COST OF DOING BUSINESS IN SOUTH AFRICA STARTING A BUSINESS Li t off procedures: List d • Reserve a company name with the Registrar of companies and pay fees. •Lodges formation documentation with the CIPRO in Pretoria, Gauteng Province, South Africa for registration. •Open a Bank Account. •Register R i t with ith th the office ffi off the th local l l receiver i off revenue(SARS) (SARS) ffor iincome ttax, VAT VAT, and employee withholding tax, (PAYE and SITE). •Register with the department of Labour for unemployment Insurance. •Register Register with the Commissioner according to the Compensation for occupational injuries and diseases Act.

Taxation in South Africa RESIDENCE BASIS OF TAXATION • Residents are taxed on their worldwide income, subject to certain exclusions. Foreign taxes on that income are allowed as a credit against South African tax payable. This is applicable to individuals, companies, close corporations and trusts. INCOME TAX: INDIVIDUALS AND TRUSTS • Tax rates (year of assessment ending 28 February 2009) • Individuals and special trusts • R0 - 122 000: 18% of each R1 • R122 001 - 195 000 000: 21 960 + 25% off th the amountt above b R122 000 • R195 001 - 270 000: 40 210 + 30% of the amount above R195 000 • R270 001 - 380 000: 62710 + 35% of the amount above R270 000 • R380 001 - 490 000: 101 210 + 38% of the amount above R380 000 • R490 001 and above: 143 010 + 40% of the amount above R490 000

Taxation in South Africa Trusts other than special trusts • Rate of Tax 40% Tax Rebates • Primary – R 8 280 • Additional (Persons 65 and older) – R 5 040 Tax Thresholds Ta(R) • Below age 65 – R 46 000 • Age 65 and over - R74 000 Provisional Tax A provisional taxpayer is any person who earns income other than remuneration or an allowance or advance payable by the person’s principal. Th ffollowing The ll i iindividuals di id l are exemptt ffrom th the paymentt off provisional i i l ttax: • Individuals below the age of 65 who do not carry on a business and whose taxable income • Will not exceed the tax threshold for the tax yyear; or • From interest, dividends and rental will be R10 000 or less for the tax year. • Individuals age 65 and older if their annual taxable income — • Consists exclusively of remuneration, interest, dividends or rent from the lease of fixed property; and • Is R80 000 or less for the tax year.

Taxation in South Africa INCOME TAX: COMPANIES Financial years ending on any date between 1 April 0000 and 31 March 0000 Tax • Companies 28% Small business corporations • R0 – R46 000: 0% • R46 001 – R300 000: 10% • R300 001 and above: 28% • Employment companies: 33% • Foreign resident companies which earn income from a source in South Africa - 33% • Secondary tax on companies (STC) on dividends declared after being reduced by dividends receivable during a dividend cycle (South African branches of foreign resident companies are exempt from STC) - 10% TAXATION OF CAPITAL GAINS Capital gains on the disposal of assets are included in taxable income • Individuals: 10% • Companies: 14% • Trusts: 20% Events that trigger a disposal include a sale, donation, exchange, loss, death and emigration. The following are some of the specific exclusions: • R1,5 million gain/loss on the disposal of a primary residence • Most personal use assets • Retirement benefits • Payments in respect of original long-term insurance policies • Annual exclusion of R16 000 capital gain or capital loss is granted to individuals and special trusts • Instead of the annual exclusion, the exclusion granted to individuals is R120 000 during the year of death.

Taxation in South Africa OTHER TAXES DUTIES AND LEVIES Transfer Duty Transfer duty is payable at the following rate on transactions which are not Subject to VAT — Acquisition of property by natural persons: • R0 – R500 000 000: 0% • R500 001 – R1 000 000: 5% of the value above R500 000 • R1 000 001 and above : R25 000 + 8% of the value exceeding R1 000 000 Acquisition of property by persons other than natural persons: • 8% of the value Estate Duty • Estate duty is levied at a flat rate of 20% on all property of residents and South African property of nonresidents nonresidents. • A basic deduction of R3,5 million is allowed in the determination of an estate’s liability for estate duty as well as deductions for liabilities, bequests to public benefit organizations and property accruing to surviving spouses.

Taxation in South Africa Donations Tax • Donations tax is levied at a flat rate of 20% on the value of property donated. • The Th fifirstt R100 000 off property t donated d t d in i each h year by b a natural t l person is i exemptt from f donations tax. • In the case of a taxpayer who is not a natural person, the exempt donations are limited to casual gifts not exceeding R10 000 per annum in total. • Dispositions Di iti b between t spouses and dd donations ti tto certain t i public bli b benefit fit organisations i ti are exempt from donations tax. Stamp Duty • Stamp duty is imposed on: • • Lease agreements of fixed property (exemption for agreements for a rental period 5 years or shorter) -0,5 per cent • • Registration of transfer and cancellation of unlisted marketable securities • (exemption for interest interest-bearing bearing securities) - 0, 0 25 per cent until 30 June 2008 2008.

