South Africa boasts the most advanced, broad-based economy in sub-Saharan Africa. The investment climate is fortified by stable institutions; an independent judiciary and robust legal sector that respects the rule of law; a free press and investigative reporting; a mature financial and services sector; and experienced local partners.
In dealing with the legacy of apartheid, South African laws, policies, and reforms seek economic transformation to accelerate the participation of and opportunities for historically disadvantaged South Africans. The Government of South Africa (GoSA) views its role as the primary driver of development and aims to promote greater industrialization, often employing tariffs and other trade measures that support domestic industry while negatively affecting foreign trade partners. President Ramaphosa’s October 2020 Economic Reconstruction and Recovery Plan unveiled the latest domestic support target: the substitution of 20 percent of imported goods in 42 categories with domestic production within five years. Other GoSA initiatives to accelerate transformation include labor laws to achieve proportional racial, gender, and disability representation in workplaces and prescriptive government procurement requirements such as equity stakes and employment thresholds for historically disadvantaged South Africans. In January 2022, the World Bank approved South Africa’s request for a USD 750 million development policy loan to accelerate the country’s COVID-19 response. South Africa previously received USD 4.3 billion from the International Monetary Fund in July 2020 for COVID-19 response. This is the first time that the institutions have supported South Africa’s public finances/fiscus since the country’s democratic transition.
In November 2021 at COP 26 the GoSA, the United States, the UK, France, Germany, and the European Union (EU) announced the Just Energy Transition Partnership (JETP). The partnership aims to accelerate the decarbonization of South Africa’s economy, with a focus on the electricity system, to help achieve the ambitious emissions reduction goals laid out in South Africa’s Nationally Determined Contribution (NDC) in an inclusive, equitable transition. The partnership will mobilize an initial commitment of USD 8.5 billion over three-to-five years using a variety of financial instruments.
South Africa continues to suffer the effects from a “lost decade” in which economic growth stagnated, hovering at zero percent pre-COVID-19, largely due to corruption and economic mismanagement. During the pandemic the country implemented one of the strictest economic and social lockdown regimes in the world at a significant cost to its economy. South Africa suffered a four-quarter technical recession in 2019 and 2020 with economic growth registering only 0.2 percent growth for the entire year of 2019 and contracting -6.4 percent in 2020. In a 2020 survey of over 2,000 South African businesses conducted by Statistics South Africa (StatsSA), over eight percent of respondents permanently ceased trading, while over 36 percent indicated short-term layoffs. Although the economy grew by 4.9 percent in 2021 due to higher economic activity in the financial sector, the official unemployment rate in the fourth quarter of 2021 was 34.9 percent. Other challenges include policy certainty, lack of regulatory oversight, state-owned enterprise (SOE) drain on the fiscus, widespread corruption, violent crime, labor unrest, lack of basic infrastructure and government service delivery and lack of skilled labor.
Due to growth in 2021, Moody’s moved South Africa’s overall investment outlook to stable; however, it kept South Africa’s sovereign debt at sub-investment grade. S&P and Fitch ratings agencies also maintain assessments that South Africa’s sovereign debt is sub-investment grade at this time.
Despite structural challenges, South Africa remains a destination conducive to U.S. investment as a comparatively low-risk location in Africa, the fastest growing consumer market in the world. Google (US) invested approximately USD 140 million, and PepsiCo invested approximately USD 1.5 billion in 2020. Ford announced a USD 1.6 billion investment, including the expansion of its Gauteng province manufacturing plant in January 2021.
|TI Corruption Perceptions Index||2021||70 of 175||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2021||61 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2020||$3.5 billion||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||$6,010||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
The GoSA is generally open to foreign investment to drive economic growth, improve international competitiveness, and access foreign markets. The Department of Trade and Industry and Competition’s (DTIC) Trade and Investment South Africa (TISA) division assists foreign investors. It actively courts manufacturing in sectors where it believes South Africa has a competitive advantage. It favors sectors that are labor intensive and with the potential for local supply chain development. DTIC publishes the “Investor’s Handbook” on its website: HYPERLINKError! Hyperlink reference not valid. and TISA provides investment support through One Stop Shops in Pretoria, Johannesburg, Cape Town, Durban, and online at http://www.investsa.gov.za/one-stop-shop/ (see Business Facilitation). The 2018 Competition Amendment Bill introduced a government review mechanism for FDI in certain sectors on national security grounds, including energy, mining, banking, insurance, and defense (see section on Laws and Regulations on Foreign Direct Investment). The private sector has expressed concern about the politicization of mergers and acquisitions.
Currently, there are few limitations on foreign private ownership and South Africa has established several incentive programs to attract foreign investment. Under the Companies Act, which governs the registration and operation of companies in South Africa, foreign investors may establish domestic entities as well as register foreign-owned entities. However, the Act requires that external companies submit their annual returns to the Companies and Intellectual Property Commission Office (CIPC) for review. Although generally there are no rules that would prohibit foreign companies from purchasing South African assets or engaging in takeovers, the Act does contain national security interest criteria for certain industries, including energy, mining, banking, insurance, and defense (see section on Laws and Regulations on Foreign Direct Investment), that could potentially subject transactions covered to additional scrutiny. Reviews will be conducted by a committee comprised of 28 ministers and officials chosen by President Ramaphosa. The law also states that the president must identify and publish in the Gazette, the South African equivalent of the U.S. Federal Register, a list of national security interests including the markets, industries, goods or services, sectors or regions for mergers involving a foreign acquiring firm.
In addition to the Companies Act national security review provisions, there are a small number of industries that are subject to additional requirements through separate acts. On September 28, 2021, President Ramaphosa signed the Private Security Industry Regulation Amendment Act, which limits foreign ownership of private security companies to 49 percent based on national security concerns. The Banks Act of 1990 permits a foreign bank to apply to the Prudential Authority (operating within the administration of the South African Reserve Bank) to establish a representative office or a local branch in South Africa. The Insurance Act of 2017 prohibits persons from conducting insurance business in South Africa without being appropriately licensed by the Prudential Authority. The Insurance Act permits a foreign reinsurer to conduct insurance business in South Africa, subject to that foreign reinsurer being granted a license and establishing both a trust (for the purposes of holding the prescribed security) and a representative office in South Africa. The Electronic Communications Act of 2005 imposes limitations on foreign control of commercial broadcasting services. The Act Provides that a foreign investor may not, directly or indirectly, (1) exercise control over a commercial broadcasting licensee; or (2) have a financial interest or an interest in voting shares or paid-up capital in a commercial broadcasting licensee exceeding 20 percent. The Act caps the percentage of foreigners serving as directors of a commercial broadcasting licensee at 20 per cent. Lastly, foreign purchasers of South African securities are obliged to notify an authorized dealer (generally commercial banks) of the purchase and have the securities endorsed “non-resident.”
DTIC’s TISA division assists foreign investors, actively courting manufacturers in sectors where it believes South Africa has a competitive advantage. DTIC publishes the “Investor’s Handbook” on its website: www.the DTIC.gov.za and TISA provides investment support through One Stop Shops in Pretoria, Johannesburg, Cape Town, Durban, and online at http://www.investsa.gov.za/one-stop-shop/ (see Business Facilitation). Foreign companies may be eligible for incentives in South Africa under several ad hoc initiatives as well as the Special Economic Zones (SEZs) Act of 2014, which promotes regional industrial development by providing incentives for foreign (and local) investors that elect to operate within the country’s SEZs. More information regarding incentive programs may be found at: http://www.thedtic.go/v.za/financial-and-non-financial-support/incentives/ and below in Incentives. The 2018 Competition Amendment Bill introduced a government review mechanism for FDI in certain sectors on national security grounds,
Although South Africa welcomes foreign investment, there are policies that potentially disadvantage foreign companies, including the Broad-Based Black Economic Empowerment Act of 2013 (B-BBEE). B-BBEE represents one avenue that South Africa has taken to re-integrate historically disadvantaged individuals (HDIs) into the economy by requiring companies meet certain thresholds of black ownership and management control to participate in government tenders and contracts. While companies support the Act’s intent, it can be difficult to meet the B-BBEE requirements, which are tallied on B-BBEE scorecards and are periodically re-defined. The higher the score on the scorecard, the greater preferential access a company must bid on government tenders and contracts.
In recognition of the challenge the scorecards place on foreign business, the Department of Trade, Industry and Competition created an alternative Equity Equivalence Investment Program (EEIP) program for multinational or foreign owned companies to allow them to show alternative paths to meeting B-BBEE ownership and management requirements under the law. Many companies still view the terms as onerous and restrictive. Multinationals, primarily in the technology sector such as Microsoft and Amazon Web Services, participate in the EE program. J.P. Morgan was the first international investment bank in South Africa to launch a DTIC-approved equity equivalent investment program in August 2021. The company will deploy R340 million (approximately USD 22 million) of financing into the South African economy and create more than 1000 permanent jobs.
The B-BBEE program has come under sharp criticism in the past several years on the grounds that the Act has not gone far enough to shift ownership and management control in the commercial space to HDIs. In response, the GoSA has increasingly taken measures to strengthen B-BBEE through more restrictive application, increasing investigations into the improper use of B-BBEE scorecards, and is considering additional legislation to support B-BBEE’s policies. For instance, the GoSA is considering a new Equity Employment Bill that will set a numerical threshold, purportedly at the discretion of each Ministry, for employment based on race, gender, and disability, over and above other B-BBEE criteria. The bill is currently with the National Council of Provinces and if it passes, it will move to President Ramaphosa for signature.
