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South Africa: Market Profile

Picture: South Africa factsheet
Picture: South Africa factsheet

1. Overview

South Africa has made considerable strides toward improving the wellbeing of its citizens since its transition to democracy in the mid-1990s, but progress is slowing. The country remains a dual economy with one of the highest inequality rates in the world, perpetuating both inequality and exclusion. The current administration is acutely aware of the immense challenges it needs to overcome to accelerate progress and build a more inclusive society. Its vision and the priorities it is making to address them are outlined in the 2030 National Development Plan, which comprises the two main strategic goals of eliminating poverty and reducing inequality from 0.69 to 0.60 by 2030.

Source: World Bank

2. Major Economic/Political Events and Upcoming Elections

June 2015
Government receives unwelcome international attention over allegations of bribery to disgraced international footballing body FIFA to secure 2010 World Cup, and allowing Sudanese President Omar al-Bashir to visit despite International Criminal Court arrest warrant over genocide and war-crimes charges.

March 2016
Supreme Court rules President Zuma violated the constitution for not repaying public money used to improve his private residence.

April 2017
President Zuma dismisses widely-respected Finance Minister Pravin Gordhan, leading to the country's credit rating being cut to junk status.

February 2018
President Zuma resigns under pressure from the governing ANC over corruption charges, which chooses veteran trade unionist and businessman Cyril Ramaphosa as his successor.

Source: BBC country profile, Human Rights Watch

3. Major Economic Indicators

Graph: South Africa real GDP and inflation
Graph: South Africa real GDP and inflation
Graph: South Africa GDP by sector (2016)
Graph: South Africa GDP by sector (2016)
Graph: South Africa unemployment rate
Graph: South Africa unemployment rate
Graph: South Africa current account balance
Graph: South Africa current account balance

Note: (e) estimate, (f) forecast
Source: IMF, World Bank

4. External Trade

4.1 Merchandise Trade

Graph: South Africa merchandise trade
Graph: South Africa merchandise trade
Graph: South Africa major export commodities (2016)
Graph: South Africa major export commodities (2016)
Graph: South Africa major export markets (2016)
Graph: South Africa major export markets (2016)
Graph: South Africa major import commodities (2016)
Graph: South Africa major import commodities (2016)
Graph: South Africa major import markets (2016)
Graph: South Africa major import markets (2016)

Source: WTO, World Bank WITS database

4.2 Trade in Services

Graph: South Africa trade in services
Graph: South Africa trade in services

5. Trade Policies

  • South Africa is a member of the World Trade Organisation (WTO). Imports originated from other WTO members, including Hong Kong and the Chinese mainland, are subject to the country's most-favoured-nation (MFN) tariff rates. In addition to import tariffs, most goods are subject to a value-added tax (VAT), where the standard rate is currently set at 14%. However, VAT on goods imported for use in manufacturing or resale by registered traders can be claimed as an input tax reduction.
  • South Africa may initiate anti-dumping or countervailing investigation and impose duties when unfair trade allegations are substantiated. A number of China-origin products, such as wheelbarrow, are currently subject to anti-dumping duties when imported into South Africa. However, there are no anti-dumping measures against Hong Kong products at present.
  • Furthermore, non-tariff barriers are extensive and specifically importers to the country will face some of the highest time and cost burdens for border and documentary compliance in the Southern African region. The US Department 2015 Annual Report on Foreign Trade Barriers has cited issues such as technical standards, customs valuation above invoice prices, anti-dumping measures, inefficient bureaucracy and excessive regulation as being significant barriers to trading with South Africa.
  • Payments of import duties and VAT can be deferred if the goods are put in bonded warehouses. The South African government also relaxed some of the import taxation rules such as removing the requirement for a taxpayer to have a tax invoice prior to claiming an input tax credit.

    Most goods can be imported into South Africa without a permit, except for certain goods like foodstuffs, petroleum products, chemicals, second-hand goods, finished machinery and gold. Import permits are usually issued by the Department of Trade and Industry, and are used mainly to collect information rather than to limit trade.

