involved (work).
Please read on for information how you make application for a business visa in South Africa or should you prefer you can contact one of our team to discuss your situation. For further information on business visa you can also view our quick links on the left hand side of this page.
Getting assistance with making a business visa application
- You can e-mail your business visa enquiry here to firstname.lastname@example.org
- Use or office Whtaspp number + 282 3738415 to contact us
NOTE: If you are an existing company based abroad but seeking to expand your operations into South Africa please mention this with details on the visa that may be applicable to you.
Who should apply for a Business Visa?
Applications for business visa, as alluded to above, are for individuals who wish to either invest into an existing South African business that they will work in, or set up a new business that will work in.
Business visa versus investor visa
A business visa should not be confused with an investor visa. A business visa allows you to work in the business and the visa is issued for this purpose. An investor visa (which is not offered in South African immigration) allows immigration through investment of a certain amount of capital and does not require the immigrant to work.
When applying for a business visa what are the residency options?
Making an application for a business visa in South Africa allows you to apply for temporary residency. Once you are in receipt of temporary residency you can then apply for permanent residency.
How long can I apply for on my business visa application?
As with all temporary visa’s, the decision as to the validity period of a business visa lies with the Department of Home Affairs. In the case of a business visa it will not be issued for more than 3 years.
When can you apply for permanent residency?
Permanent residency can be applied of at any stage but it is most normal to make an application after receiving your business visa for temporary residency.
Where should my business visa application be made?
First time applications that involve a change of your via status, for example from tourist to resident, must be made from outside of South Africa. It is only where there is no residency status change that you can apply in South Africa, for example renewing an existing temporary visa.
What is the main criteria when making an application for a business visa in South Africa?
- A completed application form
- A thorough business plan
- An appropriate company structure
- Applicable registrations or undertakings
- Investment amount for business visa
- Employment of South African citizens or Permanent residency holders
- Types of business structures in South Africa
- Types of business structures in South Africa
- The Companies Act of 2008 relays the appropriate types of business structures in South Africa pertaining to companies. Whether you are seeking a business visa, or an endorsement to a visa you will have to select the right business structure.
- Sa Migration Immigration has assisted individuals / companies since 2006 with advice on the types of business structures in South Africa and with the setting up thereafter.
- Types of business structures in South Africa
- Below we give you an insight into each of the types of business structure in South Africa you may consider for your business if setting up operations as a foreigner. Where there is more information available on the business type simply click on the headers below.
- Sole Proprietorship
- A sole proprietorship, which is often referred to as a sole trader, is a business structure that is owned and run by one individual.
- It is important to note that with a sole proprietorship there is no separation between the owner and the business structure – the business does not have its own legal entity. In practise this means the income of the business is all for the owner, as are the taxes and any liabilities.
- A partnership is akin to a coming together of between 2 and 20 people who contractually agree to operate a profit generating business business together. They further agree to split any profits as per their agreement and in proportion to their interests.
- In establishing a partnership each partner needs to make a contribution to it and as per a sole proprietorship the partnership is not a separate legal entity, leaving partners generally liable for debts
- Private Companies
- Typically the choice for most foreigners setting up a business in South Africa. This type of business structure in South Africa does not place any prohibition on foreign shareholding and only requires one shareholder and one director.
- The new Companies Act prohibits a Private Company (Pty Ltd) from offering securities to the public.
- Private companies are seen as separate legal entities and as such are taxed in their own right and offer the shareholders protection against liabilities.
- A Pty Ltd will require reservation of a company name, the completion of a memorandum of incorporation and written consent of the auditors, if any, to act for the company.
- Public Companies
- A public company is largely set up to offer shares to the general public for the purpose of capital raising. There is a requirement for a minimum of one shareholder and three directors.
- Public companies are known as Ltd companies and have their own legal identity.
- Personal Liability Companies
- If a company incorporates under section 8(2)(c) of the Companies Act the terms of its memorandum of incorporation (MOI) state that the directors and past directors are jointly and severally liable, together with the company, for any debts and liabilities of the company, as are or were contracted during their respective periods of office. Typically this means professions such as attorneys and accountants that make use section 8(2)(c) of the Companies Act.
- State Owned Companies
- A State owned company is either a company defined as a “state-owned enterprise” in the Public Finance Management Act 1 of 1999 or a company owned by a municipality. The majority of the provisions of a public company will apply to state-owned companies as well.