South Africa has not undergone any third-party investment policy reviews through organizations such as the Organization for Economic Co-operation and Development (OECD), World Trade Organization (WTO), United Nations Conference on Trade and Development (UNCTAD), or UN Working Group on Business and Human Rights.
In November 2021, civil society organizations launched a constitutional lawsuit against the GoSA, demanding that it cancel plans to build 1,500 Mega Watts (MW) of coal-fired power because this would worsen air and water pollution along with health hazards and global warming. They filed the case in the North Gauteng High Court on the grounds that the new power would pose “significant unjustifiable threats to constitutional rights” and to the climate by pushing up greenhouse gas emissions. South Africa is the 12th worst greenhouse gas (GHG) emitter in the world. The Center for Environmental Rights provided a review at: https://cer.org.za/news/new-coal-power-will-cost-south-africans-much-more-report-shows .
In November 2021, environmental activists gathered at the oil and gas giant Sasol’s annual general meeting demanding commitment to move away from fossil fuels. Activists also want Sasol and its shareholders to accelerate the country’s just transition, which commits to significantly reducing carbon dioxide emissions, and moving towards greener energy alternatives. A domestic shareholder activism organization called JustShare released a report on Sasol and climate change claiming that Sasol is not planning to decarbonize, despite climate science.
DTIC has established One Stop Shops (OSS) to simplify administrative procedures and guidelines for foreign companies wishing to invest in South Africa in Cape Town, Durban, and Johannesburg. In theory, OSS should be staffed by officials from government entities that handle regulation, permits and licensing, infrastructure, finance, and incentives, with a view to reducing lengthy bureaucratic procedures, reducing bottlenecks, and providing post-investment services. However, some users of the OSS complain that some of the inter-governmental offices are not staffed, so finding a representative for certain transactions may be difficult. The virtual OSS web site is: http://www.investsa.gov.za/one-stop-shop/ .
The CIPC issues business registrations and publishes a step-by-step guide for online registration at ( http://www.cipc.co.za/index.php/register-your-business/companies/ ), which can be done through a self-service terminal, or through a collaborating private bank. New businesses must also request through the South African Revenue Service (SARS) an income tax reference number for turnover tax (small companies), corporate tax, employer contributions for PAYE (income tax), and skills development levy (applicable to most companies). The smallest informal companies may not be required to register with CIPC but must register with the tax authorities. Companies must also register with the Department of Labour (DoL) – www.labour.gov.za – to contribute to the Unemployment Insurance Fund (UIF) and a compensation fund for occupational injuries. DoL registration may take up to 30 days but may be done concurrently with other registrations.
South Africa does not incentivize outward investments. South Africa’s stock foreign direct investments in the United States in 2019 totaled USD 4.1 billion (latest figures available), a 5.1 percent increase from 2018. The largest outward direct investment of a South African company was a gas liquefaction plant in the State of Louisiana by Johannesburg Stock Exchange (JSE) and NASDAQ dual-listed petrochemical company SASOL. There are some restrictions on outward investment, such as a R1 billion (USD 83 million) limit per year on outward flows per company. Larger investments must be approved by the South African Reserve Bank and at least 10 percent of the foreign target entities’ voting rights must be obtained through the investment. https://www.resbank.co.za/RegulationAndSupervision/FinancialSurveillanceAndExchangeControl/FAQs/Pages/Corporates.aspx
3. Legal Regime
South African laws and regulations are generally published in draft form for stakeholder comment at: https://www.gov.za/document?search_query=&field_gcisdoc_doctype=545&field_gcisdoc_subjects=All&start_date=&end_date= . South Africa’s process is similar to the U.S. notice and comment consultation process and full draft texts are available to the public; however, foreign stakeholders have expressed concern over the adequacy of notice and the GoSA’s willingness to address comments. Legal, regulatory, and accounting systems are generally transparent and consistent with international norms. The GoSA’s regulatory regime and laws enacted by Parliament are subject to judicial review to ensure they follow administrative processes.
DTIC is responsible for business-related regulations. It develops and reviews regulatory systems in the areas of competition, standards, consumer protection, company and intellectual property registration and protections, as well as other subjects in the public interest. It also oversees the work of national and provincial regulatory agencies mandated to assist DTIC in creating and managing competitive and socially responsible business and consumer regulations. DTIC publishes a list of bills and acts that govern its work at: http://www.theDTIC.gov.za/legislation/legislation-and-business-regulation/?hilite=%27IDZ%27
South Africa has a number of public laws that promote transparency of the business regulatory regime to aid the public in understanding their rights. For instance, South Africa’s Consumer Protection Act (2008) reinforces various consumer rights, including right of product choice, right to fair contract terms, and right of product quality. The law’s impact varies by industry, and businesses have adjusted their operations accordingly. A brochure summarizing the Consumer Protection Act can be found at: http://www.theDTIC.gov.za/wp-content/uploads/CP_Brochure.pdf . Similarly, the National Credit Act of 2005 aims to promote a fair and non-discriminatory marketplace for access to consumer credit and for that purpose to provide the general regulation of consumer credit and improves standards of consumer information. A brochure summarizing the National Credit Act can be found at: http://www.theDTIC.gov.za/wp-content/uploads/NCA_Brochure.pdf
The South African National Treasury is developing new legislation that will “seek to enhance the transformation imperatives of the South African financial services sector.” In August 2021, the former Minister of Finance Tito Mboweni said that a new version of the Conduct of Financial Institutions (COFI) bill contains provisions that, if enacted, will require financial institutions to develop transformation plans and commitments around B-BBEE. The bill seeks to enhance market conduct, market development and financial inclusion. National Treasury also published a draft policy document on financial inclusion for public comment, which focuses on general ‘economic inclusiveness’ for South Africa. A summary statement of the draft policy can be found at: http://www.treasury.gov.za/comm_media/press/2020/20201028%20Media%20Statement%20-%20Updated%20Financial%20Inclusion%20Policy.pdf.
Parliament’s National Assembly passed the Employment Equity Amendment Bill in November 2021 and has sent the draft law to the National Council of Provinces for concurrence. The bill will allow the Employment and Labor minister to set employment equity targets for different business sectors and for different designated groups (that is, black people, women, and persons with disabilities).
In South Africa the financial sector has been a leader in integrating environmental, social, and governance issues into its practices. For example, regulation 28 of the Pension Funds Act, 1956 requires a pension fund and its board to “before investing in, and whilst invested in an asset, consider any factor which may materially affect the sustainable long-term performance of the asset including but not limited to those of an environment, social and governance character.” There are no specific ESG disclosure rules for companies, but several ESG related laws include a carbon tax law and energy efficiency legislation.
The Financial Sector and Deposit Insurance Levies (Administration) and Deposit Insurance Premiums Bill was tabled in parliament in January 2022. The National Treasury had published the bill for comment in December 2021. The bill seeks to “facilitate the funding of financial sector regulators, ombuds and other bodies, to ensure that they are able to effectively regulate the financial sector for the benefit of financial customers.” According to the bill’s memorandum, the deposit insurance premiums will be imposed on licensed banks, mutual banks, co-operative banks and branches of foreign banks that conduct business in South Africa. The model imposes huge expenses on the financial sector and results in an increased burden on already over-taxed citizens.
Under the current disclosure regime in South Africa, there is no explicit duty to provide disclosures on ESG matters. However, JSE-listed companies are subject to general continuing disclosure obligations under the JSE Listing Requirements, which apply to financially material ESG issues. Regulatory enforcement processes are legally reviewed and made publicly available for stakeholder comments.
The country’s fiscal transparency is overall very good. National Treasury publishes the executive budget online and the enacted budget is usually published within three months of enactment. End of year reports are published within twelve months of the end of the fiscal year. Information on debt obligations (including explicit and contingent liabilities) is made publicly available and updated at least annually. Public finances and debt obligations are fairly transparent. The year ending March 2021 report is not yet published.
South Africa is a member of the African Continental Free Trade Area, which commenced trading in January 2021. It is a signatory to the SADC-EAC-COMESA Tripartite FTA and a member of the Southern Africa Customs Union (SACU), which has a common external tariff and tariff-free trade between its five members (South Africa, Botswana, Lesotho, Namibia, and Eswatini, formerly known as Swaziland). South Africa has free trade agreements with the Southern African Development Community (SADC); the Trade, Development and Cooperation Agreement (TDCA) between South Africa and the European Union (EU); the EFTA-SACU Free Trade Agreement between SACU and the European Free Trade Association (EFTA) – Iceland, Liechtenstein, Norway, and Switzerland; and the Economic Partnership Agreement (EPA) between the SADC EPA States (South Africa, Botswana, Namibia, Eswatini, Lesotho, and Mozambique) and the EU and its Member States. SACU and Mozambique (SACUM) and the United Kington (UK) signed an Economic Partnership Agreement (EPA) in September 2019.
South Africa is a member of the WTO. While it notifies some draft technical regulations to the Committee on Technical Barriers to Trade (TBT), these notifications may occur after implementation. In November 2017, South Africa ratified the WTO’s Trade Facilitation Agreement, implementing many of its commitments, including some Category B notifications. The GoSA is not party to the WTO’s Government Procurement Agreement (GPA).
