2023 Investment Climate Statements: South Africa

Policies Towards Foreign Direct Investment

The GoSA is relatively 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: 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). 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. The private sector has also claimed a generally onerous business operating environment has made South Africa a less attractive investment location for both foreign and domestic business.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign Investment and Ownership Restriction

Currently, there are few limitations on foreign private ownership and South Africa has established several incentive programs to attract foreign investment. The primary acts governing foreign private ownership are the Investment Act, the 2019 Competition Amendment Act, and the Companies Act.

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. Most foreign investors establish subsidiaries or private companies with at least one director and one shareholder. A private company’s directors do not have to be South African. A private company, on the other hand, may not have more than 50 members (shareholders). If the foreign investor requires an entity with more than 50 members, a public company may be the best option. The Companies Act also requires that external companies submit their annual returns to the Companies and Intellectual Property Commission Office (CIPC) for review.

Although generally under the Companies Act and the Investment Act there are no rules that would prohibit foreign companies from purchasing South African assets or engaging in takeovers, there are national security provisions for reviewing these transactions. The 2019 Competition Amendment Act allows for the blocking of a merger involving a foreign acquiring firm if, in the opinion of a presidentially appointed foreign investment committee, its implementation is a cause for concern for the country’s national security. The Companies Act outlines relevant 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.”

Immigration Policy and Foreign Business And Investments

The Immigration Act requires that an applicant for a business visa must invest the prescribed financial or capital contribution into the relevant business, and that contribution must form part of the intended book value of the business. The prescribed financial or capital contribution is determined by the Minister of Home Affairs by a notice in the Government Gazette, and the applicable financial contribution in 2021 was 5 million rand, whereas the capital contribution must be in the form of new machinery and equipment. Notwithstanding the foregoing, the Immigration Act allows for the Director General of the Department of Home Affairs to reduce or waive the financial or capital contribution requirements in instances where the nature of the business of the applicant is prescribed to be in the national interest. The types of business activities that the Minister of Home Affairs considers to be within the national interests during the year under review include:

• agro-processing;
• business process outsourcing and information technology enabled services;
• capital and transport equipment, metals and electrical machinery and apparatus;
• textiles, clothing and leather;
• electro technical (this includes, for example, advanced telecommunications, software development and smart metering);
• green economy industries (including power generation and renewable energy);
• oil and gas; and
• mineral benefaction and infrastructure development.

Over the past three years businesses increasingly express concerns over lengthy delays in business visa processing, particularly when it concerns intercompany transfers.

B-BBEE Policy and Impacts on Foreign Investments

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 lower the score on the scorecard, the greater preferential access a company enjoys when bidding 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, 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, which provides a good illustration of some of the types of measures that the South African government would like to see, including a pledge to provide financing for priority sectors and a target number of jobs to be created.

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.

Government Assistance for Foreign Investors

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.

Other Investment Policy Reviews

While there have been no IPRs issued on South Africa in the past five years, the Organization for Economic Co-operation and Development (OECD) released a working report that may be beneficial for some investors entitled “Assessing Tax Relief from Targeted Investment Tax Incentives Through Corporate Effective Tax Rates,” found at https://www.oecd.org/southafrica/assessing-tax-relief-from-targeted-investment-tax-incentives-through-corporate-effective-tax-rates-3eaddf88-en.htm

Local NGOs and organizations provided reports and participate in dialogue on investment policy concerns. The Trade and Industrial Policy Strategies NPO, an independent think tank in South Africa, releases policy briefs on various topics such as green energy, transport, minerals, financial flows and state-owned enterprises. The reviews may be beneficial to investors and are found at https://www.tralac.org/blog/article/13930-the-energy-crisis-how-will-investors-look-at-south-africa-now.html . The Centre for Development and Enterprise is another NPO that produces investment policy related reports. Publications on topics such as localization, infrastructure programs and special economic zones can be found at https://www.cde.org.za/publications/growth-and-jobs/.

