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Contents

1 INTRODUCTION ................................................................................................................................ 2
1.1 Country Background ..................................................................................................................... 2
1.2 Business Background .................................................................................................................... 2
1.3 Literature Review .......................................................................................................................... 3
2 IB ENVIRONMENT ............................................................................................................................ 4
2.1 Cultural ......................................................................................................................................... 4
2.2 Political ......................................................................................................................................... 6
2.3 Legal ............................................................................................................................................. 7
2.4 Economical ................................................................................................................................. 10
3 Current Status of International Business ............................................................................................. 12
3.1 Affiliation to WTO and SADC ................................................................................................... 12
3.2 FDI Flows ................................................................................................................................... 13
4 Modes of Doing Business ................................................................................................................... 14
Conclusion .................................................................................................................................................. 15
References ................................................................................................................................................... 17
ANNEXES .................................................................................................................................................. 18


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1 INTRODUCTION
1.1 Country Background
South Africa is a country of about 50 million people that is rich in diverse cultures, people and
natural heritage. It is the Southernmost country located at the tip of African continent bordering
Botswana(1840 km), Lesotho (909 km), Mozambique( 491 km), Namibia( 967 km), Swaziland
(430 km), Zimbabwe (225 km). Pretoria is the capital of the country having mostly semiarid
climate. South Africa, culturally and ecologically diverse is the country of nearly 43 million
people. As talking about ethnic makeup of the country 75.2% are black, 13.6% are white, 8.6%
are coloured and 2.6% are Indian origin. South Africa is composed of 68% Christian (includes
most whites and Coloreds, about 60% of blacks and about
40% of Indians), 2% Muslim, 1.5% Hindu (60% of Indians), 28.5% indigenous beliefs and
animist.

1.2 Business Background
South Africa has long history of trade and we are trying to brief in short the trade development
before moving towards current aspect of business environment. Europeans first settled southern
Africa to resupply their trading expeditions bound for other parts of the world. In 1652 the Dutch
East India Company settled a few employees at a small fort at present-day Cape Town and
ordered them to provide fresh food for the company's ships that rounded the Cape on their way to
East Africa and Asia. This nucleus of European settlement quickly spread outward from the fort,
first to trade with the local Khoikhoi hunting populations and later to seize their land for
European farmers.
By the early nineteenth century, when the Cape settlement came under British rule, 26,000 Dutch
farmers had settled the area from Stellenbosch to the Great Fish River .In 1820 the British
government sponsored 5,000 more settlers who also established large cattle ranches, relying on
African labor. But the European immigrants, like earlier arrivals in the area, engaged primarily in
subsistence farming and produced little for export.
The discovery of diamonds in 1869 and of gold in 1886 revolutionized the economy. European
investment flowed in; by the end of the nineteenth century, it was equivalent to all European
investment in the rest of Africa. International banks and private lenders increased cash and credit
available to local farmers, miners, and prospectors, and they, in turn, placed growing demands
for land and labor on the local African populations.
South Africa was drawn into the international economy through its exports, primarily diamonds
and gold, and through its own increasing demand for a variety of agricultural imports. The cycle
of economic growth was stimulated by the continual expansion of the mining industry, and with
newfound wealth, consumer demand fueled higher levels of trade.
In the first half of the twentieth century, white farmers received privileges, such as loans from a
government Land Bank (created in 1912), labor law protection, and crop subsidies. Marketing
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boards, which were established to stabilize production of many crops, paid more for produce
from white farmers than for produce from black farmers. All farm activity suffered from the
cyclical droughts that swept the subcontinent, but white farmers received greater government
protection against economic losses.
During the 1920s, to encourage the fledgling manufacturing industries, the government
established state corporations to provide inexpensive electricity and steel for industrial use, and it
imposed import tariffs to protect local manufacturers. Again black entrepreneurs were
discouraged, and new laws limited the rights of black workers, creating a large pool of low-cost
industrial labor. By the end of the 1930s, the growing number of state-owned enterprises
dominated the manufacturing sector, and black entrepreneurs continued to be pressured to
remain outside the formal economy.
The government increased its role in the economy, especially in manufacturing, during the 1950s
and the 1960s. It also initiated large-scale programs to promote the commercial cultivation of
corn and wheat. Government investments through the state-owned Industrial Development
Corporation (IDC) helped to establish local textile and pulp and paper industries, as well as state
corporations to produce fertilizers, chemicals, oil, and armaments. Both manufacturing and
agricultural production expanded rapidly, and by 1970 manufacturing output exceeded that of
mining.
While commercial agriculture developed into an important source of export revenue, production
plummeted during two major droughts, from 1960 to 1966 and from 1981 to 1985. Gold
continued to be the most important export and revenue earner; yet, as the price of gold
fluctuated, especially during the 1980s, South Africa's exchange rate and ability to import goods
suffered.
Manufacturing, in particular, was seriously affected by downswings in the price of gold, in part
because it relied on imported machinery and capital. Some capital-intensive industries were able
to expand, but only with massive foreign loans. As a result, many industries were insulated from
the rising labor militancy, especially among black workers, which sparked disputes and slowed
productivity in the late 1980s.