South Africa has a strong legal system composed of civil law inherited from the Dutch, common law inherited from the British, and African customary law. Generally, South Africa follows English law in criminal and civil procedure, company law, constitutional law, and the law of evidence, but follows Roman-Dutch common law in contract law, law of delict (torts), law of persons, and family law. South African company law regulates corporations, including external companies, non-profit, and for-profit companies (including state-owned enterprises). Funded by the Department of Justice and Constitutional Development, South Africa has district and magistrate courts across 350 districts and high courts for each of the provinces. Cases from Limpopo and Mpumalanga are heard in Gauteng. The Supreme Court of Appeals hears appeals, and its decisions may only be overruled by the Constitutional Court. South Africa has multiple specialized courts, including the Competition Appeal Court, Electoral Court, Land Claims Court, the Labor and Labor Appeal Courts, and Tax Courts to handle disputes between taxpayers and SARS. Rulings are subject to the same appeals process as other courts.
The major laws affecting foreign investment in South Africa are:
- The Companies Act, which governs the registration and operation of companies in South Africa.
- The Protection of Investment Act, which provides for the protection of investors and their investments.
- The Labor Relations Act, which provides protection for employees against unfair dismissal and unfair labor practices.
- The Customs and Excise Act, which provides for general incentives to investors in various sectors.
- The Competition Act, which is responsible for the investigation, control and evaluation of restrictive practices, abuse of dominant position, and mergers.
- The Special Economic Zones Act which provides national economic growth and exports by using support measures to attract foreign and domestic investments and technology.
In July 2021, the SARS updated the SARS Customs and Excise Client Accreditation rules. Section 64E deals with SARS client accreditation rules and is of interest to importers and exporters who wish to apply for accredited client status in South Africa. An accredited client, or preferred trader, is similar to the authorized economic operator found in many other countries. The new rules set out two levels of accredited client status: Level 1 – Authorized Economic Operator (Compliance) and Level 2 – Authorized Economic Operator (Security). A person that is registered for customs and excise activities in South Africa may apply for Level 1 or 2 accredited client status. According to the new rules, all customs activities for which an applicant is registered or licensed under the provisions of the Act will be considered when assessing applications for either level of accredited client status. The new rules also set out the application process, the validity of the person applying, the renewal process for accredited client status, criteria for levels of accredited client status, and the benefits of the two levels of accredited client status.
The Ease of Doing Business Bill was introduced in Parliament in February 2021 and is currently under consideration by the Portfolio Committee on Public Service and Administration. If passed, the bill will provide for a mechanism to allow the executive, Parliament. and others to assess the socio-economic impact of regulatory measures, including the detection and reduction of measures that increase the cost of doing business. DTIC has a one-stop-shop website for investment that provides relevant laws, rules, procedures, and reporting requirements for investors (refer to section one for details).
South Africa’s Competition Commission is empowered to investigate, control, and evaluate restrictive business practices, abuse of dominant positions, and review mergers to achieve equity and efficiency. Its public website is www.compcom.co.za . The Competition Commission is an investigative body. The Competition Tribunal, an adjudicative body that may review Competition Committee actions, functions very much like a court. It has jurisdiction throughout South Africa and adjudicates competition matters. Tribunal decisions may be appealed through the South African court system. International and domestic investors have raised concern the Commission has taken an increasingly social activist approach by prioritizing the public interest criteria found in the Competition Amendment Bill of 2018 over other more traditional anti-trust and monopoly criteria to push forward social and economic policies such as B-BBEE. Concerns include that the new Commission approach has led to more ambiguous, expensive, and lengthy review processes and often result in requests to alter previously agreed-upon terms of the merger and acquisition at a late stage.
In January 2021, GovChat, South Africa’s official citizen-government engagement platform, asked the Competition Tribunal to prevent its removal from a U.S.-owned platform, which charges a fee to business and GoSA clients for contacting customers or citizens. The tribunal granted GovChat’s application for interim relief, stating: “The respondents are interdicted and restrained from off-boarding the applicants from their WABA pending the conclusion of a hearing into the applicants’ complaint lodged with the [Competition] Commission, or six months of date hereof, whichever is the earlier.” On March 14, 2022, the Competition Commission referred the investigation to the Tribunal for review, alleging that the U.S. party’s actions against GovChat constituted an “abuse of dominance.” The Commission asked the Tribunal to assess the U.S. party with a maximum penalty constituting 10 percent of its annual turnover, and to enjoin the U.S. party from removing GovChat from the WhatsApp platform.
The Competition Commission prohibited the sale of the South African operations of a U.S. fast food chain and Grand Food Meat Plant, its main supplier, by Grand Parade Investments (GPI) to a U.S. private equity firm in June 2021 on the grounds that the sale would reduce the proportion of black ownership from 68 percent to zero percent. The regulator found this to be “a significant reduction in the shareholding of historically disadvantaged persons.” By August 2021, the parties and the Commission had agreed to a revised set of conditions which include the new owner’s commitment to improving its rating for the enterprise and supplier development element under its B-BBEE scorecard, which relates to empowering black-owned and smaller enterprises. In addition, the U.S. private equity firm agreed to establish an employee share ownership program that will entitle workers to a five percent stake in the company.
Racially discriminatory property laws and land allocations during the colonial and apartheid periods resulted in highly distorted patterns of land ownership and property distribution in South Africa. Given land reform’s slow and mixed success, the National Assembly (Parliament) passed a motion in February 2018 to investigate amending the constitution (specifically Section 25, the “property clause”) to allow for land expropriation without compensation (EWC). Some politicians, think-tanks, and academics argue that Section 25 already allows for EWC in certain cases, while others insist that amendments are required to implement EWC more broadly and explicitly. Parliament tasked an ad hoc Constitutional Review Committee composed of parliamentarians from various political parties to report back on whether to amend the constitution to allow EWC, and if so, how it should be done. In December 2018, the National Assembly adopted the committee’s report recommending a constitutional amendment. Following elections in May 2019 the new Parliament created an ad hoc Committee to Initiate and Introduce Legislation to Amend Section 25 of the Constitution. The Committee drafted constitutional amendment language explicitly allowing for EWC and accepted public comments on the draft language through March 2021. After granting a series of extensions to complete its work, Parliament finally voted on the Committee’s draft bill on December 7, 2021. Constitutional amendments require a two-thirds parliamentary majority (267 votes) to pass, as well as the support of six out of the nine provinces in the National Council of Provinces. Because no single political party holds such a majority, a two-third vote can only be achieved with the support of two or more political parties. Because the ruling ANC could not garner enough supporting votes from the left-leaning Economic Freedom Fighters, who sought more drastic “state custodianship” of all property, nor the right-leaning Democratic Alliance, which rejected EWC as an investment-killing measure, the bill failed. However, on December 8, Justice Minister Ronald Lamola told media that the ruling party would use its simple majority to pass EWC legislation, which requires a lower threshold than a constitutional amendment. The ANC’s EWC bill is still making its way through Parliament but will likely see constitutional challenges from opposing parties.
In October 2020, the GoSA published the draft expropriation bill in its Gazette, which would introduce the EWC concept into its legal system. The application of the draft’s provisions could conflict with South Africa’s commitments to international investors under its remaining investment protection treaties as well as its obligations under customary international law. Submissions closed in February 2021 and the Public Works committee is currently finalizing the language.
Existing expropriation law, including The Expropriation Act of 1975 (Act) and the Expropriation Act Amendment of 1992, entitles the GoSA to expropriate private property for reasons of public necessity or utility. The decision is an administrative one. Compensation should be the fair market value of the property as agreed between the buyer and seller or determined by the court per Section 25 of the Constitution.
In 2018, the GoSA operationalized the 2014 Property Valuation Act that creates the office of Valuer-General charged with the valuation of property that has been identified for land reform or acquisition or disposal. The Act gives the GoSA the option to expropriate property based on a formulation in the Constitution termed “just and equitable compensation.”
The Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA), enacted in 2004, gave the state ownership of South Africa’s mineral and petroleum resources. It replaced private ownership with a system of licenses controlled by the GoSA and issued by the Department of Mineral Resources. Under the MPRDA, investors who held pre-existing rights were granted the opportunity to apply for licenses, provided they met the licensing criteria, including the achievement of certain B-BBEE objectives. Parliament passed an amendment to the MPRDA in 2014 but President Ramaphosa never signed it. In August 2018, Minister for the Department of Mineral Resources Gwede Mantashe called for the recall of the amendments so that oil and gas could be separated out into a new bill. He also announced the B-BBEE provisions in the new Mining Charter would not apply during exploration but would start once commodities were found and mining commenced. In November 2019, the newly merged Department of Mineral Resources and Energy (DMRE) published draft regulations to the MPRDA. In December 2019, the DMRE published the Draft Upstream Petroleum Resources Development Bill for public comment. Parliament continues to review this legislation. Oil and gas exploration and production is currently regulated under MPRDA, but the new Bill will repeal and replace the relevant sections pertaining to upstream petroleum activities in the MPRDA.
On September 27, 2018, the Minister of the DMRE released a new mining charter, stating that the new charter would be operationalized within the next five years to bolster certainty in the sector. The charter establishes requirements for new licenses and investment in the mining sector and includes rules and targets for black ownership and community development in the sector to redress historic economic inequalities from the apartheid era. The new rules recognize existing mining right holders who have a minimum 26 percent B-BBEE ownership as compliant but requires an increase to 30 percent B-BBEE ownership within a five-year transitional period. Recognition of B-BBEE ownership compliance is not transferable to a new owner. New mining right licenses must have 30 percent B-BBEE shareholding, applicable to the duration of the mining right.