On March 9, 2023, environmental activists gathered at the Africa Energy Indaba in Cape Town accusing Mineral Resources and Energy Minister, Gwede Mantashe of blocking efforts to bring renewable energy online. Greenpeace Africa activists disrupted Mantashe’s address at the Africa Energy Indaba urging him to end load shedding by shifting away from coal to renewable energy. The activists took action to protest the continued resistance by Minister Mantashe to fast-track adding new renewable energy to the grid in South Africa, and the continued unprecedented levels of daily load shedding since October 2022.
https://www.msn.com/en-xl/news/other/greenpeace-africa-activists-disrupt-mantashes-address-at-africa-energy-indaba-press-release/ar-AA18mXZG 

Business Facilitation

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.

Outward Investment

South Africa does not incentivize outward investments. South Africa’s stock foreign direct investments in the United States in 2021 totaled $4.1 billion (latest figures available), a 13.9 percent increase from $3.6 billion in 2020. In 2022 the largest South African outward direct investment was a gas liquefaction plant in the State of Louisiana by Johannesburg Stock Exchange (JSE) and NASDAQ dual-listed petrochemical company SASOL. Another notable U.S.-bound investment was in 2016 when South Africa’s Sibanye Gold Ltd. procured Stillwater Mining, the only U.S. miner of platinum and palladium with a $2.2 billion deal, while also listing on the Nasdaq as Sibanye Stillwater Ltd. There are some restrictions on outward investment, such as a R1 billion ($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 

Transparency of the Regulatory System

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. The Auditor-General of South Africa has a constitutional mandate and, as the supreme audit institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability, and governance in the public sector. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations. All rules and regulations are guided by South Africa’s Constitutional Law.

Accounting, legal, and regulatory procedures are transparent. South African entities are permitted to use either International Financial Reporting Standards (IFRS), the IFRS for Small and Medium sized Entities, or South African Statements of Generally Accepted Accounting Practice (SA GAAP), depending on an entity’s ‘public interest score’.

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 several 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. The bill was passed into law in June 2022. 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 (EEA) Bill in November 2021. President Ramaphosa signed into law the EEA Bill in April 2023. 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).

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. The bill was signed into law in December 2022.

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.

South Africa is also developing new legislation to enhance transparency and accountability for large corporations, including through the adoption of the concept of “beneficial ownership” into law and by providing the public greater access to company information. In October 2021, the Department of Trade, Industry and Competition (DTIC) published the Companies Amendment Bill, 2021 for public comment. It is the second draft of the Companies Amendment Bill to be published; the first draft having been published on in September 2018. The Bill aims to amend the Companies Act, No. 71 of 2008, in several significant ways. A few of the most important changes are explained below:

• Disclosure of Executive Remuneration – One of the Act’s main goals is to make the process for determining executive remuneration for large companies more transparent. The Bill therefore seeks to insert a duty for all public and state-owned companies to submit a renumeration reports to their shareholders for approval by ordinary resolution at each annual general meeting.

• Access to company information – The Bill introduces two provisions that increase third parties’ access to company information for large companies. The goal is to improve information transparency and corporate accountability to the larger public, which the Act recognizes as a legitimate stakeholder in the decisions and financials of large corporations.

• Provisions to improve the ease of doing business – The Bill includes various provisions whose purpose is to make doing business less administratively burdensome for some companies.

• Beneficial ownership and the new ‘true owner’ concept – In line with the third main objective of the Bill – to prevent money laundering and terrorism finance – the Bill introduced the concept of beneficial ownership, called the ‘true owner.’ The true owner is the person who exercises actual control over a shareholding in the company, regardless of who the registered holder is and regardless of any intermediaries between the registered holder and the person exercising actual control over the shares. However, the Companies’ Amendment Bill’s definition of “true owner” has been superseded by two acts signed into law in 2022: the General Laws Amendment Act and the Protection of Constitutional Democracy Against Terrorism and Related Activities Amendment Act (POCDATARA Amendment Act). These Acts cross reference the Financial Intelligence Centre Act definition, which defines the term as a natural person who directly or indirectly ultimately owns or controls a company through equity, voting rights, director appointments, or influence; or ownership or control of a direct or indirect controlling holding company, another juristic person, a body of persons (corporate or unincorporate), partnership or as specified in regulations.