1.3 Literature Review

Prior to the report, World Bank, IMF, CIA and number of other organizations have also done the
assessment on doing business in South Africa. According to the publication made by World
Bank and International Finance Corporation, South Africa rank in Doing Business in 2013 is 39
and starting up business is 53.
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Doing Business analyzes regulations that apply to an economys businesses during their life
cycle, including start-up and operations, trading across borders, paying taxes, and protecting
investors. The aggregate ease of doing business rankings are based on 10 indicators. Doing
Business does not measure all aspects of the business environment that matter to firms and
investors. For example, it does not measure the quality of fiscal management, other aspects of
macroeconomic stability, the level of skills in the labor force, or the resilience of financial
systems. Its findings have stimulated policy debates worldwide and enabled a growing body of
research on how firm-level regulation relates to economic outcomes across economies.
According to the publication South Africa moves from 43 to 39 in 2013 by reducing the time and
documents required to export and import through its ongoing customs modernization program.
Most of other researches on doing business are based on the information published by the World
Bank.
Our report not only considers the 10 indicators of doing business proposed by World Bank. It
also undertakes cultural factors, trend of FDI and modes to enter the market in addition. These
factors are also major influential factors to do assessment on how we should do business in South
Africa.
2 IB ENVIRONMENT
2.1 Cultural
South Africa has 11 official languages. English is the language of administration and is spoken
throughout the country. The other official languages are: Afrikaans, Ndebele, Northern Sotho,
Southern Sotho, Swazi, Tsongo, Tswana, Venda, Xhosa and Zulu. South Africa is one of the
most multicultural countries in the world. In urban areas many different ethnic groups will make
up the population. In addition to the indigenous black peoples of South Africa colonialism and
immigration have brought in white Europeans, Indians, Indo-Malays, Chinese and many more.
The basic unit of South African society is the family, which includes the nuclear family and the
extended family or tribe.
Meeting Etiquette
There are several greeting styles in South Africa depending upon the ethnic heritage of
the person you are meeting.
When dealing with foreigners, most South Africans shake hands while maintaining eye
contact and smiling.
Some women do not shake hands and merely nod their head, so it is best to wait for a
woman to extend her hand.
Men may kiss a woman they know well on the cheek in place of a handshake. Greetings
are leisurely and include time for social discussion and exchanging pleasantries.
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Business Etiquette and Protocol
South Africans are transactional and do not need to establish long-standing personal
relationships before conducting business.
If your company is not known in South Africa, a more formal introduction may help you
gain access to decision-makers and not be shunted off to gatekeepers.
Networking and relationship building are crucial for long-term business success.
Relationships are built in the office.
Most businessmen are looking for long-term business relationships.
Although the country leans towards egalitarianism, businesspeople respect senior
executives and those who have attained their position through hard work and
perseverance.
There are major differences in communication styles depending upon the individual's
cultural heritage.
For the most part, South Africans want to maintain harmonious working relationships, so
they avoid confrontations.
They often use metaphors and sports analogies to demonstrate a point.
Most South Africans, regardless of ethnicity, prefer face-to-face meetings to more
impersonal communication mediums such as email, letter, or telephone.
Business Meeting Etiquette
Appointments are necessary and should be made as far in advance as possible.
It may be difficult to arrange meetings with senior level managers on short notice,
although you may be able to do so with lower-level managers.
It is often difficult to schedule meetings from mid December to mid January or the two
weeks surrounding Easter, as these are prime vacation times.
Personal relationships are important. The initial meeting is often used to establish a
personal rapport and to determine if you are trustworthy.
After a meeting, send a letter summarizing what was decided and the next steps.
Business Negotiations
It is imperative to develop mutual trust before negotiating.
Women have yet to attain senior level positions. If you send a woman, she must expect to
encounter some condescending behaviour and to be tested in ways that a male colleague
would not.
Do not interrupt a South African while they are speaking.
South Africans strive for consensus and win-win situations.
Include delivery dates in contracts. Deadlines are often viewed as fluid rather than firm
commitments.
Start negotiating with a realistic figure. South Africans do not like haggling over price.
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Decision-making may be concentrated at the top of the company and decisions are often
made after consultation with subordinates, so the process can be slow and protracted.
Dress Etiquette
Business attire is becoming more informal in many companies. However, for the first
meeting, it is best to dress more conservatively.
Men should wear dark coloured conservative business suits.
Women should wear elegant business suits or dresses.