In March 2019 the Minerals Council of South Africa applied for a judicial review of the 2018 Mining Charter. The court was asked to review several issues in the Mining Charter including: the legal standing of the Mining Charter in relation to the MPRDA; the levels of black ownership of mines under B-BBEE requirements; the levels of ownership required when B-BBEE partners sell their shares, and if B-BBEE ownership levels must be maintained in perpetuity, especially when levels of ownership preceded the current Mining Charter. In September 2021, the Pretoria high court ruling set aside key aspects of the Mining Charter, notably those related to black ownership targets. The DMRE resolved not to appeal the high court ruling.
The Insolvency Act 24 of 1936 sets out liquidation procedures for the distribution of any remaining asset value among creditors. Financial sector legislation such as the Banks Act or Insurance Act makes further provision for the protection of certain clients (such as depositors and policy holders). South Africa’s bankruptcy regime grants many rights to debtors, including rejection of overly burdensome contracts, avoiding preferential transactions, and the ability to obtain credit during insolvency proceedings.
4. Industrial Policies
South Africa also offers various investment incentives targeted at specific sectors or types of business activities, including tax allowances to support in the automotive sector and rebates for film and television production. The GoSA favors sectors that are labor intensive and with the potential for local supply chain development More information regarding incentive programs may be found at: http://www.thedtic.gov.za/financial-and-non-financial-support/incentives/ .
The Public Investment Corporation SOC Limited (PIC) is an asset management firm wholly owned by the GoSA and is governed by the Public Investment Corporation Act, 2004 . PIC’s clients are mostly public sector entities, including the Government Employees Pension Fund (GEPF) and UIF, among others. The PIC runs a diversified investment portfolio including listed equities, real estate, capital market, private equity, and impact investing. The PIC has been known to jointly finance foreign direct investment if the project will create social returns, primarily in the form of new employment opportunities for South Africans.
To encourage and support businesses looking to green their operations, there are incentives built in into the income tax. Section 12L of the Income Tax Act was passed in 2013 allowing for deductions for energy efficiency measures. Businesses can claim deductions of 95 cents per kilowatt hour, or kilowatt hour equivalent, of energy efficiency savings made within a year against a verified 12-month baseline. The baseline measurement and verification of savings must be done by a SANAS accredited Measurement and Verification (M&V) body. The incentive allows for tax deductions for all energy carriers, not just electricity, except for renewable energy sources which have separate provisions. An amendment in 2015 allowed businesses to claim savings from electricity co-generation, combining heat and power, if there is an energy conversion efficiency of more than 35 percent. All energy efficiency schemes that businesses want to claim the deductions against need to be registered with the South African National Energy Development Institute (SANEDI). https://www.sanedi.org.za/12L.html
Section 12B of the Income Tax Act includes a provision for a capital allowance for movable assets used in the production of renewable energy. The incentive allows for 100 percent asset accelerated depreciation in first financial year that the asset is brought online. This could equate to a 28 percent deduction on the business’ income tax. Currently, company tax in South-Africa is 28 percent (it has since been reduced to 27 percent as from April 1, the beginning of the 2022/2023 fiscal year). With this incentive, a company could deduct the value of a new solar power system as a depreciation expense decreasing the company’s income tax liability by the same value as the value of the installed solar system. The reduction can also be carried over to the next financial year as a deferred tax asset.
Section 12N of the Income Tax Act provides for improvements to property not owned by taxpayers: if the improvements are associated with the Independent Power Producer Procurement Programme. Section 12U Income Tax Act provides for additional deduction in respect of supporting infrastructure in respect of renewable energy: such as roads and fences
South Africa designated its first Industrial Development Zone (IDZ) in 2001. IDZs offer duty-free import of production-related materials and zero VAT on materials sourced from South Africa, along with the right to sell in South Africa upon payment of normal import duties on finished goods. Expedited services and other logistical arrangements may be provided for small to medium-sized enterprises or for new foreign direct investment. Co-funding for infrastructure development is available from DTIC. There are no exemptions from other laws or regulations, such as environmental and labor laws. The Manufacturing Development Board licenses IDZ enterprises in collaboration with the SARS, which handles IDZ customs matters. IDZ operators may be public, private, or a combination of both. There are currently five IDZs in South Africa: Coega IDZ, Richards Bay IDZ, Dube Trade Port, East London IDZ, and Saldanha Bay IDZ. South Africa also has SEZs focused on industrial development. The SEZs encompass the IDZs but also provide scope for economic activity beyond export-driven industry to include innovation centers and regional development. There are six SEZs in South Africa: Atlantis SEZ, Nkomazi SEZ, Maliti-A-Phofung SEZ, Musina/Makhado SEZ, Tshwane SEZ, and O.R. Tambo SEZ. The broader SEZ incentives strategy allows for 15 percent Corporate Tax as opposed to the current 28 percent, Building Tax Allowance, Employment Tax Incentive, Customs Controlled Area (VAT exemption and duty free), and Accelerated 12i Tax Allowance. For more detailed information on SEZs, please see: http://www.theDTIC.gov.za/sectors-and-services-2/industrial-development/special-economic-zones/?hilite=%27SEZ%27
The GoSA does not impose forced localization. However, authorities incentivize the use of local content in goods and technology. In 2021, President Ramaphosa and DTIC Minister Ebrahim Patel announced that South Africa will expand existing localization measures to reboot the economy. DTIC released a policy statement on localization in May 2021. The localization plan’s cornerstone is the implementation of a scheme to substitute 20 percent of imports, or approximately R20 billion (USD 1.3 billion) across selected categories with local goods by 2025. For instance, the industrial master plan for textiles set a goal that 60 percent of all clothing sold in South Africa will be locally manufactured by 2030. Preferential procurement is applied uniformly to both domestic and foreign investors. The GoSA’s B-BBEE requirements, however, make it difficult for foreign investors to score well on the “ownership” element of the B-BBEE scorecard due to corporate rules that can prevent the transfer of discounted equity stakes to South African subsidiaries. Although the GoSA created the EEIP for international companies that cannot meet the ownership element of B-BBEE through the direct sale of equity to local investors, some companies claim that the reporting requirements and high level of required financial contributions make the EE program unviable.
A Draft National Data and Cloud Policy, released by the GoSA in April 2021, seeks to put the GoSA at the heart of data control, ownership, and distribution in South Africa. The draft policy proposed a series of government interventions, including the establishment of a new state-owned enterprise to manage government-owned and controlled networks. It aims to consolidate excess capacity of publicly funded data centers and deliver processing, data facilities and cloud computing capacity. The GoSA plans to develop ICT special economic zones, hubs and transformation centers. The draft policy seeks to impose data localization requirements and defines data localization as the “…requirements for the physical storage of data within a country’s national boundaries, although it is sometimes used more broadly to mean any restrictions on cross border data flows.” The draft policy provides inter alia that: data generated in South Africa shall be the property of South Africa, regardless of where the technology company is domiciled; ownership and control of personal information and data shall be in line with the Protection of Personal Information Act (POPIA); DTIC through the CIPC and the National Intellectual Property Management Office (NIPMO) shall develop a policy framework on data generated from intellectual activities including sharing and use of such data. The POPIA entered fully into force in July 2021 and regulates how personal information may be processed and under which conditions data may be transferred outside of South Africa. Currently, there is no requirement for foreign information technology providers to turn over source code or provide access to surveillance. However, compliance burdens may be significant. The Department of Communications and Digital Technologies is responsible for developing ICT policies and legislation. The Independent Communications Authority of South Africa is the regulatory body which regulates the telecommunications sector.
5. Protection of Property Rights
The South African legal system protects and facilitates the acquisition and disposition of all property rights (e.g., land, buildings, and mortgages). Deeds must be registered at the Deeds Office. Banks usually register mortgages as security when providing finance for the purchase of property. Foreigners may purchase and own immovable property in South Africa without any restrictions since they are generally subject to the same laws as South African nationals. Foreign companies and trusts are also permitted to own property in South Africa if they are registered in South Africa as an external company. Since South Africa does not have formal land audits, the proportion of land that does not have clear title is unknown. If property legally purchased is unoccupied, property ownership does not revert back to other owners such as squatters. However, squatters are known to occupy properties illegally and may rent the properties to unsuspecting tenants when there are absentee landowners.
South Africa enforces intellectual property rights through civil and criminal procedures. It is a member of the World Intellectual Property Organization (WIPO) and in the process of acceding to the Madrid Protocol. It is also a signatory to the WTO’s Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS). Generally, South Africa is considered to have a strong domestic legal framework for protecting intellectual property (IP). Enforcement can be spotty due to lack of resources for additional law enforcement and market surveillance support. However, South African authorities work closely with rights holders and with international stakeholders to address IP violations. Bringing cases to criminal court is costly, with most of the burden placed on rights holders to develop the evidence needed for prosecutions; however, civil and criminal remedies are available. South Africa has not been named in the Special 301 or the notorious market report; however, there are yearly submissions requesting South Africa’s inclusion, primarily based on delays in burdens in patent and trademark registration, draft copyright legislation under review in Parliament described below and increasing counterfeit activity in certain business districts. South Africa does not track seizures of counterfeit goods writ-large, though CIPC and law enforcement agencies release periodic reports on significant raids and media coverage in major metro areas reports on major seizures.
Owners of patents and trademarks may license them locally, but when a patent license entails the payment of royalties to a non-resident licensor, DTIC must approve the royalty agreement. Patents are granted for twenty years, usually with no option to renew. Trademarks are valid for an initial period of ten years, renewable for additional ten-year periods. A patent or trademark holder pays an annual fee to preserve ownership rights. All agreements relating to payment for applicable rights are subject to South African Reserve Bank (SARB) approval. A royalty of up to four percent is the standard for consumer goods and up to six percent for intermediate and finished capital goods.