Source: WTO

6. Trade Agreement

6.1 Trade Updates

  • Given that South Africa has had an almost constant trade deficit since 2012, and is trying to stimulate local business activity and job creation, the country has a relatively protectionist trade regime. This makes South Africa a somewhat difficult import market to penetrate for international players from both a tariff and non-tariff barrier perspective. This is demonstrated by the fact that South Africa, at 3.9%, has the fifth highest average applied import tariff rate out of 13 Southern African states.
  • South Africa's protectionist trade regime has resulted in the country being involved in trade disputes with key export partners, such as the US and the EU, that have at some point in time put these critical relationships in jeopardy. In trying to protect the local chicken industry from lower-cost US and EU chicken parts product exports, South African has imposed anti-dumping duties on both US and EU chicken imports to the country.
  • In December 2016, the South African Department of Trade and Industry imposed a 13.9% import tariff on all chicken imports from EU countries, on the grounds that these lower cost imports constituted dumping and were resulting in significant domestic job losses. The EU has disputed that these lower cost imports constitute dumping and the resolution of the trade dispute is ongoing within legal mechanisms provided for in the EU-SADC EPA.
  • In March 2017, the EU issued a statement denying it was 'dumping' its chicken imports in South African markets and supported its case by noting that aggregate imports of EU chicken bone-in imports to South Africa in 2016 did not exceed 200,000 tonnes, which represented less than 10% of overall poultry consumption in South Africa.
  • Parliamentary hearings took place in South Africa in 2017, where both sides gave representations. As far as it can be ascertained from news reports, the International Trade Administration Commission (ITAC) is still investigating the matter. In August 2017, the International Poultry Council called South Africa 'the most protectionist country in the world when it comes to chicken'.
  • In 2016, an estimated total 26% of all of South Africa's exports went to the EU. This highlights the importance of the EU as a trading partner, as well as the finalisation of the EU-SADC Economic Partnership Agreement (EPA). On June 10 2016, the EU-SADC EPA was signed, with the SADC members of Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland all party to the agreement. This grants improved market access to EU markets for South Africa (in addition to benefits granted under the Trade, Development and Cooperation Agreement between the EU and South Africa). This improved access to EU markets includes better trading terms for the agriculture and fishery sectors in particular.

6.2 Multinational Trade Agreements


  1. EU-SADC EPA and the EU - South Africa Trade, Development and Co-operational Agreement - On June 10 2016, the EU-SADC EPA was signed, with  SADC members Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland all party to the agreement.This grants improved market access to EU markets for South Africa (in addition to the benefits granted under the Trade, Development and Cooperation Agreement between the EU and South Africa).
  2. Southern African Customs Union (SACU) - South Africa, Botswana, Lesotho, Namibia and Swaziland. Duty-free movement of goods with a common external tariff on goods entering any of the countries from outside the SACU.
    Has greatly enhanced trade flows between these countries. Namibia and Botswana are two of South Africa's largest exporting partners.

  3. Southern African Development Community (SADC) FTA (Between 12 SADC Member States) - 85% duty-free trade achieved in 2008.

  4. EFTA-SACU Free Trade Agreement (FTA) - Tariff reductions on selected goods. Tariff reductions on selected goods.

  5. Africa Growth and Opportunity Act (AGOA) - The US is South Africa's second largest exporting partner. Granted by the US to 39 SSA countries (South Africa included). Preferential access to the US market for many South African exports is granted through lower tariffs or no tariffs on some products. Duty-free access to the US market under the combined AGOA/GSP programme stands at approximately 7,000 product tariff lines.

  6. The Preferential Trade Agreement (PTA) between the South African Customs Union (SACU) and the Common Market of the South (Mercosur) - In October 2016 that the Preferential Trade Agreement (PTA) between the South African Customs Union (SACU) and the Common Market of the South (Mercosur) had been entered into force.

    Mercosur is a full customs union and trading bloc consisting of Argentina, Brazil, Paraguay and Uruguay. This PTA will offer reciprocal preferential tariff rates on around 1,000 product lines ranging from 10 - 100%.