2.2 Political
The Republic of South Africa is a constitutional democracy with three-tier system of government
and an independent judiciary, operating in a parliamentary. Legislative authority is held by
the Parliament of South Africa. Executive authority is vested in the President of South
Africa who is head of state and head of government, and his Cabinet. The President is elected
from the Parliament to serve a fixed term. South Africa's government differs greatly from those
of other Commonwealth nations. The national, provincial and local levels of government all
have legislative and executive authorities in their own spheres, and are defined in the South
African Constitution as "distinctive, interdependent and interrelated".
Operating at both national and provincial levels ("spheres") are advisory bodies drawn from
South Africa's traditional leaders. It is a stated intention in the Constitution that the country be
run on a system of co-operative governance.
The national government is composed of three inter-connected branches:
Legislative: Parliament, consisting of the National Assembly and the National Council of
Provinces
Executive: The President, who is both Head of State and Head of Government
Judicial: The Constitutional Court, the Supreme Court of Appeal, and the High Court
All bodies of the South African government are subject to the rule of the Constitution, which is
the supreme law in South Africa.

Political Stability
As an emerging economy, South Africa has not remained completely unaffected by the turmoil
in other emerging economies world-wide, especially in Asia, and lately also in Russia. This
negatively affected investor confidence in these countries.
The fact, however, that we were able to weather this storm so successfully, including an assault
on our currency, reflects positively on the inherent strength of our economy; on the soundness of
our economic and fiscal policies; and above all, on the political stability in South Africa.
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South Africa's peaceful and stable transition to democracy, universally recognized as one of the
major achievements of the 20th Century, is not a coincidence or a mere short-term success. The
realities in South Africa, which made this miraculous transition possible, are still in place and
guarantee future stability. Political stability is the key to investor confidence, especially in
today's world. It is, therefore, essential to take a closer look at those factors, external and
internal, which are guaranteeing continued political stability in South Africa.
Some Basis to Interpret Political Stability
Besides large-scale foreign investment in South Africa, there are also vested foreign interests in
various other fields which ensure continued foreign involvement in South Africa. Let us mention
a few examples:
a) Large and longstanding investments by leading European companies and increasingly also
from the USA, guarantee the continued interest and involvement in developments in South
Africa by the international community.
b) Due to South Africa's strategic and geo-political importance in a regional and global context,
a high premium is placed on its stability by the international community. In view of factors such
as South Africa's leading and stabilizing role in a regional context and the positive global impact
of South Africa's democratic miracle, the international community has more than a passive or
passing interest in the future stability of South Africa. There is just too much at stake.