Literary, musical, and artistic works, as well as cinematographic films and sound recordings, are eligible for protection under the Copyright Act of 1978. New designs may be registered under the Designs Act of 1967, which grants copyrights for five years. The Counterfeit Goods Act of 1997 provides additional protection to owners of trademarks, copyrights, and certain marks under the Merchandise Marks Act of 1941. The Intellectual Property Laws Amendment Act of 1997 amended the Merchandise Marks Act of 1941, the Performers’ Protection Act of 1967, the Patents Act of 1978, the Copyright Act of 1978, the Trademarks Act of 1993, and the Designs Act of 1993 to bring South African intellectual property legislation into line with TRIPS. To modernize its intellectual property rights (IPR) regime further, DTIC introduced the Copyright Amendment Bill (CAB) and the Performers’ Protection Amendment Bill (PPAB). The bills remain under Parliamentary review after being returned by President Ramaphosa in June 2020 on constitutional grounds. Stakeholders have raised several concerns, including the CAB bill’s application of “fair use,” and clauses in both bills that allow DTIC Minister to set royalty rates for visual artistic work or equitable renumeration for direct or indirect uses of copyrighted works. Additional changes to South Africa’s IPR regime are under consideration through a draft DTIC policy document, Phase 1 of the Intellectual Property Policy of the Republic of South Africa; however, draft legislation has not yet been released.
For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.
6. Financial Sector
South Africa recognizes the importance of foreign capital in financing persistent current account and budget deficits, and South Africa’s financial markets are regarded as some of the most sophisticated among emerging markets. A sound legal and regulatory framework governs financial institutions and transactions. The fully independent SARB regulates a wide range of commercial, retail and investment banking services according to international best practices, such as Basel III, and participates in international forums such as the Financial Stability Board and G-20 Finance Ministers and Central Bank Governors. The JSE serves as the front-line regulator for listed firms but is supervised by the Financial Services Board (FSB). The FSB also oversees other non-banking financial services, including other collective investment schemes, retirement funds and a diversified insurance industry. The GoSA has committed to tabling a Twin Peaks regulatory architecture to provide a clear demarcation of supervisory responsibilities and consumer accountability and to consolidate banking and non-banking regulation.
South Africa has access to deep pools of capital from local and foreign investors that provides sufficient scope for entry and exit of large positions. Financial sector assets are more than GDP by approximately 48 percent, and the JSE is the largest on the continent with market capitalization of approximately USD 1.282 billion as of October 2021 and 442 companies listed on the main, alternative, and other smaller boards as of January 2021. Non-bank financial institutions (NBFI) hold about two thirds of financial assets. The liquidity and depth provided by NBFIs make these markets attractive to foreign investors, who hold more than a third of equities and government bonds, including sizeable positions in local-currency bonds. A well-developed derivative market and a currency that is widely traded as a proxy for emerging market risk allows investors considerable scope to hedge positions with interest rate and foreign exchange derivatives.
SARB’s exchange control policies permit authorized currency dealers, to buy and borrow foreign currency freely on behalf of domestic and foreign clients. The size of transactions is not limited, but dealers must report all transactions to SARB. Non-residents may purchase securities without restriction and freely transfer capital in and out of South Africa. Local individual and institutional investors are limited to holding 25 percent of their capital outside of South Africa.
Banks, NBFIs, and other financial intermediaries are skilled at assessing risk and allocating credit based on market conditions. Foreign investors may borrow freely on the local market. In recent years, the South African auditing profession has suffered significant reputational damage with allegations that two large foreign firms aided, and abetted irregular client management practices linked to the previous administration or engaged in delinquent oversight of listed client companies. South Africa’s WEF competitiveness rating for auditing and reporting fell from number one in the world in 2016, to number 60 in 2019.
South African banks are well capitalized and comply with international banking standards. There are 19 registered banks in South Africa and 15 branches of foreign banks. Twenty-nine foreign banks have approved local representative offices. Five banks – Standard, ABSA, First Rand (FNB), Capitec, and Nedbank – dominate the sector, accounting for over 85 percent of the country’s banking assets, which total over USD 390 billion. SARB regulates the sector according to the Bank Act of 1990. There are three alternatives for foreign banks to establish local operations, all of which require SARB approval: separate company, branch, or representative office. The criteria for the registration of a foreign bank are the same as for domestic banks. Foreign banks must include additional information, such as holding company approval, a letter of comfort and understanding from the holding company and a letter of no objection from the foreign bank’s home regulatory authority. More information on the banking industry may be found at www.banking.org.za .
The Financial Sector Conduct Authority (FSCA) is the dedicated market conduct authority in South Africa’s Twin Peaks regulatory model implemented through the Financial Sector Regulation Act. The FSCA’s mandate includes all financial institutions that provide a financial product and/or a financial service as defined in the Financial Sector Regulation Act. The JSE Securities Exchange South Africa, the sixteenth largest exchange in the world measured by market capitalization, enjoys the global reputation of being one of the best regulated. Market capitalization stood at USD 1.282 billion as of October 2021, with 442 firms listed. The Bond Exchange of South Africa (BESA) is licensed under the Financial Markets Control Act. Membership includes banks, insurers, investors, stockbrokers, and independent intermediaries. The exchange consists principally of bonds issued by the GoSA, state-owned enterprises, and private corporations. The JSE acquired BESA in 2009. More information on financial markets may be found at www.jse.co.za . Non-residents can finance 100 percent of their investment through local borrowing. A finance ratio of 1:1 also applies to emigrants, the acquisition of residential properties by non-residents, and financial transactions such as portfolio investments, securities lending and hedging by non-residents.
Although President Ramaphosa and the finance minister announced in February 2020 the aim to create a Sovereign Wealth Fund, no action has been taken.
7. State-Owned Enterprises
State-owned enterprises (SOEs) play a significant role in the South African economy in key sectors such as electricity, transport (air, rail, freight, and pipelines), and telecommunications. Limited competition is allowed in some sectors (e.g., telecommunications and air). The GoSA’s interest in these sectors often competes with and discourages foreign investment.
There are over 700 SOEs at the national, provincial, and local levels. Of these, seven key SOEs are overseen by the Department of Public Enterprises (DPE) and employee approximately 105,000 people. These SOEs include Alexkor (diamonds); Denel (military equipment); Eskom (electricity generation, transmission, and distribution); Mango (budget airlines); South African Airways (national carrier); South African Forestry Company (SAFCOL); and Transnet (transportation). For other national-level SOEs, the appropriate cabinet minister acts as shareholder on behalf of the state. The Department of Transport, for example, oversees South African’s National Roads Agency (SANRAL), Passenger Rail Agency of South Africa (PRASA), and Airports Company South Africa (ACSA), which operates nine of South Africa’s airports. The Department of Communications oversees the South African Broadcasting Corporation (SABC). A list of the seven SOEs that are under the DPE portfolio are found on the DPE website at: https://dpe.gov.za/state-owned-companies/ . The national government directory contains a list of 128 SOEs at: https://www.gov.za/about-government/contact-directory/soe-s .
SOEs under DPE’s authority posted a combined loss of R13.9 billion (USD 0.9 billion) in 2019 (latest data available). Many are plagued by mismanagement and corruption, and repeated government bailouts have exposed the public sector’s balance sheet to sizable contingent liabilities. The debt of Eskom alone represents about 10 percent of GDP of which two-thirds is guaranteed by government, and the company’s direct cost to the budget has exceeded nine percent of GDP since 2008/9.
Eskom, provides generation, transmission, and distribution for over 90 percent of South Africa’s electricity of which 80 percent comes from 15 coal-fired power plants. Eskom’s coal plants are an average of 41 years old, and a lack of maintenance has caused unplanned breakdowns and rolling blackouts, known locally as “load shedding,” as old coal plants struggle to keep up with demand. Load shedding reached a record 1136 hours as of November 30, 2021, costing the economy an estimated USD eight billion and is expected to continue for the next several years until the GoSA can increase generating capacity and increase its Energy Availability Factor (EAF). In October 2019 the DMRE finalized its Integrated Resource Plan (IRP) for electricity, which outlines South Africa’s policy roadmap for new power generation until 2030, which includes replacing 10,000 MW of coal-fired generation by 2030 with a mix of technologies, including renewables, gas and coal. The IRP also leaves the possibility open for procurement of nuclear technology at a “scale and pace that flexibly responds to the economy and associated electricity demand” and DMRE issued a Request for Information on new nuclear build in 2020. In accordance with the IRP, the GoSA approved the procurement of almost 14,000 MW of power to address chronic electricity shortages. The GoSA held the long-awaited Bid Window 5 (BW5) of the Renewable Energy Independent Power Producer Procurement Program (REIPPPP) in 2021, the primary method by which renewable energy has been introduced into South Africa. The REIPPPP relies primarily on private capital and since the program launched in 2011 it has already attracted approximately ZAR 210 billion (USD 14 billion) of investment into the country. All three major credit ratings agencies have downgraded Eskom’s debt following Moody’s downgrade of South Africa’s sovereign debt rating in March 2020, which could impact investors’ ability to finance energy projects.
Transnet National Ports Authority (TNPA), the monopoly responsible for South Africa’s ports, charges some of the highest shipping fees in the world. High tariffs on containers subsidize bulk shipments of coal and iron. According to the South African Ports Regulator, raw materials exporters paid as much as one quarter less than exporters of finished products. TNPA is a division of Transnet, a state-owned company that manages the country’s port, rail, and pipeline networks. In May 2020 S&P downgraded Transnet’s local currency rating from BB to BB- based on a generally negative outlook for South Africa’s economy rather than Transnet’s outlook specifically.
