Mixed legal system of Roman-Dutch civil law, English common law, and customary law

Country overviewSouth Africa flag




Cyril Ramaphosa 

Capital city

Pretoria (administrative capital); Cape Town (legislative capital); Bloemfontein (judicial capital)

Major industries

Mining (world's largest producer of platinum, gold, chromium), automobile assembly, metalworking, machinery, textiles, iron and steel, chemicals, fertilizer, foodstuffs, commercial ship repair


South African Rand (ZAR)


South Africa has 11 official languages: Afrikaans, English, Ndebele, Northern Sotho, Sotho, Swazi, Tsonga, Tswana, Venda, Xhosa and Zulu

Major religions

Protestant 36.6% (Zionist Christian 11.1%, Pentecostal/Charismatic 8.2%, Methodist 6.8%, Dutch Reformed 6.7%, Anglican 3.8%), Catholic 7.1%, Muslim 1.5%, other Christian 36%, other 2.3%, unspecified 1.4%, none 15.1%

Legal information

Capital markets

Over the past year, the value of South Africa’s currency, the Rand (ZAR) has fluctuated against the US Dollar (USD), trading between [ZAR 11.55] and [ZAR 14.47] to USD 1. Currently (April 2018) the Rand trades at approximately [ZAR 12.07] to USD 1.

The Rand/Euro (EUR) exchange rate has fluctuated to a greater degree over the past year, trading between [ZAR 14.06] and [ZAR 16.97] to EUR 1, and currently (April 2018) trades at approximately [ZAR 14.93] to EUR 1.

Corporate Governance code

The King III Corporate Governance Code

Current number of listed companies

Approximately 400

Listing rules

The Listings Requirements of the JSE can be downloaded here

Regulatory body or bodies

The Takeover Regulation Panel (TRP), which regulates transactions caught by the Takeover Regulations governing takeovers and affected transactions - visit website here.

The Johannesburg Stock Exchange, in respect of transactions involving listed companies.

The Commissioner of the Companies and Intellectual Property Commission (Commission) - visit website here.

Companies Tribunal, which has the authority to review decisions of the Commission.

The Registrar of Securities Services and the Financial Services Board (FSB) - visit website here.

Principal legislation

The Companies Act 71 of 2008

The Financial Markets Act 19 of 2012

Financial Advisory and Intermediary Services Act 37 of 2002

Collective Investment Schemes Control Act 45 of 2002

Takeover / merger regulations

The Companies Act 71 of 2008 and Takeover Regulations

Competition regulation
Impact of regulatory regime on business

Mergers must be notified where the value of the merger transaction exceeds the financial thresholds for large and intermediate mergers prescribed by the Minister.

For an “intermediate merger” (the lowest threshold for mandatory pre-notification in South Africa):

  • the transferred firm(s) (being the target firm and all firms or businesses controlled by it (directly or indirectly) which are also the subject of the transaction) and the entire acquiring group (being the firm making the acquisition, all firms controlling it (directly or indirectly) and all firms or businesses controlled by it) must have combined South African assets or turnover (as reflected in their last set of audited financial statements) of at least R560 million; and
  • the transferred firm(s) must have South African assets or turnover of at least R80 million.

(NOTE: Any combination of assets or turnover can be used to arrive at the thresholds – essentially, the larger of turnover or assets is used in the calculation).

For a “large merger” the above values are replaced by R6.6 billion (combined) and R190 million (for the transferred firm(s)).

Transactions not meeting these thresholds are regarded as “small mergers”. These are only notifiable:

  • in limited circumstances outlined in the Competition Commission’s (the Commission) Guideline on small merger notification (at the time of entering into the transaction one of the parties involved (or a firm within their group) must be subject to a prohibited practice investigation (e.g. price fixing or market division) or be respondents to pending proceedings related to a prohibited practice referred by the Commission to the Competition Tribunal (the Tribunal)); or
  • at the Commission’s insistence within 6 months of the transaction having been implemented.

Small mergers may also be voluntarily notified. The filing fees are as follows:

  • for a small merger, ZAR 0
  • for an intermediate merger, ZAR 100,000
  • for a large merger, ZAR 350,000.

A small or an intermediate merger must be approved, conditionally or unconditionally, or prohibited by the Commission within 60 business days. In the case of a large merger, the Commission must make a recommendation to the Tribunal to approve, conditionally or unconditionally, or prohibit the merger, within 40 business days (this period may be extended, on application to the Tribunal, by 15 business days at a time). Thereafter a hearing is held before the Tribunal and the Tribunal makes the final decision.


The relevant legislation is the Competition Act 89 of 1998, as amended (the Act) and the regulations promulgated in terms of that Act.

Pharmaceutical regulation

The Medicines and Related Substances Act 101 of 1965 (Medicines Act) and the regulations published under the Medicines Act.

The Pharmacy Act 53 of 1974 (Pharmacy Act) and the regulations published under the Pharmacy Act.