2.3 Legal

Import and Export regulations
Traders are subject to exchange control approval, administered by the South African Reserve
Bank. The Department of Trade and Industry is also empowered to regulate, prohibit or ration
imports to South Africa in the national interest but most goods may be imported into South
Africa without restrictions. Import permits are required only for specific categories of goods and
are obtainable from the Director of Import and Export. Importers must possess an import permit
prior to the date of shipment. Failure to produce a required permit could result in the impositions
of penalties.

A summary of the main import regulations are:
Certain goods imported into South Africa require an import permit, which may be
obtained from the Director of Imports and Exports Control.
The list of goods requiring import permits is specified each year in the Annual Import
Control Program.
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Permits are valid for imports from any country.
Foreign Trade Zones: No Foreign Trade Zones or Free Ports are established in South
Africa.
South Africa uses the harmonized System of Classification.
Samples are dutiable unless they are cut samples of cloth, leather, linoleum and wallpaper
in book form and not for distribution as advertising matter.
Samples that have no commercial value because of mutilation in some way are also
allowed duty-free access.
The South African Government has viewed counter-trade as a second-best alternative to
be engaged in only when normal trade cannot be conducted.
Bonded warehouses are available at various points of entry.
South African banks can accommodate all international transactions and are situated
throughout the country.
General rebates of duty are available for specific situations, and duties may be rebated on
goods on re-export.
The Reserve Bank plays a pivotal role in the economic and financial sectors.
Some imports may require permission from the Department of Agriculture, Health or
Environment Affairs.
Specific excise taxes are levied on alcoholic and non-alcoholic beverages, tobacco and
tobacco products, mineral waters, some petroleum products and motor vehicles. SA is an
adherent to the Customs Valuation Agreement negotiated under GATT/WTO. The
dutiable value of goods imported into South Africa is calculated on the F.O.B. price in
the country of ex-port. In conformance with its WTO commitments, South Africa has
lifted import surcharges.
The new Companies Act came into effect at the beginning of April 2011 constitutes a completely
new corporate law for South Africa. The Act provides for stricter accountability and
transparency requirements for state owned companies and public companies.

New features - old act versus new act
The Act provides for a number of new features, including:
Profit companies are divided into 4 categories private companies, personal liability
companies, state owned companies and public companies;
Stricter accountability and transparency requirements for state owned companies and
public companies.
A codified standard for directors conduct and strict director liability provisions.
A revised regime for takeovers and fundamental transactions. Specific provision is made
for compulsory acquisition of minority shareholding in a takeover scenario, appraisal
rights for dissenting minority shareholders, and court approval is only required where a
significant minority (15%) is opposed to the transaction.
A capital maintenance regime based on solvency and liquidity that abolishes the
concept of par value shares and nominal value shares.
A modern business rescue regime which is largely self-administered by the company,
under independent supervision, and subject to court intervention at any time on
application by any of the stakeholders.
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The Act is characterized by flexibility, simplicity, transparency, corporate efficiency and
regulatory certainty. It is drafted in plain language, and is not as detailed and prescriptive
as the current Act. Companies are allowed flexibility to change certain requirements to
suit their specific circumstances.

Income tax rates year ending February2013


Taxable Income (R)
Tax rate (%)
0 160,000 18% of each R1

160,001 to 250,000 28,800 + 25% of the amount above
160,000

250,001 to 346,000 51,300 + 30% of the amount above
250,000
346,001 to 484,000 80,100 + 35% of the amount above
346,000
484,001 to 617,000 28,400 + 38% of the amount above
484,000
617,001 and above 178,940 + 40% of the amount above
617,000
Source@South African revenue Service www.sars.gov.za


Taxation of Dividends
From the 1st April 2012 Secondary Tax on Companies (STC) was abolished and replaced by a
dividends withholding tax which means that dividends paid to individuals and foreign persons
will be subjected to a 15% dividends withholding tax. Dividends received from a foreign
company are in principle subject to income tax, although various exemptions exist (e.g. where at
least 10% of the shares and voting rights are held). When the foreign dividend is taxable, a credit
for withholding tax suffered is generally available.