Under the current disclosure regime in South Africa, there is no explicit duty to provide disclosures on ESG matters. A noteworthy development on the disclosure front is the JSE’s publication, in June 2022, of its Sustainability Disclosure Guidance and Climate Disclosure Guidance. This is a voluntary guidance for JSE-listed companies on sustainability and climate-related disclosure that draws on existing international frameworks while providing for a South African context. 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.

In 2017, new regulations on preferential procurement said that all contracts above R30 million ($1.8 million) should contain a local sub-contracting element of 30 percent, where feasible. The regulations also made it possible for state entities to set aside a portion of contracts for specific groups previously disadvantaged by apartheid. The Constitutional Court in South Africa ruled that the 2017 procurement regulations are inconsistent with the constitution and gave the finance minister 12 months to amend them. Because the regulations did not define carefully what was intended, state entities used their discretion, for example, the absence of a definition for “local”, has led to ward councilors and communities insisting that when a project is undertaken in their ward, those who live in the ward should be the sole beneficiaries. In November 2022, the finance minister gazetted new Preferential Procurement Regulations which say that procurement policies of state entities must include a preference points system and measures regarding preference for certain categories of people and enterprises and for goods and services that are locally produced and provided. The regulations are a placeholder while the Public Procurement Bill is being finalized. The bill has now been processed by the National Economic Development and Labour Council and the next step is for it to be tabled in Parliament.

The preferential procurement regulations have created uncertainty about how organs of state will identify “specific groups previously disadvantaged” in their procurement processes. While the preferential procurement regulations do not specifically require the consideration of B-BBEE, organs of state can still use it as a factor in preference point scoring, along with or instead of other goals like employment equity, green procurement, and local content and production. The regulations give organs of state more flexibility in their procurement policies but there is a risk that their allocation of preference points is not fair, equitable, and transparent.

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.

International Regulatory Considerations

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’s policy on standards is executed through the South Africa Bureau of Standards (SABS), which is recognized internationally by Netherlands-based Raad voor Accreditatie (RvA).  SABS is a founding member of the International Organization of Standardization (ISO) and the International Electrotechnical Commission (IEC). South Africa also develops its own standards for domestic adoption and works through SADC on regional standards, as well as with the ISO, IEC, and the European Committee for Standardization (CEN). Although reciprocity with U.S. standards is not guaranteed, most U.S. standards conform and are harmonized with ISO; therefore, most U.S. importers do not face significant challenges, except in the automotive and pharmaceuticals sectors.

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), which creates complications when tenders are withdrawn, canceled, and awarded privately. Corruption in the tender process is a significant concern because of lack of transparency of the tender process.

Legal System and Judicial Independence

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.

Laws and Regulations on Foreign Direct Investment

The major laws affecting foreign investment in South Africa are:

1. The Companies Act, which governs the registration and operation of companies in South Africa.
2. The Protection of Investment Act, which provides for the protection of investors and their investments.
3. The Labor Relations Act, which provides protection for employees against unfair dismissal and unfair labor practices.
4. The Customs and Excise Act, which provides for general incentives to investors in various sectors.
5. The Competition Act, which is responsible for the investigation, control and evaluation of restrictive practices, abuse of dominant position, and mergers.
6. The Special Economic Zones Act which provides national economic growth and exports by using support measures to attract foreign and domestic investments and technology.