In order to conduct business in South Africa as a manufacturer, importer or exporter, wholesaler or distributor of medicines or medical devices, various licences, registrations and notifications are required in terms of the Medicines Act and the Pharmacy Act, and the regulations thereto.

Regulatory authority

The existing regulatory authority which administers and enforces the Medicines Act is the Medicines Control Council (MCC), while the regulatory authority which enforces the Pharmacy Act is the South African Pharmacy Council. The MCC will be replaced with the South African Health Products Regulatory Agency, when pending amendments to the Medicines Act come into effect.

Foreign / local ownership restrictions

Within the South African context, there are various proposals to introduce foreign ownership restrictions in various sectors such as, for example, land, telecommunications and security services. There are also existing foreign ownership controls in sectors such as broadcasting and aviation. However, no such foreign ownership restrictions have been discussed or introduced in the pharmaceuticals sector, as yet.

There are also currently no B-BBEE requirements in either the Medicines Act or the Pharmacy Act.


All “mergers” meeting the thresholds (turnover and asset based) are covered. A merger is any transaction involving the direct or indirect acquisition or establishment of control by one or more persons over the whole or part of the business of another firm. The Act contemplates that control may be achieved in any manner.

Note that:

Offshore acquisitions of control are covered where the thresholds are met.

Acquisitions of both positive and negative control are covered as well.

Telecommunications and Broadcasting Regulation

The Electronic Communications Act 36 of 2005 (ECA) and the regulations published under the ECA.

The Independent Communications Authority of South Africa Act 13 of 2000.


The ECA covers, amongst other things, the licensing of broadcasting services, electronic communications services, and electronic communications network services in South Africa, as well as the licensing of radio frequency spectrum.

Regulatory authority

The Independent Communications Authority of South Africa (ICASA).

Foreign / local ownership restrictions.


In terms of section 64 of the ECA, a foreigner may not, whether directly or indirectly: (1) exercise control over a commercial broadcasting licensee; or (2) have a financial interest or an interest either in voting shares or paid-up capital in a commercial broadcasting licensee, exceeding 20% (twenty percent). Not more than 20% (twenty percent) of the directors of a commercial broadcasting licensee may be foreigners.


There are, as yet, no specific restrictions on foreign ownership of telecommunication services, although foreign owners are required to incorporate a local company in order to obtain a licence to provide a telecoms service in South Africa. ICASA has indicated that it intends to set foreign ownership restrictions for strategic telecommunications operators in line with the policies adopted by the Department of Trade & Industry. To date, no such foreign ownership restrictions have been set.


In granting licences, ICASA is obliged to take the empowerment of historically disadvantaged persons (HDPs) into account and to ensure that the range of services regulated under the ECA, viewed collectively, is provided by persons from a diverse range of communities in South Africa. Where application is made for a new individual licence to provide telecoms services or networks of relatively large scope and scale, or to provide commercial broadcasting of national or regional scope, a certain percentage of shares, as specified by ICASA, with a minimum of 30%, are required to be held by HDPs.

Corruption / transparency
UNAC ratified?




Signatories to United Nations Convention Against Corruption (UNAC)?


Corruption Perception Index rank worldwide for 2011


Signatories to the African Union Convention on Preventing and Combating Corruption?


Corruption Perception Index score for 2011


Signatories to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions?



South Africa recently reformed its arbitration law with the enactment of the International Arbitration Act 15, 2017 (the IAA), which commenced on 20 December 2017. South Africa now has two principal arbitration regimes. Domestic arbitrations are regulated by the Arbitration Act 42 of 1965 and the common law, while the IAA contains the arbitration law for international commercial arbitrations. 

The IAA is a significant step in the development of South African arbitration law. After the commencement of the Arbitration Act in 1965, the country fell behind the rest of the global community in following and adopting international best practice. Much work had been done by transnational bodies, such as the United Nations Commission on International Trade Law (UNCITRAL), to establish models laws and arbitration procedures that contributed significantly to the harmonisation of arbitration law around the world. By adopting these standards, other African jurisdictions took the lead in becoming centres for international arbitration. 

With the enactment of the IAA, South Africa has taken a number of important steps in establishing itself as a hub for international arbitration: 