Normal Tax
Companies
Year of assessment ending on or after 31st March 2013. 28% for companies and 33% for
branches.
Small Business Corporations
Year of assessment ending on or after 31st March 2013
Taxable Income up to ZAR63,556 - 0%
Taxable Income from ZAR63,557 to ZAR350,000 - 7% above on amount ZAR63,557
Taxable Income in excess of ZAR350,001 20,051+ 28% of amount above ZAR350,000
Personal service provider companies
Year of assessment ending on or after 31st March 2013 - 28%
South African Branches of Foreign Companies
Year of assessment ending on or after 31st March 2013 - 28%
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2.4 Economical

Economic Freedom 61.8
Property Rights 50
Freedom from
Corruption 41
Government Spending 69
Fiscal Freedom 70
business Freedom 74.7
Labor Freedom 55.6
Monetary Freedom 75.8
Trade Freedom 76.3
Investment Freedom 45
Financial Freedom 60
Source Heritage Foundation@ 2013 index

South Africas economic freedom score is 61.8, making its economy the 74th freest in the 2013
Index. Its score is 0.9 point lower than last year due to losses in half of the 10 economic
freedoms including those measuring the control of government spending and freedom from
corruption. South Africa is ranked 6th out of 46 countries in the Sub-Saharan Africa region, and
its overall score is higher than the world and regional averages.
South Africa has been losing ground on economic freedom for five years. The economy
continues to be moderately free, but the level of economic freedom this year is the second
lowest in the countrys 19-year Index history. The foundations of economic freedom are neither
well established nor strongly protected. The judicial system remains weak and vulnerable to
corruption, undermining the rule of law and prospects for stable long-term economic
development.
The rule of law remains weak and uneven, but the legal system has gained more independence
and provides relatively effective protection of property rights. Contracts are generally secure.
However, the court system is slow, understaffed, underfunded, and overburdened. The courts
impose undue burdens and costs on rights holders pursuing infringement cases. Corruption
continues to undermine the foundations of economic freedom.
The top income tax rate is 40 percent, and the top corporate tax rate is 28 percent. Other taxes
include a value-added tax (VAT) and a capital gains tax. The overall tax burden equals 23.8
percent of total domestic income. Government spending has increased to a level equivalent to 32
percent of GDP, and the budget balance has fallen into deficit, prompting a rate downgrade by
some agencies. Public debt is about 40 percent of GDP.
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Establishing a business takes five procedures and 19 days, with no minimum capital required.
The cost of completing licensing requirements has been reduced to about 30 percent of the level
of average annual income, but obtaining necessary licenses still takes over 100 days. Labor
regulations are not applied effectively, and the labor market lacks flexibility. Prices are generally
set by the market, but the government controls the prices of certain products.
The trade-weighted average tariff rate is modest at 4.4 percent, but non-tariff barriers that include
the use of anti-dumping laws undercut gains from the free flow of goods and services. Private
investment continues to be hindered by non-transparent laws, and foreign investment faces
additional restrictions that impede efficiency. The financial system has been gradually evolving,
and the resilient banking sector continues to be sound.
Some economic data and index of South Africa
2010 2011 2012
GNI per capita, PPP (current
international $)
10,310 10,710
Population, total 49,991,300 50,586,757
GDP (current US$) 363,523,195,186 408,236,752,340
GDP growth (annual %) 3 3
Taxes on international trade (% of
revenue)
3 4
Total reserves minus gold
(current US$)
38,175,049,260 42,595,178,722
Total reserves (includes gold,
current US$)
43,819,537,260 48,748,267,722
Trade (% of GDP) 55 58
Inflation, GDP deflator (annual
%)
8 8
Inflation, consumer prices
(annual %)
4 5
Ease of doing business index
(1=most business-friendly
regulations)
41 39
@Source World Bank web site
From the above table, we can say that South Africa is economically feasible country for FDI. To
support the statement, we can over view some aspects from the table. As South Africa GDP has
upward slopes and the total reserves also are increasing annually, the graphs highlights point that
it is the feasible place to invest for the business also support for the BOP. With good monetary
and fiscal policy the government has maintained the inflation within 5% although the world has
been suffering high inflation rate.
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Also, South Africa reduced the time and documents required to export and import through its
ongoing customs modernization program as well as some of the business related i.e. trading
reforms has shift doing business index from 43 to 39.

