Setup company in South Africa

With its world-class business infrastructure, robust regulatory framework and double taxation agreements, South Africa has earned its reputation as the powerhouse of Africa. Here we take a look at critical areas that affect company formation in the country.

In the last few years, South Africa has taken steps to reduce complexity for businesses, dropping down our GBCI (Global Business Complexity Index) report rankings from 23rd most complex jurisdiction in 2018 to 51st in 2023.

While this progress is impressive, certain factors such as government finance, policy issues and business conditions can create a challenging economic environment.

Why do business in South Africa?

As the economic hub of Africa, South Africa is home to some of the world’s biggest corporations and boasts a diverse business landscape. Its world-class business infrastructure supports a robust regulatory framework that governs investment in all sectors of the economy.

Government policy has focused on promoting growth in four sectors:

- infrastructure – unparalleled; an excellent springboard into Africa

- tourism – affected by the economic outlook

- manufacturing – export driven

- agriculture – high employment potential.

South Africa boasts advanced financial centres and banking platforms, and Johannesburg is a natural choice for investors and companies looking to extend their footprint into Africa.

In addition, the country’s digitalisation efforts have resulted in simplified processes and significantly shorter incorporation time frames.

Key considerations for incorporating in South Africa

The following legal structures are available in South Africa:

- private company

- public company

- personal liability company

- partnership

- external company (branch office)

- non-profit.

The first step to incorporation is deciding whether to set up a private company or a branch office. While there are fewer requirements for setting up branch offices, the tax implications for branch offices are more significant than they are for private companies.

We’ve highlighted some of the key differences between private companies and branch offices below.

Legal Requirements

- Directorship

A private company must have at least one director. Directors of private companies and branch offices are not required to be South African residents. They do however need to meet the qualification criteria, as required under the Companies Act. Delays may occur when registering foreign directors as original versions of certain documents, such as passports, must be apostilled, notarised or certified as true copies of the original.

- Public officer requirement

A public officer is your business’s tax representative and must be resident in South Africa. The appointee will act as the liaison between your business and the South African Revenue Service (SARS) and is responsible for your company’s tax returns and filings. The public officer must be registered with SARS and enrol for an eFiling account.

- How to open a business bank account in South Africa

Your company’s bank account must be opened with a South African bank in order to trade in the country. In the past, original versions of signed documents were required to open a bank account which resulted in delays in cases where the company’s director was based overseas.

During the Covid-19 pandemic, banks accepted electronically signed or scanned versions of original documents, but it is unclear whether this trend will persist.