There are also key regulatory authorities governing foreign investment:

1. The Companies and Intellectual Property Commission (CIPC). This is a statutory body within the Department of Trade and Industry that was established by the Companies Act. The CIPC is responsible for the registration of companies and intellectual property rights (among other things).
2. The Competition Commission (Commission). The Commission is a statutory body that was established by the Competition Act 89 of 1998 (Competition Act). The Commission serves as an investigative and enforcement agency over competition/anti-trust law related matters.
3. The Competition Tribunal (Tribunal). This is a statutory body that was established under the Competition Act. The Tribunal is primarily responsible for adjudicating competition matters.
4. The South African Reserve Bank (SARB) Financial Surveillance Department. This is a government department that is responsible for the administration of exchange control and implementing exchange control policy and administering Exchange Control Regulations (among other things).

The Ease of Doing Business Bill, the draft of which was introduced in Parliament in February 2021, lapsed in December 2022 due to inaction. If revived and 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).

Competition and Antitrust Laws

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 U.S.-owned platform.

The Competition Commission announced in March 2023 that it intends to launch an investigation into digital media and platforms in South Africa and has published draft terms of reference for the planned investigation. This is a result of the Publishing Support Services (PSS), which represents major South African news publishers, making representations to the Competition Commission’s online intermediation platform market inquiry, pointing out that publishers’ revenue streams were declining significantly, preventing them from growing into the new digital publishing world. The investigation will focus on the major digital platforms, such as search engines, social media sites, video sharing platforms, and news aggregation platforms, as well as new technologies adopted by digital platforms, such as generative artificial intelligence (AI) search support, including ChatGPT.

Expropriation and Compensation

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 constitutional amendment 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, 2022, 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 should it pass.

In a parallel process, in October 2020, the South African Government published a draft land expropriation bill for public comment that would amend South Africa’s 1975 Expropriation Act to explicitly allow expropriation of property, including land, without compensation. While the constitutional amendment failed to garner enough votes in December 2021, the parallel land expropriation bill was adopted by the National Assembly on September 28, 2022, and forwarded to the National Council of Provinces (NCOP) for further processing.   The NCOP reopened the proposed laws for public comment giving the public until March 6, 2023, to submit their views. If passed by the NCOP, the bill will move on to the president to be signed into law. The bill introduces instances where “nil compensation” could be paid for expropriated land in specific circumstances such as abandoned land, state land, or land held for speculative purposes, something which is not currently accommodated in South Africa’s Constitution, which calls for “just and equitable” compensation. The land expropriation bill is expected to be challenged in the Constitutional Court if it is passed in its current form by the National Council of Provinces (NCOP) and signed into law by the President.

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 (UPRD) 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. The most anticipated development in the South African upstream oil and gas sector is the enactment of the act. On July 1, 2021, the UPRD was introduced to the National Assembly, and on May 17, 2022, DMRE briefed the Portfolio Committee on the salient provisions of the UPRD. During this briefing, DMRE reiterated the importance of the UPRD, its contribution to the development and growth of the upstream petroleum industry, and the need to promote investor certainty by passing the UPRDB. The Portfolio Committee agreed on May 24, 2022, that there will be two phases for public participation associated with the UPRD, namely written submissions and public hearings. On June 28, 2022, the first phase commenced, as the Portfolio Committee invited the public to submit written comments and indicate any interest in making oral submissions on the UPRD. Written submissions were due by July 29,2022. Given the timeline for submission of written comments, public hearings will likely take place during the first quarter of 2023.

https://www.cliffedekkerhofmeyr.com/en/news/publications/2023/Sectors/Oil/International-Comparative-Legal-Guide-Oil-Gas-Regulation-2023.html 

https://www.georgeherald.com/News/Article/General/public-hearing-on-new-upstream-petroleum-resources-development-bill-on-sunday-202302161031 

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.

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.