Exchange rates of the Rand (percentage change)
9/10-12/10 12/10-03/11 03/11-06/11 06/11-08/11
Euro 7.3 -8.2 -2 -3.1
US Dollar 5.1 -2.4 0 -3.5
Chinese Yuan 3.6 -3 -1.3 -4.7
British Pound 7.8 -6.2 0.8 -5.1
Japanese Yen 2.8 -0.7 -2.8 -8
Source: South African Reserve Bank, Quarterly Bulletin, September 2011

With the help of above fluctuation in the exchange rates of Rand with some various currencies
the foreign investor can access their risk of return prior to the investment. Also, the investor may
have to analyze the reserves (currency and gold) as price of the gold determines the value of the
Rand.
According to World Bank report apr/2013, South Africas growth slowed from 3.5% in 2011 to
2.5% in 2012 (with the annualized fourth quarter growth coming in at only 1.2%), primarily
reflecting the sluggish external environment and domestic labor strife. Eight out of the 10 major
subsectors (agriculture and construction being the two exceptions) saw a decline in growth, with
a decline of 4.3% in mining value added being the most damaging. The decline in mining also
adversely affected manufacturing activity (especially metal products) where output growth was
contained to a modest 2.2%, down from 3.6% in the previous year. On the demand side, the
global economic slowdown kept exports growth to 1.1%, while household consumption growth
slowed down considerably (from 4.8% in 2011 to 3.4% in 2012) as consumer confidence
weakened on account of heightened unemployment, global economic uncertainties, and a
weakened rand. Growth in fixed capital formation picked up by almost two percentage points, as
accelerated investment spending by state-owned enterprises and the government overcame
continued mild increases in private investment. Growth is projected to pick up only slightly to
2.7% in 2013.
3 Current Status of International Business
3.1 Affiliation to WTO and SADC
Established on 1 January 1995, the World Trade Organization provides a forum for
implementing the multilateral trading system, negotiating new trade agreements and resolving
trade disputes. South Africa has one of the most widespread and documented histories of
applying anti-dumping measures. South Africas anti-dumping laws date back to 1914; and the
first anti-dumping duties are said to have been imposed in 1921. In all documented appearances
of South Africa before WTO panels, South Africa appeared only as a respondent and the subject
matter was dumping/anti-dumping. South Africa had participated five times in the WTO Dispute
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Settlement system; thrice as respondent and twice as a complaining party. It is noteworthy to
point out that South Africa has never brought a complaint to the WTO about a trade measure
taken by any of its trading partners. The notable trend has been that South Africa has always
appeared before WTO panels as the party complained against in anti-dumping matters. It has
generally been argued by M.L Busch and E. Reinhardt, Developing Countries and General
Agreement on Tariffs and Trade/World Trade Organization Dispute Settlement (2003) Journal
of World Trade that the extent of a countrys participation in the WTO dispute settlement system
is a reliable indicator of the level of its economic activity. Appearing only as respondent is not
healthy because this points at the fact that there are a number of weaknesses in your legal system
which your trading partners always complain about.
South African dumping/anti-dumping law as one that is in a continuous state of positive legal
metamorphosis. With the noticeable exception of the decision in Progress Office Machines, the
decisions under discussion were well-reasoned and the unavoidable conclusion one is likely to
reach is that the courts did apply WTO law and its municipal statutory equivalents properly.

South Africa and the Southern African development committee (SADC)
The SADC has been in existence since 1980, when it was formed as a loose alliance of nine
majority-ruled states in Southern Africa known as the Southern African Development
Coordination Conference, with the main aim of coordinating development projects to lessen
economic dependence on the then apartheid South Africa.
The founding member states The Free Trade Agreement, which was launched in 2008, is part of
the SADCs ongoing efforts to create strong relations with Southern African countries through
trade. The SADC also aims to create a regional customs union. The free-trade area has the
potential to significantly increase South Africas trade and investment, but the country has to
remain in full political control of its destiny in Africa.
Thus, foreign investor should also have some information regarding SADC members to identify
some possible influence on business environment through these member countries economic and
political environments.