South Africa’s state-owned carrier, South African Airways (SAA), entered business rescue in December 2019 and suspended operations indefinitely in September 2020. The pandemic exacerbated SAA’s already dire financial straits and complicated its attempts to find a strategic equity partner to help it resume operations. Industry experts doubt the airline will be able to resume operations. United Airlines and Delta Air Lines provide regular service between Atlanta (Delta) and Newark (United) to Johannesburg and Cape Town.
The telecommunications sector, while advanced for the continent, is hampered by poor implementation of the digital migration. In 2006, South Africa agreed to meet an International Telecommunication Union deadline to achieve analogue-to-digital migration by June 1, 2015. The long-delayed migration is scheduled to be completed by the end of March 2022, and while potential for legal challenges remain, most analysts believe the migration will be completed in 2022. The independent communications regulator initiated a spectrum auction in September 2020, which was enjoined by court action in February 2021 following suits by two of the three biggest South African telecommunications companies. After months of litigation, the regulator agreed to changes some terms of the auction, and the auction took place successfully in March 2022. One legal challenge remains, however, as third-largest mobile carrier Telkom has alleged the auction’s terms disproportionately favored the two largest carriers, Vodacom and MTN. Telkom’s case is due to be heard in April 2022, and its outcome will determine whether the spectrum allocation will proceed.
The GoSA appears not to have fulfilled its oversight role of ensuring the sound governance of SOEs according to OECD best practices. The Zondo Commission of Inquiry into allegations of state capture in the public sector has outlined corruption at the highest echelons of SOEs such as Transnet, Eskom, SAA and Denel and provides some explanation for the extent of the financial mismanagement at these enterprises. The poor performance of SOEs continues to reflect crumbling infrastructure, poor and ever-changing leadership, corruption, wasteful expenditure and mismanagement of funds.
The GoSA has taken few concrete actions to privatize SOEs; on the contrary, even minor reorganizations are roundly criticized as attempts to privatize state assets. Meanwhile, failing SOEs like PRASA are propped up by the fiscus. In 2021, the GoSA sought to sell a controlling 51 percent interest in South African Airways to a bespoke consortium funded in large part by the Public Investment Corporation, which controls investments of state pensions. A year later, however, the airline remains under government control because critical terms of the deal, including the sale price, have not been agreed upon. Transnet, Eskom, and defense contractor Denel have been subjects of various reorganization plans, but ultimately remain accountable to Cabinet shareholders.
President Ramaphosa, during his February 10, 2022, State of the Nation Address (SONA), announced that the cabinet had approved amendments to the Electricity Regulations Act (ERA) that would liberalize South African electricity markets. The amendment provides changes to definitions that will enable the legal framework for a liberalized energy market and allow for a more competitive and open electricity market in the country including the establishment of a Transmission System Operator, a necessary part of state-owned utility Eskom’s unbundling process. The Eskom generation and distribution divisions are set to be restructured by December 2022. The market structure in the bill provides for a shift to a competitive multimarket electricity supply industry, which represents a significant departure from South Africa’s long-standing vertically integrated model monopolized by Eskom. According to a press release from the DMRE, the changes will provide for “an open market that will allow for non-discriminatory, competitive electricity-trading platform.”
8. Responsible Business Conduct
There is a general awareness of responsible business conduct in South Africa. The King Committee, established by the Institute of Directors in Southern Africa (IoDSA) in 1993, is responsible for driving ethical business practices. They drafted the King Code and King Reports to form an inclusive approach to corporate governance. King IV is the latest revision of the King Report, having taken effect in April 2017. King IV serves to foster greater transparency in business. It holds an organization’s governing body and stakeholders accountable for their decisions. As of November 2017, it is mandatory for all businesses listed on the JSE to be King IV compliant.
South Africa’s regional human rights commitments and obligations apply in the context of business and human rights. This includes South Africa’s commitments and obligations under the African Charter on Human and Peoples’ Rights, the African Charter on the Rights and Welfare of the Child, the Maputo Protocol on the Rights of Women in Africa, and the African Charter on Democracy, Elections and Governance. In 2015, the South African Human Rights Commission (SAHRC) published a Human Rights and Business Country Guide for South Africa which is underpinned by the UN Guiding Principles on Business and Human Rights (UNGPs) and outlines the roles and responsibilities of the State, corporations and business enterprises in upholding and promoting human rights in the South African context.
The GoSA promotes Responsible Business Conduct (RBC). The B-BBEE policy, the Companies Act, the King IV Report on Corporate Governance 2016, the Employment Equity Act of 1998 (EEA) and the Preferential Procurement Act are generally regarded as the government’s flagship initiatives for RBC in South Africa.
The GoSA factors RBC policies into its procurement decisions. Firms have largely aligned their RBC activities to B-BBEE requirements through the socio-economic development element of the B-BBEE policy. The B-BBEE target is one percent of net profit after tax spent on RBC, and at least 75 percent of the RBC activity must benefit historically disadvantaged South Africans and is directed primarily towards non-profit organizations involved in education, social and community development, and health.
The GoSA effectively and fairly enforces domestic laws pertaining to human rights, labor rights, consumer protection, and environmental protections to protect individuals from adverse business impacts. The Employment Equity Act prohibits employment discrimination and obliges employers to promote equality and eliminate discrimination on grounds of race, gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language and birth in their employment policies and practices. These constitutional provisions align with generally accepted international standards. Discrimination cases and sexual harassment claims can be brought to the Commission for Conciliation, Mediation and Arbitration (CCMA), an independent dispute reconciliation body set up under the terms of the Labour Relations Act. The Consumer Protection Act aims to promote a fair, accessible and sustainable marketplace for consumer products and services. The National Environmental Management Act aims to to provide for co-operative, environmental governance by establishing principles for decision-making on matters affecting the environment, institutions that will promote co-operative governance and procedures for co-ordinating environmental functions exercised by organs of state.
The SAHRC is a National Human Rights Institution established in terms of the South African Constitution. It is mandated to promote respect for human rights, and the culture thereof; promote the protection, development, and attainment of human rights; and monitor and assess the observance of human rights in South Africa. The SAHRC is accredited with an “A” status under the United Nations’ Paris Principles. There are other independent NGOs, investment funds, unions, and business associations that freely promote and monitor RBC.
The South African mining sector follows the rule of law and encourages adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. South Africa is a founding member of the Kimberley Process Certification Scheme (KPCS) aimed at preventing conflict diamonds from entering the market. It does not participate in the Extractive Industries Transparency Initiative (EITI). South African mining, labor and security legislation seek to embody the Voluntary Principles on Security and Human Rights. Mining laws and regulations allow for the accounting of all revenues from the extractive sector in the form of mining taxes, royalties, fees, dividends, and duties.
South Africa has a private security industry and there is a high usage of private security companies by the government and industry. The country is a signatory of The Montreux Document on Private Military and Security Companies.
Department of State
- Country Reports on Human Rights Practices;
- Trafficking in Persons Report;
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
- U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
- Xinjiang Supply Chain Business Advisory
Department of the Treasury
Department of Labor
South Africa’s 2019 National Climate Change Adaptation Strategy (NCCAS) and National Climate Change Bill (currently under consideration in Parliament) aim to serve as an overarching legislative framework for adapting to and mitigating the effects of climate change, supported by the implementation of the low‐emissions development and growth strategy for South Africa.
South Africa’s NCCAS supports the country’s ability to meet its obligations in terms of the Paris Agreement on Climate Change. The 2011 National Climate Change Response Policy is a comprehensive plan to address both mitigation and adaptation in the short, medium and long term (up to 2050). GHG emissions are set to stop increasing at the latest by 2020-2025, to stabilize for up to 10 years and then to decline in absolute terms.
The NCCAS specifies strategies for climate change adaptation and mitigation, making use of the short-, medium- and long-term planning horizons. Concerning mitigation, it includes proposals to set emission reduction outcomes for each significant sector and sub-sector of the economy based on an in-depth assessment of the mitigation potential, best available mitigation options and a full assessment of the costs and benefits using a ‘carbon budgets’ approach. It also proposed the deployment of a range of economic instruments, including the appropriate pricing of carbon and economic incentives, as well as the possible use of emissions offset or emission reduction trading mechanisms for those relevant sectors, sub-sectors, companies or entities where a carbon budget approach has been selected.
South Africa’s Energy Efficiency and Energy and Demand Management flagship programs cover development and facilitation of an aggressive energy efficiency program in industry, building on previous Demand Side Management programs, and covering non-electricity energy efficiency as well. A structured program will be established with appropriate initiatives, incentives and regulation, along with a well-resourced information collection and dissemination process. Local governments are encouraged to take an active part in demand-side management.
The GoSA has called its 2020 Low Emission Development Strategy (LEDS) “the beginning of our journey towards ultimately reaching a net zero economy by 2050”. The strategy is a response to the Paris Agreement’s call for countries to set out long-term climate strategies. It draws together existing policies, planning and research across economic sectors. Among these are the IRP, which is how South Africa plans its electricity supply.
The IRP guides the evolution of the South African electricity supply sector, in that it identifies the preferred electricity generation technologies to be built to meet projected electricity demand. It thus provides a mechanism for the GoSA to drive the diversification of the country’s electricity generation mix and promote the use of renewable energy and other low-carbon technologies.