  • South African arbitration law now incorporates the UNCITRAL Model Law on International Commercial Arbitrations. This means that the Model Law, as adapted in Schedule 1 to the Act, will apply to international commercial arbitrations where South Africa is the juridical seat of the arbitration. This general rule is subject to the provisos that the dispute is capable of determination by arbitration in South Africa, and that the arbitration agreement is consistent with public policy. 
  • The IAA applies to international commercial arbitrations involving both private and public bodies. The definition of a public body under the IAA adopts the definition of an organ of state in terms of the South African Constitution. With an increasingly structurally pluralistic State, a public body may in certain circumstances include a private company where that party exercises a public law power or performs a public function (either in terms of the Constitution or in terms of legislation). This will be subject to the section 13 of the Protection of Investment Act 22, 2015 (which has not yet come into force), which will deal with disputes between the State and foreign direct investors arising from that legislation. 
  • The IAA promotes respect for party autonomy in the resolution of disputes and confirms that no court shall intervene in an arbitration except where provided for in the legislation. In addition to the provisions of the Model Law and the question of enforcement of agreements and awards, the IAA confirms that arbitration may not be excluded solely on the ground that legislation confers jurisdiction on a court or other tribunal to determine a matter falling within the terms of an arbitration agreement. 
  • The IAA affords immunity to arbitrators and arbitral institutions in the bona fide discharge of their functions. This is a vital measure to ensure the independence and neutrality of the adjudicators in arbitration proceedings. 
  • As a general rule, arbitrations involving private bodies may be held in private. This means that the award and all documents created for the arbitration that are not otherwise in the public domain must be kept confidential by the parties and tribunal. This rule is subject to the proviso that the documents or award may be disclosed if required by reason of a legal duty, or in order to protect or enforce a legal right. On the other hand, arbitrations involving public bodies must be held in public unless, for compelling reasons, the arbitral tribunal orders otherwise. 
  • Parties to an arbitration agreement may refer a dispute covered by the arbitration agreement to conciliation, before or after referring the dispute to arbitration, subject to the terms of the agreement. If so referred, the parties may agree to use the UNCITRAL Conciliation Rules set out in Schedule 2 to the IAA. 
Effectiveness of the court system

The High Courts and Magistrates Courts are governed by an advanced set of Rules and dispense judgments which are often of high quality. However, the courts are often plagued by inefficiency and maladministration.

The Chief Justice of South Africa, Mogoeng, has recently introduced a draft norms and standards document for judicial officers, aimed at improving efficiencies in the judicial system by making courts more efficient and effective. The norms and standards prescribe that civil cases in the High Court be finalised within one year from the issue of summons and those in the Magistrates’ Courts within nine months. Judges must strive to finalise their cases within the specified time periods and must do so as expeditiously as possible. The directive adds that judgments should not be reserved without giving a definite date on when they will be delivered and must be delivered within three months. Judges are required to submit data on their performance and their workflow to enable the heads of courts and the Chief Justice to monitor their performance. The proposed changes are meant to simultaneously safeguard judicial independence while increasing accountability.

Enforcement of arbitral awards

The Recognition and Enforcement of Foreign Arbitral Awards Act 40 of 1977 governs the recognition and enforcement of foreign arbitral awards in light of South Africa’s accession to the New York Convention in 1976. South Africa is, however, not a party to the International Centre for Settlement of Investment Disputes Convention.

Enforcement of foreign judgments

The other important objectives of the IAA are to provide for the recognition and enforcement of arbitration agreements and arbitral awards, and to give effect to South Africa’s obligations under the New York Convention.  The Act repeals and amends the provisions of the previous legislation that dealt with the question of enforcement. 

  • Consistent with the New York Convention, the general rule under the IAA and the UNCITRAL Model Law is that an arbitration agreement and an arbitral award, irrespective of the country in which it is made, must be recognised in South Africa. In order to enforce the award, an application must be made to the High Court where the judge must make the award an order of court.  The court may only refuse to recognise and enforce a foreign award if it would be contrary to public policy or if the matter is not capable of being referred to arbitration in South Africa. Although the IAA does not exhaustively define what public policy entails, it specifically provides that an award will not be enforced if:  a breach of the arbitral tribunal's duty to act fairly occurred in connection with the making of the award, which has caused, or will cause, substantial injustice to the party resisting recognition or enforcement; or
  • the making of the award was induced or affected by fraud or corruption.

The party against whom enforcement of a foreign arbitral award is sought is entitled to oppose the application and a court will only refuse to make the award an order of court if it is shown that:

  • A party to the arbitration agreement did not have capacity to contract under the laws applicable to that party, or the arbitration agreement is invalid under the laws to which the parties have subjected the agreement.  
  • The defendant did not receive the required notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his/her case.
  • The award deals with a dispute falling outside the terms of reference to arbitration.
  • The constitution of the arbitral tribunal, or the arbitration procedure, was not in accordance with the arbitration agreement or, if the agreement does not provide for such matters, with the law of the country in which the arbitration took place.
  • The award has not yet become binding on the parties, is subject to an appeal or has been reviewed or set aside in the country in which the award was made.

With an independent judiciary that respects party autonomy, internationally respected arbitrators and arbitral institutions, a constitutional guarantee to fairness in legal proceedings, world-class facilities and amenities, and the reform of its national arbitration law in line with international best practice, South Africa has the potential to become one of the leading centres of international arbitration in Africa. which the award was made.

