South Africa: Rise of the Rainbow Nation

The usual gripe is, inevitably, about wages, and can usually be solved by sitting around a table. But most workers belong to a union and companies would do well to accommodate demands, within reason.

“You do have a lot of strikes here, which can create problems with companies looking to set up in South Africa,?” says Hein Stroebel, founder of Executive Immigration, a consultancy based in the Western Cape town of George, that advises foreign companies setting up shop across the nation.

Then there’s the issue of work permits. South Africa allows foreign specialists (say, chemical engineers, senior managers, derivatives bankers) to work there for up to three years. After that, the firm should either transfer the job to a local citizen or apply for an intra-company work transfer permit” to retain the foreign worker. These are often hard to get.

Another headache is provided by the Black Economic Empowerment (BEE) scheme. This is honourable in intent, a way of boosting the percentage of black African workers employed at every level of the economy. Major foreign employers (most smaller companies are exempt) should read the BEE rules line by line.

Big companies will typically need to hire three South African workers for every foreign employee. In most cases, of that majority, half will need to be black, with the other half a mix of white workers and Chinese and Indian South Africans.

And one more thing. South African rules demand that major foreign corporates working here relinquish a stake (it can vary from five to 50 per cent) of the local holding company, which can be held by either a BEE-related organisation, or a powerful member of the BEE community. Again, these rules are complex, so do your homework!

But get your head wrapped around these issues and South Africa is a great place to do business. Caroline Dean, head of marketing at UKTI in Johannesburg, notes the country’s emerging middle class with expendable cash?, and its position as the ?leading market in the region?.

The Rainbow Nation is an increasingly powerful force in shipbuilding, banking, construction, engineering, and commodity extraction and refining. Its tourism industry is on a high, aided by the successful hosting of the 2010 football World Cup. It’s an outlandishly pleasant place to live and do business.

The UKTI’s Dean also highlights South Africa’s ?good exchange rate, good infrastructure, low labour costs?, as well as the climate, excellent sporting facilities, food and drink, medical facilities, and generally high quality of life. 

Luke Barlow, a taxation director working at global auditor Deloitte in the Western Cape, says: ?Given the global attraction of a city like Cape Town, it is relatively easy to persuade key employees to relocate. Cape Town and other cities in South Africa also have a highly educated workforce, and the country has a very sophisticated business infrastructure.

It is also, broadly speaking, a straightforward place to do business no small fact in Africa. South Africa placed 34th in the World Bank’s Ease of Doing Business Index 2011, the highest-ranked African nation (neighbouring Botswana was next, in 52nd place), thanks to performing well in two particular metrics: ease of getting credit, and the level of state protection for investors.

The nation’s global outlook is also to be applauded. The newly introduced “headquarter company regime , for example, grants an array of tax concessions to foreign-owned, South Africa-based firms notably the relaxation of an array of transfer pricing rules, and exemption from foreign exchange regulations.

Of course, doing business anywhere is only easy if you have the right product at the right time and if you are willing to do your homework. South African Hilary Alexander moved back to Cape Town in 2010 with her company, marketing consultancy Top Copy Communications. She missed the lifestyle and loves after a decade spent in London the low overheads and wage costs.

But she advises newcomers to do their local research: “Make the time to know your industry. Most industries are small worlds here, so make contacts, find the networks, and work out who the movers-and-shakers are you?ll be able to do that just by looking at Twitter.

And read contracts, adds Alexander. After years in London, where she got used to business being done on the basis of trust (Approach client, send invoice, invoice paid ), she ran into a few nasty surprises back in her homeland. Make sure everyone has read the contract, and that they understand what is being said, to avoid having to untangle any nasty knots later.

Viewed from any angle, South Africa is an open and genuinely global economy. It is the latest and the first African Bric, and is being courted by the world’s leading trading nations. It isn’t always the easiest place to do business, but understand the rules, follow them, and you?ll be fine. And when you’ve done that, go surfing, eat fabulous food and drink world-class wines. Could business life be any better?

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