    This agreement is very new at present; currently, the Latin American region only accounts for around 1.1% of South Africa's export revenues and South Africa only imports around 3.5% of its total import products from Latin America as a region.

  7. Preferential Trade Agreement between SACU and India-Given India's rising prominence as a global player on account of its rapid economic growth, exceptionally large population and fact that it is highly reliant on coal-fired power (which accounted for almost 70% of total electricity generation in 2017), India remains a highly important export market for South Africa.

    Additionally, in 2016 (latest available data), India was South Africa’s ninth largest export market and fourth largest importing partner. Therefore a reduction in tariffs would greatly enhance bilateral trade flows.

Under Negotiation

  1. Tripartite Free Trade Agreement (links Common Market for Eastern and Southern Africa - COMESA, the South African Development Community - SADC and the East African Community - EAC). While most of South Africa's main African trading partners are already within the SADC area, reducing tariffs between South Africa and other African countries will undoubtedly increase trade flows between South Africa and the rest of the continent. South Africa needs to diversify its main export base in order to reduce its exposure to shifts in external demand from its core export base, which mostly consists of China and other SACU-member states.

Source: Trade Policy Review

7. Investment Policy

7.1 Foreign Direct Investment

Graph: South Africa FDI stock
Graph: South Africa FDI stock
Graph: South Africa FDI flow
Graph: South Africa FDI flow

7.2 Foreign Direct Investment Policy

  1. Foreign investors face an array of barriers to investing in South Africa. These include: the vast amount of uncertainty for the protection of foreign investor property rights which stems from various pieces of legislation proposed in 2016, policy and regulatory uncertainty which has caused significant foreign investor concern in sectors such as renewable energy and tourism, heightened transformation policies for the mining sector, the political infighting between the former President Zuma and the National Treasury throughout over the past three years, various corruption scandals and excessive regulatory compliance requirements in relation to socio-economic and environmental impact reporting.

  2. One of the most pertinent barriers is the current uncertainty which surrounds the specific regime governing FDI into South Africa. After apartheid ended in the early 1990s, South Africa entered into Bilateral Investment Treaties (BITs) with many foreign countries; these governed the foreign investment regime for investors from those countries in South Africa (in terms of offering guarantees in the event of expropriation and recourse to certain dispute resolution mechanisms). However, in 2013 South Africa unilaterally cancelled many of its BITs or expressed that the BITs would not be renewed (mainly with EU members) in order to make changes to the way in which those protections are ensured, while maintaining its right to implement policies to address the country's social and economic requirements and to redress the injustices of the past through its affirmative action policies.

  3. This has resulted in the signing into law of the Protection of Investment Act of 2015 (though no official operation date has yet been announced), which has significantly altered the protection which foreign investors in South Africa will receive in terms of compensation if their property is expropriated by the South African government. It has also changed the process of settling of legal disputes between foreign investors and the South African government.

  4. Under the old BITs, foreign investors were guaranteed to be compensated at 'fair market value' if their property was expropriated, and had the first right of recourse to an international tribunal if there was a dispute concerning their foreign investment. Under this new legislation, foreign investors are on the same level in terms of protection as domestic investors, and if their property is expropriated they are due to be compensated at a value which is considered a 'fair and equitable' value by the South African government. In terms of dispute settlement, the foreign investor must exhaust all domestic remedies before they are entitled to take the matter to an international tribunal. Protection under this legislation for FDI is therefore considerably less than under the old BITs (which do however, remain in force until this legislation is given a promulgation date).

  5. The changes made by the Protection of Investment Act of 2015 mean that the provisions of the new Expropriation Bill, which was approved by the South African Parliament on February 25 2016 but has yet to be signed into law by the former President Zuma, will apply directly to foreign investors. These provisions detail how the South African government can now acquire any property it deems 'in the public interest' without the property owner's consent, by paying compensation deemed 'fair and equitable' by a South African government adjudicator. The definition of what constitutes 'property' is very wide, and the risk exists that the compensation awarded will be disproportionate to the actual market value of the property.