On April 14, 2022, the DMRE published the Exploration Strategy for the Mining Industry of South Africa. This Strategy acknowledges that with the declining gold resources, the appeal of the South African mining industry lies in the minerals of the future. The Strategy is anchored on three critical pillars, (i) economic growth; (ii) social benefits; and (iii) environmental care through good governance. The Strategy acknowledges some of the weaknesses that have hampered the growth of South Africa’s mining industry and asserts that South Africa should take advantage of the opportunities presented by the growing demand for minerals needed by industries of the future including battery storage, artificial intelligence, robotics, electric vehicles, and clean energy with a growing market demand globally.

https://cer.org.za/virtual-library/whats-new/exploration-strategy-for-the-mining-industry-of-south-africa-and-implementation-plan-2022#:~:text=Exploration%20Strategy%20for%20the%20Mining%20Industry%20of%20South,plan%20for%20the%20mining%20industry%20of%20South%20Africa .

Dispute Settlement

ICSID Convention and New York Convention

South Africa is a member of the New York Convention of 1958 on the recognition and enforcement of foreign arbitration awards as implemented through the Recognition and Enforcement of Foreign Arbitral Awards Act, No. 40 of 1977 . It is not a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States or the World Bank’s International Center for the Settlement of Investment Disputes.

Investor-State Dispute Settlement

The 2015 Promotion of Investment Act removes the option for investor state dispute settlement through international courts typically afforded through BITs. Instead, investors disputing an action taken by the GoSA must request DTIC to facilitate the resolution by appointing a mediator. A foreign investor may also approach any competent court, independent tribunal, or statutory body within South Africa for the resolution of the dispute. Dispute resolution can be a time-intensive process in South Africa. If the matter is urgent, and the presiding judge agrees, an interim decision can be taken within days while the appeal process can take months or years. If the matter is a dispute of law and is not urgent, it may proceed by application or motion to be solved within months. Where there is a dispute of fact, the matter is referred to trial, which may take several years so there is a growing preference for Alternative Dispute Resolution. There are no known investment disputes involving U.S. persons or other foreign investors as of February 2023.

International Commercial Arbitration and Foreign Courts

The Arbitration Act of 1965, which does not distinguish between domestic and international arbitration and is not based on UNCITRAL model law, governs arbitration in South Africa. South African courts retain discretion to hear a dispute over a contract using the law of a foreign jurisdiction. However, the South African court will interpret the contract with the law of the country or jurisdiction provided for in the contract. South Africa recognizes the International Chamber of Commerce, which supervises the resolution of transnational commercial disputes. It applies commercial and bankruptcy laws with consistency and has an independent, objective court system for enforcing property and contractual rights. Alternative Dispute Resolution is increasingly popular in South Africa for many reasons, including the confidentiality which can be imposed on the evidence, case documents, and the judgment. South Africa’s Companies Act also provides a mechanism for Alternative Dispute Resolution. South Africa’s judiciary and court system are generally considered to be transparent and operate fairly. There are no known complaints about the court processes in relation to investment disputes.

Bankruptcy Regulations

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.

Investment Incentives

As part of the 2023 Budget Speech, the South African government has offered a tax incentive for rooftop solar panels from March 2023. A tax credit worth 25 percent of the price of any new and unused solar photovoltaic (PV) panels installed at a person’s private residence will be available up to $810 (R15,000) per individual to reduce the taxpayer’s personal income tax obligation for the 2023–2024 tax year. The Government also announced an expansion of section 12B of the Income Tax Act No. 58 of 1962. This act enables businesses to deduct the cost of their brand-new solar power system from profits as a depreciation expense – up to 125 percent.
https://www.fenns.co.za/solar-panel-tax-incentive-for-individuals/ 

South Africa 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.

The Critical Infrastructure Program (CIP) is a government incentive scheme designed to bolster infrastructure investment by supporting infrastructure deemed to be critical, and as a result lowering the cost of doing business. The CIP is a cost-sharing incentive that is available to approved applicants or infrastructure projects on the completion of verified milestones. The mandatory requirement for foreign investors in South Africa is that it must be proved that the foreign investor has not entered into any partnership agreements in foreign countries. The Codes of Good Practice under the B-BBEE makes provision for contributions in lieu of direct sale of equity. A grace period of 15 months after the date of submission is given to all applicants to comply with the relevant requirements. The Department of Trade and Industry, through the CIP, offers the following grants:

• A grant of 10 percent to 30 percent of the total qualifying infrastructural development costs, up to a maximum of ZAR50 million.
• For agro-processing applicants: the CIP will offer a grant of 10 percent to 50 percent of the total infrastructural development costs, up to a maximum of ZAR50 million.
• For projects that alleviate water and/or electricity dependency on the national grid: the CIP will offer a grant of 10 percent to 50 percent, up to a maximum of ZAR50 million.