South African measures are currently being implemented by government to address GHG emissions mitigation across the four key sectors of the economy, namely energy (supply and demand), industry, AFOLU and waste.
Decarbonization of energy supply will largely be driven through the Integrated Energy Plan, the Integrated Resource Plan and the Industrial Biofuels Strategy, issued by the Department of Energy, the predecessor of this Department.
South Africa’s Energy planning is guided by the Integrated Energy Plan (IEP). The Energy Act also mandates the Minister of Energy to develop, review and publish the IEP. The IEP approach analyses current energy supply and demand trends within the different sectors of the economy, across all energy carriers. It then uses this information along with assumptions about future demand and technology evolution to project the country’s future energy requirements under a variety of different scenarios, including those with emissions limits and different carbon prices. The IEP provides the overall future direction for the energy mix in South Africa, and thus represents a key instrument for driving the move to a low carbon future. The IEP update with a clear trajectory for the energy sector is critical to guiding overall energy planning for the country.
The Biofuels Industrial Strategy of the Republic of South Africa outlines the GoSA’s approach to the development of a biofuel sector in the country. The primary aim of the Strategy is to address poverty and unemployment, although the role in climate change mitigation in the liquid fuels sector is recognized. In support of the strategy, the Regulations Regarding the Mandatory Blending of Biofuels with Petrol and Diesel were published in the Government Gazette in August 2012. The Regulations describe the eligibility and process for purchasing biofuels for blending and specify the type of records that need to be kept.
In 2022, South Africa’s Department of Science and Innovation launched its Hydrogen Society Roadmap (HSRM) to, among other things, take advantage of and develop opportunities for direct replacement of hydrogen from natural gas by green hydrogen. The HSRM will focus on the creation of and export market for hydrogen and ammonia, providing power to the electricity grid, decarbonizing heavy-duty transport, decarbonization or energy intensive industry, and local manufacture of hydrogen products and fuel cell components.
A diverse range of actions that contribute to GHG emissions mitigation is being seen across the private sector in South Africa, with significant gains having been made in certain sectors on both energy efficiency and emissions mitigation.
The private sector action is being driven by a growth in understanding of the business opportunities, local and global market pressure and existing and forthcoming legislation. Actions range from adopting new products and processes to new service offerings to retrofitting of existing operations to make them more energy efficient and less emissions intensive. With suitable support this growth in action will continue.
President Ramaphosa signed into law on May 26, 2019, a carbon for company-level carbon taxes, signaling his commitment to mitigate climate change in South Africa. The carbon tax applies to entities that operate emission generation facilities at a combined installed capacity equal or above their carbon tax threshold. Each emissions generating facility must obtain a license to operate and report their emissions through the National Greenhouse Gas Emission Reporting Regulations of the Department of Environment, Forestry and Fisheries. The GoSA set the carbon tax at 120 ZAR (7.91 USD) per ton of carbon dioxide (CO2) but implemented a soft start including a phased rollout. The Minister of Finance in his February 2022 national budget speech announced an increase to the carbon tax rate from USD 8 to USD 9 (R144), effective from 1 January 2022. He also provided more clarity on the tax announcing an increase in the carbon tax rate, a delay in the roll out of the second phase of the carbon tax, and a reference to the Climate Change Bill, under consideration in the parliament, that makes it compulsory for taxpayers to participate in the carbon budget system. To uphold South Africa’s COP26 commitments, the carbon tax rate will increase each year by at least one USD until it reaches USD 20 per ton of CO2. Starting in 2026, the carbon price increases more rapidly every year to reach at least USD 30 by 2030, and USD 120 beyond 2050. The carbon tax is being implemented in three phases, with the second phase originally scheduled to start in January 2023 having been postponed to the beginning of 2026. Taxpayers will continue to enjoy tax-free allowances which reduce their carbon tax liability. These allowances are given as rebates or refunds when the allowances being applied for are verified. The following allowances were permitted: 60 percent allowance for fossil fuel combustion; 10 percent trade exposure allowance; five percent performance allowance: five percent, carbon budget allowance; and a five percent offset allowance. The Act stipulates those multiple allowances can be granted to the same taxpayer. However, the total may not exceed 95 percent. Regulations regarding the trade exposure and performance allowances are determined by National Treasury.
The South African Air Quality Act of 2004 established minimum emissions standards (MES) for a wide range of industries and technologies from combustion installation to the metallurgical industry. The MES have been poorly enforced but there is growing pressure on the GoSA to hold companies accountable due to the negative impact air pollution is having on human health. In March 2022 the Pretoria High Court, in a suit brought by the Center for Environmental Rights, ruled that the Department of Forestry, Fisheries and the Environment (DFFE) has unreasonably delayed regulations to implement and enforce air pollution standards.
South Africa remains one of the most biodiverse countries in the world. The country is home to 10 percent of the world’s plant species and seven percent of its reptile, bird, and mammal species. Furthermore, endemism rates reach 56 percent for amphibians, 65 percent for plants and up to 70 percent for invertebrates. The GoSA has identified the biodiversity economy as a catalyst to address the triple challenge of unemployment, poverty, and inequality. The United Nations Development Programme (UNDP) has partnered with the GoSA through the Biodiversity Finance Initiative (BIOFIN) to pilot financial solutions which will advance the biodiversity economy agenda of the country.
According to the South African National Biodiversity Assessment, published by the South African National Biodiversity Institute (SANBI) in 2018, there are more than 418,000 biodiversity-related jobs in the country. This speaks volumes to the contribution of biodiversity towards addressing issues of unemployment in a post-COVID-19 agenda.
South Africa has been recognized globally for its efforts in providing fiscal incentives to promote the conservation of biodiversity. The GoSA, through the National Treasury, has provided fiscal incentives in the form of biodiversity tax incentives aiming to fulfil national environmental policy to preserve the environment. This is facilitated through the government-led regime of entering into agreements with private and communal landowners to formally conserve and maintain a particular area of land.
These agreements result in declared protected areas and are established through the national biodiversity stewardship initiative. These agreements result in environmental management expenses incurred by taxpayers as well as loss of economic rights and use. The biodiversity tax incentives present a mechanism to address the mitigation of management costs, address potential loss of production income due to land management restrictions, ensure the continued investment of landowners and communities in long term and effective land management. This mechanism ultimately assists in the sustainability of compatible commercial operations essential to the persistence of the area and the economy and livelihood growth required in South Africa.
The BIOFIN program in South Africa is currently working with the DFFE to promote the implementation of biodiversity tax incentives. The feasibility of the biodiversity tax incentives has been thoroughly tested through various projects including the partnership between SANBI and UNDP on the Biodiversity Land Use (BLU) project. The BLU project has successfully made progress in improving tax incentives for biodiversity stewardship. This project was instrumental in advocating for the 2014 amendment to the Income Tax Act that was published, which included a new Section 37D. Section 37D has provided much-needed expense relief as well as long-term financial sustainability to privately and communally owned and managed protected areas. Biodiversity tax incentives have proven to be a lifeline for many during the COVID-19 pandemic by enabling continued conservation and livelihood sustenance
BIOFIN considers biodiversity tax incentives as one of the financial mechanisms that can be used to promote biodiversity conservation and bolster the biodiversity economy. The granting of a tax relief encourages landowners (communal and private) to use their land in a sustainable manner whilst reducing the costs associated with managing a protected area. Biodiversity tax incentives effectively enhance the financial effectiveness of South Africa’s protected areas and their compatible commercial activities. They aid in sustainable biodiversity and ecosystem management. This is essential to the longevity of these areas and the creation of broader biodiversity economy livelihoods, the effective growth of small, medium and micro enterprises (SMMEs), and commercial operations linked to the wildlife economy. They also increase the protected area estate and area under responsible land management. Non-state investment in establishing and managing protected areas requires a suite of sustainable finance tools to mitigate management costs, offset loss of production income, increase land under protection, and ensure effective growth of enterprises engaged in the biodiversity economy.
South Africa recognizes the risk of general environmental decay and global warming and is committed to responding to the climate change challenge.
South Africa has taken strides in the environmental domain that support, either directly or indirectly, which include public procurement targets for renewable energy; provisions in the Energy Act; the new Green Economy Accord; and international commitments to climate change mitigation.
The GoSA’s REIPPPP is a government-led procurement program that aims to increase the share of renewable energy in the national grid by procuring energy from independent power producers (IPPs). It was issued by the Department of Energy in 2011 to replace a feed-in tariff program. A key objective of the program is economic development: using a competitive bidding process, renewable energy projects submitted are assessed on two factors, namely the tariff they offer (weighted 70 per cent) as well as their contribution to defined economic development criteria. The REIPPPP is an important component of South Africa’s overarching Integrated Resource Plan for electricity and makes clear targets for the procurement of renewable energy.
South Africa ranked 10th in the 2021 BNEF’s Climatescope rankings of most attractive markets for energy transition investments. In 2021, the MIT Technology Review’s Green Future Index, which ranks countries and territories on their progress and commitment toward building a low carbon future, ranked South Africa 47th of 76 countries. South Africa is listed at number 11 of 21 African nations ranked by the Global Green Growth Institute’s Global Green Growth Index.