  6. The third piece of legislation which is relevant is the Regulation of Land Holdings bill, which the former President Zuma announced on February 18 2016. The passing of this bill would mean that foreigners would not be allowed to own agricultural land and would only be able to lease it. This would be highly detrimental to foreign investment within the agricultural sector. The bill applies to agricultural land ownership, with three key industries targeted thus far: game farms, renewable energy and forestry. Residential property is not affected. Should it pass constitutional muster, it will significantly raise business costs, given that leasing land over a long period of time amounts to a higher cost than the purchasing a parcel of land. Businesses will also be wary of operating without the long-term security necessary to gain return on investment.

Sources: The International Trade Administration (ITA), U.S. Department of Commerce

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Industrial Development Zones (IDZs), located at Dube Trade Port IDZ - Durban, Coega IDZ; - Port Elizabeth, East London IDZ, Richard's Bay and Saldanha Bay IDZIn 2000, the South African government initiated the Industrial Development Zones (IDZs) programme, which is part of a broader national effort to promote Special Economic Zones, including free ports, free trade zones, IDZs, and sector development zones. Various tax incentives are on offer which differs between the various SEZs.

Source: Government sources

8. Taxation – 2017

  • Value added tax: 18%
  • Corporate income tax: 28%

Source: Government websites, BMI

8.1 Important Updates to Taxation Information

  • Corporate tax is residence-based in the country, and companies are classed as residents if they have their management headquarters in South Africa or are incorporated there. Those companies classified as residents are then taxed on their global incomes. However non-resident companies are not taxed on their non-South African incomes. Dividends paid within a group of companies (with 75% holding) are exempt.
  • There are targeted tax breaks available under a scheme is overseen by the Department of Trade and Industry (DTI). Seeking to promote new business and encourage trade, the tax breaks of 50% or 100% are available for certain approved investments if they are managed through the Strategic Industrial Project (SIP) programme of the DTI. 

8.2 Business Taxes

Type of TaxTax Rate and Base
Corporate Tax
Resident Companies

A flat corporate tax rate of 28% applies to all companies and close corporations, with the exception of companies which mine for gold or long-term insurance companies.

Companies which mine gold and long-term insurance companies pay special rates determined by industry-specific scales.
Non-Resident Companies

Branches of foreign companies operating in South Africa are taxed at a flat rate of 28% and are not liable for dividends tax or any branch's repatriation tax on profits.

They are only taxed on their SA-sourced income.
Capital Gains Tax
Effective rate: 22.4%.
Dividends Tax
A dividends tax of 20% is payable, on all dividends declared and paid by resident companies and non-resident companies in relation to shares listed on the JSE and paid to SA residents. This tax, however, is not payable if the beneficial owner of the dividend is an SA resident company, SA retirement fund, or other prescribed exempt person.
Transfer Tax
Transfer duty is levied on the acquisition of fixed property with a value exceeding ZAR750,000. The rate of the duty on property with a value exceeding ZAR750,000 depends on the purchase price of the property; the maximum rate is 11%, which applies to property with a value exceeding ZAR2.25 million. Transfer duty on property sales above ZAR10 million was raised from 11% to 13% from March 1 2016.
VAT/GST (standard)A standard rate of 15% applies as of April 1 2018.

Source: Government websites, BMI

9. Foreign Worker Requirements

9.1 Localisation Requirements

Hiring procedures in South Africa are heavily regulated in relation to domestic and foreign workers. In order to address the historical injustices of South Africa's apartheid past, various affirmative action policies have been implemented since 1994 to promote the employment of South Africa's black population.

These resulted in the passing of the Broad-Based Black Economic Empowerment (BBBEE) Act of 2003, for which new codes were introduced in 2015. BBBEE policies are aimed at increasing the participation of previously disadvantaged people in the formal economy in relation to ownership and employee hiring. Companies may undergo a BBBEE audit and obtain a BBBEE score in terms of these codes.