Enforcement of foreign judgements

Generally, there are no provisions in South African law prohibiting the enforcement of foreign judgments abroad. Therefore, in order to enforce a domestic judgment abroad, a party must consult the laws of the particular foreign jurisdiction for guidance. There are instances, however, particularly with reference to the Enforcement of Foreign Civil Judgements Act 32, 1988, where South Africa has agreed to reciprocal enforcement of civil judgements with certain countries. Zimbabwe is one such example.


Section 165 of the Constitution of the Republic of South Africa (the Constitution) enshrines the independence of the courts by providing that no person or organ of state may interfere with the functioning of the courts. To this end, the courts are empowered to apply the Constitution and the law impartially and without fear, favour or prejudice.

In addition, the separation of powers doctrine creates a system of checks and balances whereby the three arms of Government (namely, the Legislature, the Executive and the Judiciary) are separated in order to ensure good governance, prevent the abuse of power and enhance State efficiency.

In this way, the Constitution shields the judicial system from undue influence and interference from other branches of Government. While there have been instances, particularly in the last few years, where the independence of the Judiciary has been brought into question, the general perception is that the South African judicial system has successfully managed to maintain its independence and impartiality.

Perception of the local courts

For a large portion of South Africans, the court system is inaccessible due to financial constraints. The courts, from the perspective of the majority of citizens, are therefore perceived as institutions capable of dispensing justice which are simply out of reach. Many South African courts are overburdened and inefficiently administered and this creates a negative perception of the court system in South Africa. This mindset is particularly prevalent where the Magistrates’ Courts are concerned. However, in a criminal context, according to a 2012 South African Victims of Crime Survey published by Statistics South Africa, 64.7% of the households surveyed nationally, indicated that they were satisfied with the manner in which the courts carried out their functions. There are ongoing efforts at a national level in South Africa to enhance the public perception of the courts.

Structure of the court system

The Constitutional Court is the highest court in South Africa. It has the final arbiter on all matters relating to the Constitution of South Africa. Its decisions on the Constitution are binding on all other courts.

The Supreme Court of Appeal is the highest court in respect of all matters other than those involving the Constitution. Apart from the Constitutional Court, no other court may alter a decision of the Supreme Court of Appeal as its decisions are binding on all courts of lower hierarchy.

The High Court is comprised of seven provincial divisions and six local divisions which have jurisdiction over defined geographical areas. The High Court deals with both civil and criminal matters. The decisions of the High Courts are binding on Magistrates Courts within their areas of jurisdiction. Circuit Courts are also part of the High Court. They sit at least twice a year, moving around to serve more rural areas. 

The Magistrates Courts are the lower courts which deal with the less serious criminal and civil cases. They are divided into regional courts and district courts.

Small Claims Courts have jurisdiction to hear any civil matter involving less than 15000 rand (the lawful currency in South Africa), however, certain types of matters (such as divorces) may not be heard. No legal representation is permitted in the Small Claims Court.

In addition, there are various specialist courts, such as the Labour Courts, which have the same status as a High Court, and the Labour Appeal Court, which hears appeals against decisions of the Labour Courts and which is the highest court for labour appeals.

Foreign investments
Foreign investment incentives

South Africa welcomes foreign investment, in both the public and private sectors and in all spheres of the economy. 

Although South Africa faces social challenges in respect of unemployment, a large current account deficit, a volatile currency and slowing demand for commodities, there is significant scope for foreign direct investment in the fast-moving consumer goods, financial services, hospitality, pharmaceuticals, resources, retail, telecommunications and information technology sectors. South Africa has many attractive assets for investors, including a diversified, productive and advanced economy, abundant natural resources, a transparent legal system and a well-established and independent electoral system. 

With the establishment of a new ANC administration led by President Cyril Ramaphosa at the beginning of 2018, it is anticipated that the Government will emphasize policies and programmes to further encourage foreign investment. To this end, the Department of Trade and Industry (DTI) offers a wide range of incentive schemes to encourage the growth of competitive new enterprises and the creation of sustainable industries. More information on the various initiatives can be found here

Introduction – Bilateral Investment Treaties 

Since the end of the Apartheid period, South Africa has negotiated more than 40 Bilateral Investment Treaties (BITS)   designed to promote and protect foreign investment.

South Africa recently embarked on a review aimed at creating an investment regime that strikes a balance between the interests of foreign investors and the need for the government to implement measures in the public interest (such as promotion of economic opportunities for the previously disadvantaged South Africans). The DTI made a recommendation to restructure the existing BITs that South Africa has concluded to ensure that the BITs are in line with South Africa’s broader social and economic policies.

To this end, the DTI published the first draft of the Promotion and Protection of Investment Bill for public comment on 01 November 2013 (the Bill). The Bill, which, on the face of it, aims to replace existing BITs when it becomes law, is still in a draft format and must still go through the Parliamentary process before it is passed into law.  In line with this policy shift, South Africa has recently cancelled BITS with Switzerland, Luxembourg, Spain, Germany and Belgium. Cancellation of other BITs is therefore a foreseeable future possibility. 