3.2 FDI Flows
Policy changes related to efforts for transforming South African society into a more equitable
one and currency volatility remain a challenge for foreign investors looking to take advantage of
South Africas endowments in terms of markets and resources.
The recent spate of incidents reflecting labor unrest in the mining, transport and agricultural
sectors, and a perceived lack of political leadership in response to the socio-economic travails of
widening income disparities and high unemployment rates, precipitated a downgrade of South
Africas credit rating by Moodys and Standard and Poors in September 2012. In response to
slower growth and the gloomy domestic and international economic outlook, South Africas
Minister of Finance outlined, in his Medium Term Budget Policy Statement, a number of
measures to improve investor confidence and to broaden economic participation in the economy.
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These include the re-establishment of orderly labor relations, strengthening of municipal
finances, the promotion of special economic zones (SEZs), the acceleration of youth employment
opportunities, shifting of exports toward emerging markets, providing support to small
businesses, and a focus on eighteen new strategic infrastructure programs that would add to the
US$ 90 billion infrastructure building programs already in progress. Furthermore, recent policy
statements by the ruling African National Congress (ANC) in favor of a more limited strategic
Nationalization of natural resources and its stronger stance against corruption will encourage
FDI, as investors look for alternative investment opportunities outside the Euro-zone and focus
their attention on emerging markets with strong institutional frameworks and robust
infrastructure.
In the medium term, it is expected that South Africa will continue to attract large portfolio
capital inflows, but that FDI will increase as well due to continued commodity demand from
China, India and other emerging economies. South Africa also remains a significant contributor
to sub-Saharan African GDP, and it is anticipated that South African businesses, especially the
financial sector, are set to benefit from the boom experienced by fast-growing African
economies. In addition, massive investment in infrastructure is expected to forge stronger links
among countries in the region, thereby promoting larger Africa-wide markets that attract further
investment and spur economic growth.

Foreign direct investment, net inflows (BoP, current US$)@ source CIA
Country
name
2008 2009 2010 2011
South Africa 9,644,834,927 5,353,688,723 1,224,280,433 5,889,306,981

4 Modes of Doing Business

Franchising
Recent years have seen a significant increase in the popularity of franchising in South Africa, as
it is perceived as an effective way to conduct and grow successful businesses across a range of
services. Franchising also plays an important role in furthering the development of small and
medium businesses. Job creation, poverty alleviation, economic growth and black empowerment
rank high on the South African governments agenda. Franchising, with its advantages of skill
transfer, start-up support and ongoing operational assistance, is becoming a preferred type of
business to address these areas. Business format franchising, in particular, is a proven concept
offering potential opportunities for interested firms.
Direct Marketing
Direct marketing channels in South Africa include:
Direct e-mail selling, including Internet viral campaigns (where one email user nominates
friends to participate in a promotional campaign and to his/her own benefit hands over
the email addresses of friends and colleagues)
Direct selling channel, such as an independent agent or distributor system
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Internet marketing, a sector which has also grown rapidly as more South African
consumers are now feeling comfortable about handing over banking details and ordering
from non-brick and-mortar companies.

Joint Ventures/Licensing
Joint ventures and licensing arrangements involving foreign entities attract the attention of the
South African regulatory authorities when repatriation of funds (royalties, fees and profits) from
South Africa to a foreign recipient is agreed to or possibly required in the future.
When a company is interested in entering into a foreign licensing agreement to manufacture a
product in South Africa, the South African licensee must submit an application to the
Department of Trade and Industry (DTI). The Department, in turn, will make a recommendation
to the South African Reserve Bank (SARB). Government regulations stipulate that the SARBs
Exchange Control Section must approve the payment of royalties. When a licensing agreement
involves no manufacturing, the request for exchange control approval is sent directly to SARB
by the South African licensee.
The calculation of discretionary funds (royalties, fees etc.) that can be set by the parties to a Joint
Venture or Licensing arrangements are subject to complex foreign exchange controls set by the
SARB that have been made less onerous over recent years. Contract conditions involving
obligatory purchasing and pricing agreements or requiring the licensee to sole-source articles
from the licensor are prohibited.