While BBBEE code compliance is voluntary for private companies, these codes are legally binding on state institutions and state-owned enterprises, which are also obliged to use the codes to measure BBBEE compliance when choosing suppliers, granting licences or making concessions.

Therefore, when companies are participating in a public procurement process, the higher their BBBEE rating, the higher their competitive edge will be in the tendering process.

9.2 Obtaining Foreign Worker Permits for Skilled Workers

In 2015 South Africa enacted new immigration laws which have made it more difficult for companies to hire foreign workers in certain circumstances.

There are two types of visas that apply: the critical skills work visa and the general work permit. The South African government has acknowledged that in order to advance national interest, it needs to be easier for foreign workers with critical skills required for South Africa's economy to be granted permits to work in the country. Critical skills visas apply to a wide range of professionals in fields such as engineering, construction, agriculture and financial services.

This visa can be applied for without a formal job offer, and takes three months with minimal paper work. However, for companies wanting to employ foreign workers who do not fall within a critical skill set, the application procedure is particularly onerous. Prior to even submitting an application for a general work visa (which can only be applied for from the applicant's country of origin), the prospective employer is required to apply to South Africa's Department of Labour for a certificate which confirms, among many things, that despite having conducted a diligent search, the prospective employer has been unable to find a suitable candidate with qualifications or skills and experience equivalent to those of the applicant.

Once this has been granted the visa is supposed takes two to three months to issue, but delays are regular. It is therefore a highly extensive and costly process required for employers and potential foreign employees to obtain this type of visa.

9.3 Visa/Travel Restrictions

Citizens of most North and South American states, European states and African states are not required to obtain a visa for a visit lasting up to 90 days to South Africa.

Citizens of most Asian countries are not required to obtain a visa for a visit lasting up to 30 days. Chinese and Russian citizens require visas. Changes to South Africa's visa regime which came in to force in 2014, included requirements that persons applying for a South African tourism visa must submit biometric data to the South African embassy they applied at, which means all applications had to be made in person.

Furthermore, any adults travelling with minor children had to have an unabridged birth certificate for that minor child and proof of consent from both of the child's parents for that child to travel.

These have been amended that foreigners who have applied for a South African visa can now do this via postal application or have a travel agency do it for them, and that they are no longer required to carry an unabridged birth certificate for their minor children.

9.4 Religious/Cultural Barriers

South African is a secular state with a Constitution and various labour laws which provide for gender equality. Therefore while the country has low female workforce participation rates, there are no specific cultural or religious issues which will act as a barrier to the employment of foreign females in South Africa.

However, given the outbreaks of xenophobic violence in South Africa, it must be noted that the hiring of foreign workers can be very contentious in South Africa given the high unemployment rate.

We note this is most likely to be an issue in low to semi-skilled positions (for example construction or factory work), as these are the types of positions in the country for which there is already an oversupply of local workers in the labour market. These types of positions are therefore in high demand.

10. Risks

10.1 Sovereign Credit Ratings

Rating (Outlook)Rating Date
Standard & Poor's BB+ 24/11/2017
Fitch BB+ 23/11/2017

Source: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators

World Ranking
Ease of Doing Business Index
Ease of Paying Taxes Index
Logistics Performance Index
Corruption Perception Index
IMD World Competitiveness52/6353/63N/A

Source: World Bank, IMD, Transparency International

10.3 BMI Risk Indices

World ranking
Economic Risk Index Rank70/202
Short-Term Economic Risk Score50
Long-Term Economic Risk Score 58.6 57.5 58.1
Political Risk Index Rank108/202
Short-Term Political Risk Score 61 5965.4
Long-Term Political Risk Score 63.4 61.3 61.3
Operational Risk Index Rank86/201
Operational Risk Score 53.3 52.751.7

Source: BMI Research

10.4 BMI Risk Summary

Given South Africa's close links with the global economy, the country remains heavily exposed to the external environment. South Africa's current account deficit constitutes an ongoing liability, as a decline in capital flows could make the financing of the shortfall a challenge over the medium term. Meanwhile, a combination of low commodity prices and a challenging operating environment will keep growth tepid and a high level of guarantees to state-owned enterprises (SOEs) will continue to act as a headwind to fiscal consolidation. That said, the threat of a major economic crisis will remain limited.