Briefly, the Bill diminishes the rights afforded to investors in current BITs in the following ways:

In the event of expropriation, investors are no longer assured of compensation at full market value. The Bill provides that compensation will be in line with the Constitution of the Republic of South Africa, which provides for compensation which must be “fair and equitable”.

The Bill removes the obligation on the South African government to enter into international arbitration in the event of a dispute. The DTI would facilitate mediation or South African courts may be approached for relief.

The Bill does not contain the provision that currently exists in most BITs which entitles investors to “fair and equitable treatment”.

Another significant difference between the Bill and impending law as compared to the existing BITs is that the Bill and eventual law could be changed unilaterally by the South African Parliament, whereas, the BITs offer protected investment for a fixed term, thereby assuring investors of security and stability.

In light of the above, the BITs which are currently in force to which South Africa is a party have been specifically highlighted. Please note that there are other BITs that have been signed by South Africa and other countries that have not been brought into force. BITs to which South Africa is a party as at 1 June 2013, whether or not they are in force or have subsequently been terminated, can be found at the arrow icon to the right.

Foreign investment rules

There are few restrictions on foreign investment in South Africa, with tax breaks and incentives for small enterprises, strategic industrial projects and exporters.

Although there is no overarching piece of legislation which limits foreign ownership, there are a number of strategic sectors in which regulations affecting foreign entry or ownership are commonly found. The sectors which are subject to such regulations are: agriculture and fisheries, broadcasting and print media, business services (e.g., accountancy, legal services), defence and aerospace, energy, financial services, natural resources, nuclear energy and materials, real estate, telecommunications and transport.

In addition to this, the Regulation of Agricultural Land Holdings Bill (in draft form) will, if enacted in its present form, have far reaching consequences on the agricultural sector, affecting all owners of agricultural land and, in particular, foreign nationals and owners of agricultural land holdings determined to be in excess of ‘ceilings’ for land ownership, which excess may be available for redistribution, with or without expropriation. 

The Promotion and Protection of Investment Act 22, 2015 (the PPI Act) was passed by the South African Parliament on 3 November 2015. The PPI Act provides for the protection of investors and their investments and aims to balance the rights and obligations that apply to all investors.  The PPI Act is intended to promote investment by modernising the current investment regime and achieving a balance of rights and obligations that will apply to all investors when investing in South Africa.

Importantly, the PPI Act provides a foreign investor with the same rights that a domestic investor enjoys in South Africa and it states that foreign investors will be treated no less favourably than domestic investors. There has been controversy surrounding the protection standards‚ such as the ability to seek recourse from an international tribunal and guaranteed market-related compensation for any expropriation. However, the DTI has defended the PPI Act, saying that South Africa has one of the highest levels of investor protection and foreign investors will always benefit from the legal protection of property rights granted by the South African Constitution. The DTI has also stated that the PPI Act is in keeping with international trends in whereby countries are terminating bilateral investment treaties and introducing legislation to deal with investments internally within their countries.

Black Economic Empowerment (BEE)

The Broad-Based Black Economic Empowerment Act 53 of 2003 (BEE Act) – which is the principal legislation through which broad-based black economic empowerment (B-BBEE) is measured.

The general Codes of Good Practice (Current Codes) – which were published by the Minister of Trade & Industry (Minister) in 2007 and which set out the details of the scoring process for B-BBEE.

The revised Codes of Good Practice – which were published by the Minister on 11 October 2013 and which will replace the current Codes by 30 April 2015.

Sector-specific codes which detail the manner in which B-BBEE must be measured for businesses operating in particular sectors (e.g. sector codes have been published for the tourism, forestry, information communication and technology, chartered accountancy, finance, construction, transport, and agriculture sectors). 

General legislation

The Constitution of the Republic of South Africa Act 108 of 1996

The Electronic Communications Act 36 of 2005

The Independent Broadcasting Authority (Advertising, Infomercials and Sponsorships) Regulations, 1999

The National and Provincial Party Elections Broadcasts and Political Advertisements Regulations, 2014

Municipal Elections Party Elections Broadcasts and Political Advertisements Regulations, 2011

The Code of Advertising Practice administered by the Advertising Standards Authority of South Africa – which regulates advertising generally

Outdoor Advertising By-Laws adopted by the City of Johannesburg – which, although not applicable on a national basis, is indicative of the type of local government restrictions on outdoor advertising and billboards

Consumer Protection Act 68 of 2008 and the Consumer Protection Act Regulations, 2011 – which deal with the marketing of goods and services to consumers. 

Impact of regulatory regime on business

Government’s B-BBEE policy seeks to redress the inequalities created by apartheid in South Africa and to increase levels of participation in economic activities by black people. For this purpose, the Minister of Trade and Industry (the Minister), who is tasked with implementing the B-BBEE Act, has published various Codes of Good Practice (Codes) under the B-BBEE Act which must be taken into account by Government entities when dealing with the private sector (e.g. awarding licences, granting concessions, selling state-owned assets, and entering into public-private partnerships).