South Africa has a robust anti-corruption framework, but laws are inadequately enforced, and public sector accountability is low. High-level political interference has undermined the country’s National Prosecuting Authority (NPA). “State capture,” a term used to describe systemic corruption of the state’s decision-making processes by private interests, is synonymous with the administration of former president Jacob Zuma. In response to widespread calls for accountability, President Ramaphosa launched four separate judicial commissions of inquiry to investigate corruption, fraud, and maladministration, including in the Public Investment Corporation, South African Revenue Service, and the NPA which have revealed pervasive networks of corruption across all levels of government. The Zondo Commission of Inquiry, launched in 2018, has published and submitted three parts of its report to President Ramaphosa and Parliament as of March 2022. Once the entire report is reased and submitted to Parliament, Ramaphosa stated his government will announce its action plan. The Zondo Commission findings reveal the pervasive depth and breadth of corruption under the reign of former President Jacob Zuma.
The Department of Public Service and Administration coordinates the GoSA’s initiatives against corruption, and South Africa’s Directorate for Priority Crime Investigations focuses on organized crime, economic crimes, and corruption. The Office of the Public Protector, a constitutionally mandated body, investigates government abuse and mismanagement. The Prevention and Combating of Corrupt Activities Act (PCCA) officially criminalizes corruption in public and private sectors and codifies specific offenses (such as extortion and money laundering), making it easier for courts to enforce the legislation. Applying to both domestic and foreign organizations doing business in the country, the PCCA covers receiving or offering bribes, influencing witnesses, and tampering with evidence in ongoing investigations, obstruction of justice, contracts, procuring and withdrawal of tenders, and conflict of interests, among other areas. Inconsistently implemented, the PCCA lacks whistleblower protections. The Promotion of Access to Information Act and the Public Finance Management Act call for increased access to public information and review of government expenditures. President Ramaphosa in his reply to the debate on his State of the Nation Address on 20 February 2018 announced Cabinet members would be subject to lifestyle audits despite several subsequent repetitions of this pledge, no lifestyle audits have been shared with the public or Parliament.
The South Africa government’s latest initiative is the opening of an Office on Counter Corruption and Security Services (CCSS) that seeks to address corruption specifically in ports of entry via fraudulent documents and other means.
South Africa is a signatory to the Anticorruption Convention and the OECD Convention on Combatting Bribery. South Africa is also a party to the SADC Protocol Against Corruption, which seeks to facilitate and regulate cooperation in matters of corruption amongst Member States and foster development and harmonization of policies and domestic legislation related to corruption. The Protocol defines ‘acts of corruption,’ preventative measures, jurisdiction of Member States, as well as extradition. http://www.sadc.int/files/7913/5292/8361/Protocol_Against_Corruption2001.pdf
To report corruption to the GoSA:
Advocate Busisiwe Mkhwebane
Office of the Public Protector, South Africa
175 Lunnon Street, Hillcrest Office Park, Pretoria 0083
Anti-Corruption Hotline: +27 80 011 2040 or +27 12 366 7000
http://www.pprotect.org or email@example.com
Or for a non-government agency:
87 De Korte Street, Braamfontein/Johannesburg 2001
+27 80 002 3456 or +27 11 242 3900
10. Political and Security Environment
South Africa has strong institutions and is relatively stable, but it also has a history of politically motivated violence and civil disturbance. Violent protests against the lack of effective government service delivery are common. Killings of, and by, mostly low-level political and organized crime rivals occur regularly. In May 2018, President Ramaphosa set up an inter-ministerial committee in the security cluster to serve as a national task force on political killings. The task force includes the Police Minister‚ State Security Minister‚ Justice Minister‚ National Prosecuting Authority, and the National Police Commissioner. The task force ordered multiple arrests, including of high-profile officials, in what appears to be a crackdown on political killings. Criminal threats and labor-related unrest have impacted U.S. companies in the past. In July 2021 the country experienced wide-spread rioting in Gauteng and KwaZulu-Natal provinces sparked by the imprisonment of former President Jacob Zuma for contempt of court during the deliberations of the “Zondo Commission” established to review claims of state-sponsored corruption during Zuma’s presidency. Looting and violence led to over USD 1.5 billion in damage to these province’s economies and thousands of lost jobs. U.S. companies were amongst those impacted. Foreign investors continue to raise concern about the government’s reaction to the economic impacts, citing these riots and deteriorating security in some sectors such as mining to be deterrents to new investments and the expansion of existing ones.
11. Labor Policies and Practices
The unemployment rate in the third quarter of 2021 was 34.9 percent. The results of the Quarterly Labour Force Survey (QLFS) for the third quarter of 2021 show that the number of employed persons decreased by 660,000 in the third quarter of 2021 to 14.3 million. The number of unemployed persons decreased by 183,000 to 7.6 million compared to the second quarter of 2021. The youth unemployment (ages 15-24) rate was 66.5 percent in the third quarter of 2021.
The GoSA has replaced apartheid-era labor legislation with policies that emphasize employment security, fair wages, and decent working conditions. Under the aegis of the National Economic Development and Labor Council (NEDLAC), government, business, and organized labor negotiate all labor laws, apart from laws pertaining to occupational health and safety. Workers may form or join trade unions without previous authorization or excessive requirements. Labor unions that meet a locally negotiated minimum threshold of representation (often, 50 percent plus one union member) are entitled to represent the entire workplace in negotiations with management. As the majority union or representative union, they may also extract agency fees from non-union members present in the workplace. In some workplaces and job sectors, this financial incentive has encouraged inter-union rivalries, including intimidation and violence.
There are 205 trade unions registered with the Department of Labor as of February 2019 (latest published figures), up from 190 the prior year, but down from the 2002 high of 504. According to the 2019 Fourth QLFS report from StatsSA, 4.071 million workers belonged to a union, an increase of 30,000 from the fourth quarter of 2018. Department of Labor statistics indicate union density declined from 45.2 percent in 1997 to 24.7 percent in 2014, the most recent data available. Using StatsSA data, however, union density can be calculated: The February 2020 QLFS reported 4.071 million union members and 13.868 million employees, for a union density of 29.4 percent.
The right to strike is protected on issues such as wages, benefits, organizational rights disputes, and socioeconomic interests of workers. Workers may not strike because of disputes where other legal recourse exists, such as through arbitration. South Africa has robust labor dispute resolution institutions, including the CCMA, the bargaining councils, and specialized labor courts of both first instance and appellate jurisdiction. The GoSA does not waive labor laws for foreign direct investment. The number of working days lost to strike action fell to 55,000 in 2020, compared with 1.2 million in 2019. The sharp decrease is attributable to the GoSA’s imposition of the National State of Disaster at the onset of the COVID-19 pandemic, and the accompanying lockdown that commenced on March 26, which forced many businesses either to close or lay off workers and implement wage cuts or shorten time of work. The fact that many wage negotiations were put on hold also led to a reduction in strike figures.
Collective bargaining is a cornerstone of the current labor relations framework. As of February 2019, the South Africa Department of Labor listed 39 private sector bargaining councils through which parties negotiate wages and conditions of employment. Per the Labor Relations Act, the Minister of Labor must extend agreements reached in bargaining councils to non-parties of the agreement operating in the same sector. Employer federations, particularly those representing small and medium enterprises (SMEs) argue the extension of these agreements – often reached between unions and big business – negatively impacts SMEs. In 2019, the average wage settlement resulted in a 7.1 percent wage increase, on average 2.9 percent above the increase in South Africa’s consumer price index (latest information available).
In his 2022 state of the nation address President Ramaphosa spoke of tax incentives for companies that employ youth in efforts to curb youth unemployment. In addition, President Ramaphosa announced measures to move funds in the national budget to address youth unemployment.
South Africa’s current national minimum wage is USD 1.45/hour (R21.69/hour), with lower rates for domestic workers being USD 1.27/hour (R19.09/hour). The rate is subject to annual increases by the National Minimum Wage Commission as approved by parliament and signed by President Ramaphosa. Employers and employees are each required to pay one percent of wages to the national unemployment fund, which will pay benefits based on reverse sliding scale of the prior salary, up to 58 percent of the prior wage, for up to 34 weeks. The Labor Relations Act (LRA) outlines dismissal guidelines, dispute resolution mechanisms, and retrenchment guideline. The Act enshrines the right of workers to strike and of management to lock out striking workers. It created the CCMA, which mediates and arbitrates labor disputes as well as certifies bargaining council impasses for strikes to be called legally.
The Basic Conditions of Employment Act (BCEA) establishes a 45-hour workweek, standardizes time-and-a-half pay for overtime, and authorizes four months of maternity leave for women. Overtime work must be conducted through an agreement between employees and employers and may not be more than 10 hours a week. The law stipulates rest periods of 12 consecutive hours daily and 36 hours weekly and must include Sunday. The law allows adjustments to rest periods by mutual agreement. A ministerial determination exempted businesses employing fewer than 10 persons from certain provisions of the law concerning overtime and leave. Farmers and other employers may apply for variances. The law applies to all workers, including foreign nationals and migrant workers, but the GoSA did not prioritize labor protections for workers in the informal economy. The law prohibits employment of children under age 15, except for work in the performing arts with appropriate permission from the Department of Labor.
The EEA, amended in 2014, protects workers against unfair discrimination on the grounds of race, age, gender, religion, marital status, pregnancy, family responsibility, ethnic or social origin, color, sexual orientation, disability, conscience, belief, political, opinion, culture, language, HIV status, birth, or any other arbitrary ground. The EEA further requires large- and medium-sized companies to prepare employment equity plans to ensure that historically disadvantaged South Africans, as well as women and disabled persons, are adequately represented in the workforce. More information regarding South African labor legislation may be found at: www.labour.gov.za/legislation
14. Contact for More Information
Trade and Investment Officer
877 Pretorius Street
Arcadia, Pretoria 0083