South Africa remains one of the Sub-Saharan African (SSA) outperformers in terms of the overall operating risks which businesses will face. The country's main strengths come from the Trade and Investment and Logistics Risks pillars, where the country receives it highest scores. Factors such as the sheer size of the country's total trade turnover and total inward FDI stock demonstrate that it is clearly one of the region's economic powerhouses. This is further supported by its highly developed and stable banking sector and financial markets, comparatively efficient taxation system and independent judiciary. South Africa's transport infrastructure is also one of the most developed in the SSA region, which lowers overall operating costs. The country's performance is less competitive on the labour and crime and security fronts, with high labour costs, risks of widespread strike action and very high crime levels being major deterrents for investors. Additionally, South Africa's operating profile has come under significant threat from rising levels of corruption and fiscal slippages over the past decade. Since President Ramaphosa’s appointment in February 2018, business-friendly rhetoric and a number of personnel changes have boosted investor sentiment.

Graph: South Africa short term political risk index
Graph: South Africa short term political risk index
Graph: South Africa long term political risk index
Graph: South Africa long term political risk index
Graph: South Africa short term economic risk index
Graph: South Africa short term economic risk index
Graph: South Africa long term economic risk index
Graph: South Africa long term economic risk index

10.5 BMI Operational Risk Index

Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
South Africa Score51.7
 49.8 57.455.8
Southern Africa Average 42 41


 41 44
Southern Africa Position (out of 13) 3 3 2 2 6
SSA Average 34.6 38.3 35.3 32.5 32.3
SSA Position (out of 48) 3 6 2 2 10
Global Average 49.8 49.8 50.0 49.3 49.9
Global Position (out of 201) 86 104 69 67115

100 = Lowest risk; 0 = Highest risk
Source: BMI Operational Risk Index

Graph: South Africa vs global and regional averages
Graph: South Africa vs global and regional averages
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Secruity Risk Index
South Africa51.749.857.455.844.0
Regional Averages
Emerging Markets Averages46.848.047.545.846.1
Global Markets Averages49.849.850.049.349.9

Note: Higher score = Lower risk
Source: BMI Operational Risk Index

11. Hong Kong Connection

11.1 Hong Kong’s Trade with South Africa

Growth rate(%)
Number of South African residents visiting Hong Kong66,456
Number of South Africans residents in Hong KongN/A

Source: Hong Kong Tourism Board, Hong Kong Immigration Department

11.2 Commercial Presence in Hong Kong

Growth rate(%)
Number of South African companies in Hong Kong 15N/A
- Regional headquarters 0
- Regional offices 5
- Local offices 10

11.3 Treaties and agreements between Hong Kong and South Africia

Hong Kong and South Africa concluded Comprehensive Double Taxation Agreements in 2015, these measures will be effective from 2016/2017 tax year. This the first income tax treaty Hong Kong has with a jurisdiction in Africa.

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

South African Chamber of Commerce of Hong Kong
Address: 18/F, Wing Hing Commercial Building, 16 Sutherland Street, Sheung Wan, Hong Kong
Email: president@sacchk.com
Tel: (852) 2799 2332

South African Consulate General in Hong Kong
Address: Room 1906-08, 19/F, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong
General Enquiries: info@sacg.hk
Consular Section: consular@sacg.hk
Trade and Economics: satrade@dtihk.org.hk
Consular Hours: 08:30 - 12:30
Office Hours: 08:30 - 17:15
Consul General: Ms P. P. Gwala
Tel: (852) 3926 4300
Fax: (852) 2890 1975

Source: www.embassypages.com

11.5 Visa Requirements for Hong Kong Residents

People travelling on a Hong Kong passport do not need a visa to visit South Africa for 30 days or less.

Source: Visa on Demand

Content provided by Picture: Fitch Solutions – BMI Research