The Codes include a B-BBEE Scorecard stipulating various measurement indicators on which companies’ B-BBEE performance is measured (i.e. ownership, management control, skills development, supplier and enterprise development and corporate social investment).

The overall number of points that an investor achieves across all these categories translates into a B-BBEE level (e.g. Level 1 (100+ points), Level 2 (between 95 and 100 points), with Level 1 being the highest and Level 8 being the lowest). An investor’s overall B-BBEE score is then taken into account by Government entities when engaging with the private sector (e.g. deciding which suppliers to procure goods and services from). Investors with high B-BBEE scores relative to their competitors are preferred in any Government procurement process.

Other than in certain State licensing, permitting and authorisation processes (e.g. in the gambling sector), there is no ‘hard law’ requiring that any private entity in South Africa must meet specific B-BBEE targets, implement a B-BBEE policy or achieve certain levels of ownership by black people. However, while there are no absolute requirements in relation to B-BBEE, any company wishing to do business in the South African environment must consider and develop its B-BBEE position. An entity that does not have a good B-BBEE rating, or does not strive to improve its B-BBEE rating, may be hampered in the conduct of its day-to-day business with Government, organs of State and private sector customers. 


B-BBEE is a central part of the South African government’s economic transformation strategy, and the multi-faceted approach to B-BBEE has been adopted with a number of components which aim to increase the numbers of black people (being South African citizens who have been racially classified as African, Indian or Coloured) that manage, own and control the country’s economy, and to decrease racially based income inequalities. 

Industry specific legislation

Tobacco Products Control Act 83 of 1993

Liquor Act 59 of 2003

The Medicines and   Related Substances Act 101 of 1965 (Medicines Act) and the General Regulations made in terms of the Medicines Act

Labelling and Advertising Regulations, 1977 published in terms of the Foodstuffs, Cosmetics and Disinfectants Act 54 of 1972 – dealing with labelling and advertising of cosmetics and disinfectants

Regulations governing the Labelling and Advertisement of Foodstuffs, 1992 published in terms of the Foodstuffs, Cosmetics and Disinfectants Act 54 of 1972 – dealing with the labelling and advertising of foodstuffs

Financial Advisory and Intermediary Services Act 37 of 2002 and the General Code of Conduct for Authorised Financial Service Providers and Representatives, 2003

Collective Investment Schemes Control Act 45 of 2002

Code of Advertising Practice – which imposes extensive and detailed requirements in relation to the manner in which particular products may be advertised including:   anti-perspirants and deodorants; antiseptics; germicides and disinfectants; charitable causes; over-the-counter medicines; commemorative and other items produced in limited editions; collectibles and limited editions; financial advertising; self-employment opportunities; employment training and course of instruction; furniture advertising; hair and scalp products; imported products; inclusive tours; dieting aids; smoking deterrents; toothpastes and similar oral hygiene products; and cellular telephones.

Capital Gains Tax

A percentage of a taxpayer’s net capital gain for the year of assessment is included in the taxpayer’s taxable income for the year, which constitutes the taxpayer’s taxable capital gain.

The inclusion rate for natural persons or special trusts is 40%, while the inclusion rate for companies and normal trusts is 80%.

Taxable capital gains of individuals and companies are thus subject to the following effective rates:

  • 22.4% for companies and close corporations;
  • 18% (maximum rate) for individuals and special trusts; and
  • 36% for normal trusts.
Corporation tax

South Africa’s income tax system is a residence-based system. South African residents are taxed on their worldwide income, while non-residents are taxed on income from a South African source.

The corporate income tax rate of resident and non-resident companies (including close corporations) is 28%. 

A company will be tax-resident if it is incorporated in South Africa or has its place of effective management in South Africa, subject to the provisions of a double tax agreement (DTA) if applicable.

Income tax is imposed in respect of the taxable income of a taxpayer. Taxable income is calculated by   deducting from gross income any “exempt income” as defined, as well as all permissible deductions or allowances, and adding all amounts to be included or deemed to be included in the taxable income of a person in terms of the Income Tax Act 58 of 1962 (the ITA), such as net capital gains.

Exchange control

South African residents are subject to exchange controls in terms of the Exchange Control Regulations, issued under the Currency and Exchanges Act, 1933. 

The Financial Surveillance Department (FinSurv) (previously known as the Exchange Control Department) of the South African Reserve Bank (SARB) is responsible for the day-to-day administration of exchange control.  FinSurv from time to time issues Rulings and Circulars to provide further guidelines regarding the implementation of exchange controls.  The Exchange Control Regulations, Rulings and Circulars are collectively referred to as “Excon Rules” for purposes hereof.

Certain South African banks have also been appointed to act as authorised dealers in foreign exchange (Authorised Dealers).  Authorised Dealers may buy and sell foreign exchange, subject to conditions and within limits prescribed by FinSurv. 