To encourage and support businesses looking to green their operations, there are incentives built 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.

https://www.westerncape.gov.za/energy-security-game-changer/news/clean-energy-tax-incentives 

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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 

Performance and Data Localization Requirements

The GoSA incentivizes the use of local content in goods and technology across all sectors and government procurement often requires, or heavily weights, the use of domestically produced products. The government’s localization policy was revamped in 2021 and its cornerstone is the implementation of a scheme to substitute 20 percent of imports, or approximately R20 billion ($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.

South Africa’s Constitution requires that when an organ of state in the national, provincial, or local sphere of government contracts for goods and services, it must do so using a “fair, equitable, transparent, competitive and cost effective” system. Organs of state may implement procurement policies which provide for certain categories of preference in the allocation of contracts, and the protection or advancement of persons disadvantaged by unfair discrimination. 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 equity equivalency options (EE) 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.

In February 2022, the Constitutional Court struck down provisions of the 2017 Preferential Procurement Regulations (see section 3). Following this decision, the government published new draft Preferential Procurement Regulations (PPRs) in November 2022, under the Preferential Procurement Policy Framework Act, 2000. The new regulations became effective in January 2023 and allow each organ of the state discretion in implementing their own procurement policies. For instance, the South African National Defence Forces has chosen to require that all uniforms must be procured from local producers. These new regulations, however, are placeholders until a new public procurement bill is finalized.

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 Draft Policy provides that investment in data centers will be centralized in large metropolitan areas in South Africa, like Gauteng, KwaZulu-Natal and the Western Cape. The Draft Policy proposes establishing a digital or ICT “Special Economic Zone” (“SEZ”) to encourage domestic and foreign investment in data and cloud infrastructure and services.

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.

The South African Copyright Act on Intellectual Property protects source code. Foreign information technology companies are not required to provide the source code to any entity or government. Access to encryption falls under the Regulation of Interception of Communications and Provision of Communications Related Information Act (RICA), which is the main communications surveillance law. Its mandate is to regulate communications interception and related processes, including the establishment of a system for law enforcement to apply for judicial authorization for communications interception. RICA includes provisions that allow law enforcement, security, and intelligence agencies to petition a judge for a “decryption direction,” which directs the provider of an encryption key to disclose that key or provide decryption assistance in the case of encrypted data.

Real Property

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. The legal questions around land reform and redistribution post-apartheid remain among the most sensitive and divisive in the country.

Intellectual Property Rights

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. Civil and criminal remedies are available. Bringing cases to criminal court is costly, with most of the burden placed on rights holders to develop the evidence needed for prosecutions. South Africa has not been named in the Special 301 or the notorious market report. South Africa does not track seizures of counterfeit goods writ-large. 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 a regular 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 1993, which grants protection for 10 years for functional designs, and 15 years for aesthetic designs. 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. 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; however, draft legislation has not yet been released. Policy changes are proposed in two phases. Phase 1 will focus on IP and Public Health, including patent requirements, voluntary licensing, compulsory licenses, and international IP cooperation. Phase 2 will focus on collective marks, certification marks and geographic indications; safeguarding South Africa emblems and national icons; commercialization of IP; IP enforcement; IP localization and beneficiation; IP awareness and capacity building; IPRs and the environment/climate change/green technologies; IP in agriculture, IP and biotechnology, genetic resources, and genomic sovereignty. The comprehensive IP Policy will be developed through an interagency process coordinated through the Inter-Ministerial Committee on Intellectual Property.

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/. 

