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This publication is available at https://www.gov.uk/government/publications/overseas-business-risk-south-africa/overseas-business-risk-south-africa
1. Political Overview
South Africa is a young, relatively stable democracy, dominated by one political party. Jacob Zuma became president in May 2009 following the ANC’s victory at the polls securing 65.9% of the popular vote. He came to power with the support of the tripartite alliance consisting of the South African Communist Party (SACP), the Congress of South African Trade Unions (COSATU) and the ANC. In 2012, he was re-elected to a second five-year term as President of the ANC, beating his only rival and deputy, Kgalema Motlanthe, by a wide margin. Cyril Ramaphosa (a prominent figure in the South African business community and politician, activist and trade union leader) was elected as Deputy President of the ANC, succeeding Motlanthe who had declined a second term after losing to Zuma.
The most recent general election was held in May 2014 to elect a new National Assembly and new provincial legislatures in each province. It was the fifth election held in South Africa under conditions of universal adult suffrage since the end of the apartheid era and also the first held since the death of Nelson Mandela.
2. Economic Overview
The South African economy is forecast to grow at around 2% in 2015, up from 1.5% in 2014. This is expected to improve further in 2016 and 2017, however, there are still issues of unemployment, poverty and inequality. South Africa is the most sophisticated and developed economy in Africa and has some high class companies in finance, real estate and business services, manufacturing and wholesale and retail trade. South Africa is the ‘gateway to Africa’ for investors due to its comparative sophistication, ease of doing business, continental expertise and ability to act as a base for critical services (e.g. auditing) for doing business on the rest of the continent.
Click here for a guide on exporting to South Africa
3. Key Economic Developments
Unemployment remains an immense challenge with an official figure of 25.2% but the real figure is probably nearer 40%. Two thirds of all those unemployed are below the age of 35. The National Treasury’s forecasted growth rate falls short of the 6% rate analysts believe the country needs to tackle its stubbornly high unemployment levels. The South African Government’s multi-year capital expenditure programme (valued at £90 billion) is attempting to tackle infrastructure bottlenecks in energy, transport and water. It is hoped that the infrastructure programme will create short term employment and also provide the infrastructure necessary for the economy to grow at a faster pace in the longer term.
4. Business Environment
South Africa’s business environment is challenging but still one of the best in the developing world. Problems include the skills deficit, poor labour relations, lack of electricity and corruption. But a well developed transport infrastructure, sound macro conditions and robust financial and legal frameworks also exist. South Africa’s overall performance in the World Bank’s 2015 Ease of Doing Business Index dropped from 41st to 43rd, at a time of subdued GDP outlook. The main contributor to this score is due to the country’s poor and limited access to electricity, one of the biggest challenges. This presents business opportunities for British electricity produces (see here). Despite this drop in score, the country has improved in a range of other areas around starting a business, registering property, trading across borders, enforcing contracts and paying taxes. There are still challenges for South Africa in attracting further investors, but these are not insurmountable, and many are already being addressed. As a developing country, South Africa will continue to face considerable socioeconomic challenges, however, the development of powerful interventions such as the National Development Plan and the New Growth Path provide a strong blueprint for tackling these issues.
The South African Government continues to focus on creating an enabling environment to facilitate investment, job creation and growth.
5. Human Rights
Human rights in South Africa are protected under its 1996 constitution, which has been hailed as one of the most progressive in the world as it also guarantees economic, social and cultural rights. The country has a strong commitment to human rights and has statutory oversight bodies such as the South African Human Rights Commission which protects the rights guaranteed under the Constitution.
South Africa is signatory to various international human rights instruments including the Universal Declaration of Human Rights; African Charter on Human and Peoples’ Rights; the International Covenant on Economic, Social and Cultural Rights; and the UN declaration on sexual orientation and gender identity.
Despite South Africa’s strong constitutional protections for human rights and its relative success at providing basic services, the government continues to struggle to meet demands for economic and social rights. Issues such as unemployment, corruption, and threats to freedom of expression remain a concern for many citizens. Excessive force by police is a persistent problem as well as concerns about the treatment of migrants, refugees, and asylum seekers, and resultant xenophobia violence. South Africa continues to play an important but inconsistent role in advancing the rights of lesbian, gay, bisexual and transgender people.
6. Bribery and Corruption
Corruption in South Africa includes the private use of public resources, bribery and improper favouritism. Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
South Africa is a signatory to the OECD Anti-Bribery Convention. It should be noted that UK bribery legislation also applies to UK registered companies and UK nationals committing acts of bribery wholly outside the UK.
In a report released by a leading South African legal firm, the country has made some inroads in addressing loopholes, however, there has been an upsurge of bribery incidents. This could be attributed to an increase in general awareness among organisations, with over 90% having a policy prohibiting bribery and 52% having an anti-bribery compliance programme in place. Two forms of corruption are particularly prevalent in South Africa:
Tenderpreneur is a term that describes individuals who enrich themselves through corrupting the awarding of government tender contracts, mostly based on personal connections and corrupt relationships - although outright bribery might also take place - and sometimes involving an elected or politically appointed official (or his or her family members) holding simultaneous business interests. This is often accompanied by overcharging and shoddy workmanship.
8. BEE Fronting
BEE-fronting is an abuse of the rules governing Black Economic Empowerment (BEE), where qualifying persons are given a seat on the Board of Directors of a company while having no decision-making power in the company, in order to qualify the company for government contracts in terms of BEE.
Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in South Africa.
Read the information provided on our Bribery and corruption page.
9. Terrorism Threat
There is an underlying threat from terrorism. Attacks, although unlikely, could be indiscriminate, including in places frequented by expatriates and foreign travellers.
10. Protective Security Advice
The Centre for the Protection of National Infrastructure also provides protective security advice to businesses.
South Africa has a high level of crime and visitors should be vigilant about personal security and when driving around the country. Please consult FCO travel advice for up-to-date information about the situation. Visitors to South Africa should be diligent about protecting digital data. Spyware, phishing and malicious software tools are common. One example of this is to send authentic-looking emails to potential victims. The emails appear to have been sent from a trusted institution such as a bank, requesting recipients to divulge personal information. Once criminals have these details they are able to steal money from the victims’ bank accounts. Diligence coupled with firewalls or spyware removal tools are recommended.
11. Intellectual Property
IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, they you should consider registering your IP rights in your export markets. In 2008, South Africa enacted the IPR Intellectual Property Right for Publicly Financed Research and Development Act. The law clarifies obligations related to the ownership of intellectual property rights in the country and applies to aesthetic and functional designs, marks related to patentable inventions and copyright. Further information can be viewed at the South African Department of Trade & Industry’s website.
There are four Acts in South Africa that govern the country’s Intellectual Property Laws. Generally, the most widely applied IP law is that of copyright. The other three are for patents, trademarks and registered designs. Read the information provided on our Intellectual Property page.
12. Organised Crime
Read the information provided on our Organised crime page.
Contact the UKTI team in South Africa for more information.