The purpose of exchange controls is, inter alia, to regulate inflows and outflows of capital from South Africa.  South African residents are not permitted to export capital from South Africa except as provided for in the Excon Rules.

No South African resident is thus entitled to enter into any transaction in terms of which capital (whether in the form of funds or otherwise) or any right to capital is directly or indirectly exported from South Africa without the approval of either FinSurv or, in certain cases, by an Authorised Dealer.

Exchange controls do not apply to non-residents, but non-residents may be impacted indirectly as acquisitions of South African assets and transactions with a resident may require exchange control approval.

Contravention of the Exchange Control Regulations (the Regulations) is a criminal offence and general offences are subject to a fine, imprisonment for a period not exceeding five years, or both.  Transactions concluded in contravention of the Regulations could be void ab initio or could be voidable.  Other possible penalties include the attachment of any money or goods in respect of which a contravention of the Regulations, whether by omission or commission has been committed and the forfeiture and disposal of such money or goods to the State.


Currently, a specific exemption applies to interest paid to a non-resident, provided the foreign lender does not carry on business via a PE in South Africa or, in the case of a natural person, he/she did not spend more than 183 days in the fiscal year in South Africa.  Further relief may be available under a DTA if the non-resident does not qualify for the domestic law exemption.

However, a new withholding tax on interest paid to non-residents is due to come into effect from 1 January 2015.  The withholding tax will be levied at a rate of 15% but the rate could be reduced in terms of an applicable DTA.

Export Processing Zone

The Industrial Development Zone (IDZ) programme was introduced in 2000 to encourage foreign direct investment.  An IDZ is a purpose built industrial estate linked to an international air or sea port, which might contain one or multiple Customs Controlled Areas (CCA).  The objective is for goods to be manufactured and stored in these estates in order to create jobs and develop skills in these regions, and also to boost beneficiation, investment and economic growth. 

There currently are five IDZs in South Africa, all along the coast. Investing in an IDZ may offer the following benefits:

  • relief from customs duties at time of importation into a CCA;
  • simplified customs procedures;
  • fiscal incentives on goods; and
  • subsidised infrastructure. 

The Government has in recent years been working on a new bill providing for Special Economic Zones (SEZs), in order to improve on the current IDZ programme.  Provision is made for various types of SEZs, including IDZs.

It is envisaged that incentives applicable to SEZs will include a 15% corporate tax, a building tax allowance, an employment tax incentive, CCAs and accelerated depreciation allowances.


Dividends tax is imposed at a rate of 15% on dividends paid by a South African resident company, or by a non-resident company in relation to shares listed on the JSE. 

A DTA may apply to reduce the rate of withholding tax, typically to 5% or 10%.

There are a number of instances where the payment of dividends will be exempt from dividends tax, for example where the beneficial owner of the dividend is inter alia a South African resident company, a tax exempt public benefit organisation, a benefit fund or a retirement fund. 

South Africa   does not currently impose a branch profits remittance tax.

Payroll tax and social security

Remuneration from employment is subject to an employees’ tax withholding system, known as Pay As You Earn (PAYE). A resident employer is required to deduct employees’ tax at source, and to pay the amount so deducted directly to SARS.    A non-resident employer will only be obliged to withhold employees’ tax if it has a “payroll agent” in South Africa who is authorised to pay remuneration on behalf of the non-resident employer.

It is important to note that not only individuals, but also companies or trusts could be regarded as employees for employees’ tax purposes, which could oblige the “employer” making payment to them, to withhold employees’ tax from their remuneration.

Employers and employees are required to contribute to the Unemployment Insurance Fund (UIF). Contributions are made monthly. Employees pay 1% of their salary and employers contribute another 1%, subject to a current monetary ceiling of R148.72 in respect of each of the employer and employee contributions.

The Skills and Development Levy (SDL) is a levy imposed to promote learning and development in South Africa.  The amount is 1% of the total amount paid in salaries to employees (including overtime payments, leave pay, bonuses, commissions and lump sum payments).

Personal income tax

The taxable base is determined by calculating the taxable income of a person, which consists of:

Gross income (see below) 

Less exempt income

= Income


Less all permissible deductions or allowances Plus all amounts to be included or deemed to be included in the taxable income of a person in terms of the ITA, such as taxable capital gains

= Taxable income.


‘Gross Income’ includes, in the case of a resident:

  • the total amount;
  • in cash or otherwise;
  • received by or accrued to or in favour of such resident;
  • during the year or period of assessment;
  • excluding receipts and accruals of a capital nature; and
  • including certain specified amounts, irrespective of whether they are of a capital or revenue nature.

For a non-resident, ‘Gross Income’ is similar to that applicable to a resident, but subject thereto that it only includes amounts from a South African source.

‘Income’ is calculated by deducting from gross income any ‘exempt income’ as defined. Gross income which is exempt under the terms of a DTA is not ‘exempt income’ as defined.