Capital Markets and Portfolio Investment

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 Sector Conduct Authority (FSCA). The FCSA 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. The FSCA was established to be the dedicated market conduct regulator in South Africa’s Twin Peaks regulatory model implemented via the Financial Sector Regulation Act. Their mandate includes all financial institutions that provide a financial product and/or a financial service as defined in the Financial Sector Regulation Act.

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 $1.36 trillion as of March 2022 and 349 companies listed on the main, alternative, and other smaller boards as of January 2021. 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-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. Non-residents can finance 100 percent of their investment through local borrowing. A finance ratio of 1:1 also applies to immigrants, the acquisition of residential properties by non-residents, and financial transactions such as portfolio investments, securities lending and hedging by non-residents.

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.

In 2019, South Africa underwent its Mutual Evaluation under FATF. The subsequent Mutual Evaluation Report https://www.fatf-gafi.org/content/dam/fatf/documents/reports/mer4/Mutual-Evaluation-Report-South-Africa.pdf found South Africa delinquent in a number of areas related to financial crimes and anti-money laundering. South Africa submitted it progress report to the FATF Regional Grouping in October 2022, and at the February 2023 FATF Plenary was placed under “increased monitoring,” i.e., the “grey list.” https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/Increased-monitoring-february-2023.html . South Africa will remain under increased monitoring until 2025.

Money and Banking System

In 2020 (latest data available), the penetration rate of bank accounts in South Africa was 79 percent. The rate is expected to reach 90 percent by 2025. South Africa non-performing loans ratio was 4.6 percent in November 2022. South African banks are well capitalized and comply with international banking standards. There are 18 domestic registered banks in South Africa and 13 branches of foreign banks as of September 2022. Twenty-nine foreign banks have approved local representative offices. Six banks – Standard, ABSA, First Rand (FNB), Capitec, Investec, and Nedbank – dominate the sector, accounting for over 85 percent of the country’s banking assets, which total over $470 billion in 2022. 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 .

Only those who have a current temporary or permanent residency visa are permitted to open “resident” bank accounts in South Africa. A resident account is just an ordinary bank account without any restrictions. The only type of bank account that may be opened in South Africa while you are on a tourist visa or temporary residency visa which does not allow work or business in South Africa (for example, a relative’s visa or retirement visa) is a non-resident account. These accounts have all the characteristics of a typical bank account; however, they are limited in that individuals cannot deposit in South African Rands and can bring in money from abroad.

Foreign Exchange and Remittances

Foreign Exchange

The SARB Exchange Control Department administers foreign exchange policy. An authorized foreign exchange dealer, normally one of the large commercial banks, must handle international commercial transactions and report every purchase of foreign exchange, irrespective of the amount. Generally, there are only limited delays in the conversion and transfer of funds. Due to South Africa’s relatively closed exchange system, no private player, however large, can hedge large quantities of Rand for more than five years. While non-residents may freely transfer capital in and out of South Africa, transactions must be reported to authorities. Non-residents may purchase local securities without restriction. To facilitate repatriation of capital and profits, foreign investors should ensure an authorized dealer endorses their share certificates as “non-resident.” Foreign investors should also be sure to maintain an accurate record of investment.

South Africa operates within a flexible exchange rate regime, the country has a free-floating exchange rate, and the SARB is tolerant of exchange rate fluctuations. This is because there are low levels of foreign exchange debt. The value of the rand, like any commodity, is determined by the market forces of supply and demand. The demand for the currency relative to the supply will determine its value in relation to another currency.

Remittance Policies

In the 2020 Budget Speech , National Treasury proposed a complete overhaul of the exchange control systems. This aimed to modernize and reduce some of the burdensome and unnecessary administrative approval processes by implementing a new capital flow management system. Under this framework all cross-border transactions will be allowed except for those that are subject to the capital flow management measures and/or pose a high risk of illegitimate cross- border financial flows. Furthermore, red tape on legitimate flows will be reduced while more robust measures will be introduced to detect, deter and disrupt illegitimate cross-border financial flows. New capital flow management regulations will be drafted to implement this framework. The Taxation Laws Amendment Bill came into force in January 2021 and includes tax proposals linked to the implementation of the new capital flow management system.