- Non-profit Companies (NPC)
- A non profit company is incorporated public that is established, as an example, for some form of cultural or social activities or communal / group interests. Income is not distributed to any stakeholder from this type of business structure.
- Foreign and External Companies
- External companies are foreign owned companies that are incorporated outside of South Africa but trade in South Africa. There is a requirement for foreign owned companies to register as an external company with the CIPC and they may not offer securities to the South African public.
- This type of business structure in South Africa is utilised by foreign companies wishing to set up a branch in South Africa.
Business Plans for South Africa
Researching a business plan, formulating it and ensuring the business plan is realistic and workable are just some of the key criteria when commencing a new business.
When such a business plan is presented as supporting evidence to immigration authorities its importance becomes even more valid.
A business plan is a written document that describes the business, the business objectives, strategies, market segment, forecasts and financial resources.
The functions of a business plan are many but include:
- Providing a template from which to run your business
- Measuring the success of your business
- Setting out financial goals – short and long term
- Quantifying expansion plans
- Raising capital
- Supporting immigration applications
- A review document
- Attracting investors, shareholders and business networking
What should a Business Plan include?
A business plan is a written statement of the journey your business is going to take. It should provide details of how you intend to develop the business, who is going to play a role in this business and how the financial side of the business will be managed.
Clarity on these issues is particularly important if you’re looking for finance, investment or using the business plan to support an immigration application. Your plan should at least include:
- An executive summaryThis is an overview of the business you want to start. This is essential – first impressions count! Many people will be influenced by how well the summary is presented based on the first few pages of your plan.
- Short description of the business opportunityThis details who you are, what product or service you will supply and why, who you will supply the product to and how.
- OperationsIncluding such things as manpower, premises, IT infrastructure, future expansion.
- Marketing and sales strategyWho will buy your service or product and why. How will you promote the service in terms of product, placement and pricing.
- FinancialsOne of the most important aspects of the business plan. These documents and tables translate everything form the business plan into figures.
The Exempted Industries are :
- 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 indigenous teas
- 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
- oils: tea extracts, including buchu, honeybush: and other oil derivatives (avocado, amarula etc.)
- Diversification / beneficiation of biomass sources i.e. sugar, maize
(b) 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
(c) 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
- White goods and associated components
- Electric motors, generators and transformers
- Electricity distribution and control apparatus
- Insulated wire and cable
- Accumulators, primary cells and primary batteries
(d) Electro Technical
- Advanced telecommunications
- Software development
- Software and mobile applications
- Smart metering
- Embedded software
- Radio frequency identifications
- Digital TV and Set Top Boxes due to migration to full digital television
- Process control, measurement and instrumentation
- Security and monitoring solutions
- Financial software
- Manufacturing sensors
(e) 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
(f) Consumer goods
- White goods and associated components
- Boatbuilding and associated services industry
- Engines and engine systems
- Marine equipment and accessories
(h) Pulp, paper and Furniture
- Manufacture of paper products: publishing, printing and reproduction
- Manufacture of articles of straw and plaiting materials
- Paper and paper products and furniture
- Manufacture of wood and products of wood and cork
(i) 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
- wiring harnesses, instrument panels vehicle interiors, electronic drive train components,
- lighting equipment
- 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
(J) Green Economy Industries
(jj) Power generation:
- Nuclear Build Programmer 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
- Independent power generation, energy infrastructure and alternative energy
(jjj) Renewable Energy:
- Onshore wind power – manufacture of turbines/blades
- Solar PV and Concentrated Solar Power manufacture/assembly
- Small hydro
- Lowering greenhouse gas emissions from landfill sites
- Energy efficiency and energy saving industries
- Solar water heaters
- Waste Management and Recycling
- Reducing landfill
(k) Advanced Manufacturing
- High performance materials based on natural resources (advanced bio-composites
- Advanced 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/medical sectors
- 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, industry and health/medical.
- Fuel cells and Technology
(l) 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
(m) 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
(n) 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
- Jewellery manufacturing and design
- Fashion design
(o) 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
(p) Mineral beneficiation
- Downstream processing and value addition
(q) Infrastructure Development
- Geoamatics and Digital media
- Wireless and Telecom
- Software Development
- Advanced programming
List of undesirable Business in South Africa;
- Businesses that import second hand motor vehicles into the Republic of South Africa for the purpose of exporting to other markets outside the Republic of South Africa
- The exotic entertainment industry
- Security Industry