‘Taxable income’ means the aggregate of:

  • income less all permissible deductions or allowances; plus
  • all amounts to be included or deemed to be included in the taxable income of a person in terms of the ITA, such as taxable capital gains.
Real property tax

Transfer duty is levied on a purchaser on the transfer of fixed property in South Africa, subject to specific exemptions. 

Transfer duty is payable on a sliding scale, ranging from 0% in respect of fixed property with a market value of not more than R600,000 to 8% on property with a market value exceeding R1,5 million.

Where a non-resident disposes of South African immovable property or shares in an immovable property company, the purchaser (or his agent) may be required to withhold tax from the payment and pay such tax to SARS. The withholding tax rate in respect of a foreign company is 7.5%. This is not a final tax and the non-resident may also, in a number of instances, apply for a directive that no tax, or tax at a reduced rate, should be withheld from the purchase price.


The payment of royalties to a non-resident is currently subject to withholding tax at the rate of 12% unless a DTA reduces this rate. It is proposed that this rate will be increased to 15% with effect from 1 January 2015, however, it may be reduced in terms of the provisions of an applicable DTA.

Stamp duty

Securities Transfer Tax (STT) is levied on every transfer of a security and was introduced with effect from 1 July 2008 to replace stamp duty and uncertificated securities tax on the transfer of listed and unlisted securities respectively.

STT is payable on the transfer or redemption of any security at a rate of 0.25% on the greater of the market value or consideration payable. 

There is no business licence tax.

There is no apprenticeship tax, but employers are obliged to pay a levy, known as a Skills Development Levy (SDL), which aims to fund education and training as envisaged in the Skills Development Act.

The collection and payment of levies are administered by the Commissioner. Every employer who pays or is liable to pay remuneration to employees, is required to pay the levy, subject to certain exemptions.

Technical service fees

A new withholding tax on service fees paid to a non-resident is proposed to come into effect from 1 January 2016. The withholding tax will be levied at a rate of 15% but the rate could be reduced in terms of an applicable DTA. “Service fees” includes payments for technical, managerial and consultancy services but does not include payments for the imparting of knowledge and any connected services.

Thin Cap regulations

The South African thin capitalisation rules (which form part of South African transfer pricing rules) must be considered where a resident subsidiary of a foreign parent is funded by way of capital and shareholders’ loans.  

Until April 2012, SARS applied a “safe harbour” 3:1 debt-to-equity guideline ratio to determine whether interest-bearing loans were disproportionate in relation to the capital of the South African entity. 

However, the transfer pricing rules, including the thin capitalisation rules, have been amended with effect from 1 April 2012.  In terms of a draft interpretation note published by SARS in this regard, SARS requires taxpayers “to determine the amount of debt that could have been borrowed and would have been borrowed at arm’s length from an independent party and to take that amount into account when preparing their tax return and assessing what portion of the related expenditure, if any, is not deductible under section 31.”  No provision is made for a safe harbour rule.  Parties would effectively have to perform a functional analysis taking into account various factors and ratios such as Debt:EBITDA ratio, interest cover ratio and Debt:Equity ratio.  

The draft note indicates that a debt to EBITDA ratio that exceeds 3:1 will be viewed as resulting in a high thin capitalisation risk, but it emphasises that this is not a safe harbour rule.

Transfer pricing

From a tax perspective, the South African ‘thin capitalisation’ rules (which form part of the transfer pricing rules as provided for in section 31 of the Income Tax Act 58, 1962 (ITA)) could effectively restrict the amount to be advanced to a subsidiary by way of share capital.

Thin capitalisation refers to the funding of a business with a disproportionate degree of debt in relation to equity, which enables the foreign investor to receive interest income (which was exempt until a withholding tax on interest came into effect on 1 March 2015) and confers on the company the benefit of deducting the interest paid (relative to the non-deductibility of dividends paid on equity capital). Thin capitalisation measures are designed to limit the deduction of interest on excessive debt funds.

The South African transfer pricing rules, including the thin capitalisation rules, were amended with effect from 1 April 2012, providing inter alia that the general transfer pricing (arm’s length) provisions will be applied to determine whether a company is thinly capitalized.

Value Added Tax

South Africa applies a VAT system in terms of which VAT is levied on the supply of all goods and services by a registered VAT vendor at each stage within the production and distribution chain. Vendors collect output tax from their customers and are able to claim credits for input tax paid by them, with the effect that the tax burden is on the final consumer. VAT is also payable on the importation of goods and certain services to South Africa.

In terms of the VAT Act 89, 1991, VAT is payable on the supply of goods and/ or rendering of services by a registered VAT vendor, or on goods and certain services imported into South Africa.

Any person who carries on any enterprise in South Africa, and has taxable supplies that exceeds ZAR 1 million per annum is obliged to register as VAT vendor. There are certain exemptions from VAT, and certain transactions are subject to VAT at 0% (referred to as ‘zero-rating’).