Subsidiaries and branches of foreign companies in South Africa are considered South African entities, treated legally as South African companies, and subject to SARB’s exchange control. South Afri0can companies generally may freely remit to non-residents repayment of capital investments; dividends and branch profits (provided such transfers are made from trading profits and are financed without resorting to excessive local borrowing); interest payments (provided the rate is reasonable); and payment of royalties or similar fees for the use of know-how, patents, designs, trademarks, or similar property (subject to SARB prior approval).

South African companies (excluding trusts and close corporations) can make bona fide new outward foreign direct investments into companies outside the Common Monetary Area (eSwatini, Lesotho, Namibia, and South Africa) up to the value of R1 billion per company per calendar year through any Authorized Dealer. South African individuals may freely invest in foreign firms listed on South African stock exchanges. Individual South African taxpayers in good standing may make investments up to a total of R10 million ($588,000) in other countries. Currently, South African banks are permitted to commit up to 25 percent of their capital in direct and indirect foreign liabilities. In addition, mutual and other investment funds can invest up to 25 percent of their retail assets in other countries. Pension plans and insurance funds may invest 25 percent of their retail assets in other countries.

Before accepting or repaying a foreign loan, South African residents must obtain SARB approval. SARB must also approve the payment of royalties and license fees to non-residents when no local manufacturing is involved. DTIC must approve the payment of royalties related to patents on manufacturing processes and products. Upon proof of invoice, South African companies may pay fees for foreign management and other services provided such fees are not calculated as a percentage of sales, profits, purchases, or income.

Sovereign Wealth Funds

Although President Ramaphosa and the finance minister announced in February 2020 the aim to create a Sovereign Wealth Fund, no action has been taken.

Privatization Program

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. Two years 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.

During his February 10, 2022, State of the Nation Address (SONA), Ramaphosa stated that the cabinet had approved amendments to the Electricity Regulations Act (ERA) that would liberalize South African electricity markets. As of March 27, 2023, the bill had not yet passed. 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. Eskom applied for a transmission license for the new TSO in December 2021. As of March 2023, the National Energy Regulator of South Africa (NERSA) was in the process of reviewing the application for a transmission license, and electricity trading license, and an electricity import and export license for the new transmission entity. The Eskom generation and distribution divisions will be separated at a later date. 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.”

Climate Issues

South Africa’s 2019 National Climate Change Adaptation Strategy (NCCAS) and National Climate Change Bill (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. A common theme throughout South Africa is the existence of very good legislation, but lack of enforcement.

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.

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, the Carbon Tax Act 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 Minister of Finance in his February 2022 national budget  speech announced an increase to the carbon tax rate from $8 to $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 $1 until it reaches $20 per ton of CO2. Starting in 2026, the carbon price increases more rapidly every year to reach at least $30 by 2030, and $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.

On March 15, 2023, the Minister of Forestry, Fisheries, and Environment announced the decision to allow Eskom to operate the Kusile coal power plant without the use of the flue gas desulfurization mechanism for a period of at least 13 months to address the on-going electricity crisis. This is likely to result in increased sulfur dioxide emissions during this period, in excess of the current applicable limit contained in Kusile’s atmospheric emission license.

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.

The UNDP BIOFIN program in South Africa is 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.

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 tax relief encourages landowners (communal and private) to use their land in a sustainable manner while 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.

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.

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.

Resources to Report Corruption

To report corruption to the GoSA:
Advocate Kholeka Gcaleka
Acting Public Protector
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 customerservice@pprotect.org
Or for a non-government agency:
David Lewis
Executive Director
Corruption Watch
87 De Korte Street, Braamfontein/Johannesburg 2001
+27 80 002 3456 or +27 11 242 3900
http://www.corruptionwatch.org.za/content/make-your-complaint 
info@corruptionwatch.org.za