Conclusion

As from the research in different areas like cultural, political, legal, economical and trade history
South Africa can be the better place for doing business. Besides this report, other assessments on
the same topic have also led towards the same conclusion. But some challenges we have
highlighted above give us clear risk minimization assessment to be practiced before entering in
South Africa. As South Africa Is culturally diverged one should know to be culturally interacted
to the circumstances for better position in the place. Talking about the political stability, in the
recent politically unstable world South Africa came across politically sustainable country for the
long term business environment. The government has also put out extra effort to attract and to
enforce policy that better fits the investor. South Africa practices most legal methods and the
high legal provisions for getting contracts, documents for business, shipments and other legal
procedures for the business. South Africa implemented the tax reduction strategy to pave the
path for FDI so that the resources can be utilized to the optimum for the benefit of people and the
country. From the annex table 1, Starting Business ranks fall due to delay in construction permit,
registering property and getting electricity. Thus these factors are reluctance factors for any
investors inside South Africa. Although these legal and paper process are discouraging investors,
if one considers the government policy against getting credit and protecting investors one finds
South Africa as the most favorable for doing business.
Thus besides the legal procedures, considering reduction in tax, trade of foreign currency, credit
and protection for the investors and the political stability our report suggests South Africa as the
place for the long term business having the huge market for the world.
16

Despite the notable accomplishments, South Africas economic transformation agenda remains
incomplete. A range of enduring legacy issues from the apartheid system continues to undermine
economic efficiency and job creation. The limited progress since 1994 in lifting the living
standards of the majority and reducing the income inequality has put the social contract under
pressure and has grown into an open public debate. Service delivery protests by underserved
groups suggest that parts of the population have become frustrated and disillusioned with the
pace of reform, the poor quality of public health, education and infrastructure services, and
modest job growth prospects. Wildcat strikes in the mining, energy, transport and farming
sectors have put into question labor and business relations in the country.























17

References

CIA-World Fact book publication
https://www.cia.gov/library/publications/the-world-factbook/index.html
Thesis report on Political stability of South Africa
http://www.hri.org/MFA/thesis/summer98/stability.html
International Monetary Fund Publication
http://www.imf.org/external/data.htm
Doing Business in South Africa Report
http://www.southafrica.info/business/
World Bank Data Publication
http://www.worldbank.org/en/country/southafrica
http://www.kwintessential.co.uk/resources/global-etiquette/south-africa-country-
profile.html
South Africa Country Commercial Guide 2011 pdf
A Journal of Foreign Policy Issues by H.E. David Jacobs, South African Ambassador to the
Hellenic Republic
South Africa Legal Provisions pdf file Compiled by Swiss Business Hub Southern Africa
,Pretoria, February 2013
http://www.mongabay.com/reference/country_studies/south-africa/ECONOMY.html
http://www.heritage.org/index/country/southafrica
Country profiles of inward and outward foreign direct investment issued by the Vale
Columbia Center on Sustainable International Investment May 8, 2013
http://www.vcc.columbia.edu/files/vale/documents/South_Africa_I FDI _-
_May_8_2013_-_FI NAL.pdf
National Development Plan 2030 pdf report on Positioning South Africa in the World
South Africa and The World Trade Organization Anti-dumping Agreement
http://www.ssrn.com/link/SIEL-2012-Singapore-Conference.html















18

ANNEXES

Table :1

Topic Rankings DB 2013 Rank DB 2012 Rank Change in Rank
Starting a Business 53 43 -10
Dealing with Construction Permits 39 38 -1
Getting Electricity 150 148 -2
Registering Property 79 78 -1
Getting Credit 1 1 No change
Protecting Investors 10 10 No change
Paying Taxes 32 34 2
Trading Across Borders 115 145 30
Enforcing Contracts 82 83 1
Resolving Insolvency 84 81 -3
source@ International Finance Corporation