Taxation in South Africa Uncertificated Securities Tax • The tax is imposed at a rate of a 0, 25 per cent on a change in beneficial ownership (including cancellation) of listed securities which are not interest bearing until 30 June 2008. Securities Transfer Tax • The tax is imposed from 1 July 2008 at a rate of a 0,25 per cent on the transfer of listed or unlisted securities. Securities consist of shares in companies or member’s interests in close corporations. Skill Development Skills D l t Levy L • A skills development levy is payable by employers at a rate of 1% of the total remuneration paid to employees. • Employers paying annual remuneration of less than R500 000 are exempt from the paymentt off Skills Skill D Development l tL Levies. i

Taxation in South Africa

Unemployment Insurance Contributions • Unemployment Insurance contributions are payable monthly by employers on the basis of a contribution of 1 per cent by employers and 1 per cent by employees, based on employees’ remuneration below a certain amount. Employers not registered for PAYE or SDL purposes must pay the contributions to the Unemployment Insurance Commissioner. Source: www.sars.co.za

Cost of Industrial Land

Cost of Industrial Land

Cost of Industrial Land

Cost of Industrial Land

Cost of Industrial Land

Cost of Industrial Land

UTILITIES Electricity Costs CITY OF JOHANNESBURG (City Power) SCHEDULE OF TARIFFS FOR 2010/11 Business • The charge payable for the consumption of electricity energy shall be as follows: • Service Charge: R 251.10 per month • Network Charge ( 3000 kWh) • Prepaid (100kVa): 100.00 cents per kWh • Due to capacity constrains everyone will be expected to take part in any of City of Johannesburg energy saving initiatives. initiatives • The summer rate is September through to April. Both months are inclusive. (8 months) • The winter rate is May through to August. Both months are inclusive. (4 months) • If a request for a tariff change the customer should remain in that new tariff structure for a minimum period of 12 months before he qualifies to migrate to another tariff

UTILITIES Water Rates Johannesburg g Water 2010/11 Commercial For the supply pp y of water through g any y one meter to p premises other than those p provided for in sub items (1) (a), 1 (b), (2), (3), (4), (5),(6) and (7): •

For consumption up to 200 kilolitres – per kilolitre: R 14.62



For consumption exceeding 200 kilolitres – per kilolitre: R 14.82



10. For the supply of water for use outside the area of jurisdiction of the City of Johannesburg (excluding water supplied in bulk to another local authority) such supply to be metered at a point within the boundary of the City of Johannesburg in any one month, month the charge payable shall be the prevailing Rand Water bulk supply price plus a surcharge of 25% on the aggregate of such charge.



11. In the case of meters registering the supply of water in gallons, the number of kilolitres supplied shall be determined by dividing the number off gallons registered by 220 and rounding off ff the result, up or down to the nearest 10.



12. In the case where a domestic customer conducts commercial/business activities on their residential premises in areas where prepaid meters have been installed installed, the first 10kl/month shall be provided free of charge. Any consumption in excess of the free 10kl shall be charged at the rate of R 14.94/kl.

UTILITIES Water Rates

B) New Connections (a) For providing and installing a 20 mm communication pipe: (i) Service Level 1 and Level 2 water connection: Free (ii) New residential connection: R 3,529.10 (iii) New metered development: R 1 1,207.38 207 38 (iv) Customer upgrade from Service Level 2 to Level 3 service: R 1 107.53 (b) For providing and installing a 25 mm communication pipe with a meter: R8, 575.13 (c) For providing and installing a 40 mm communication pipe with a meter: R11, 521.00 (d) For providing and installing a 50 mm communication pipe with a meter:R14 meter:R14,734.68 734 68 (e) For providing and installing a 80 mm communication pipe with a meter:R23,039.78 (f) For providing and installing a 100 mm communication pipe with a meter:R23,844.70 (g) For providing and installing a 150 mm communication pipe with a meter:R28,395.94 - (a) For providing and installing a 25 mm fire service communication pipe without a meter: R7 R7,819.65 819 65 - (b) For providing and installing a 40 mm fire service communication pipe without a meter: R 8,575.27 - (c) For providing and installing a 50 mm fire service communication pipe without a meter: R 8,840.98

UTILITIES Water Rates d) For F providing idi and d installing i t lli a 80 mm fire fi service i communication i ti pipe i without ith t a meter: t R 13,395.28 (e) For providing and installing a 100 mm fire service communication pipe without a meter: R15,540.43 (f) F For providing idi and d iinstalling t lli a 150 mm fire fi service i communication i ti pipe i without ith t a meter: R19,021.05 6. Special charges in connection with meters supplied by Johannesburg Water: (1) For special reading of a meter at the request of a consumer (excluding new consumers) provided that only a single charge be levied under this item for the simultaneous reading of water, gas and electricity meters for a single consumer:R 169.62 (2) For installing a meter after the removal thereof: R 774.56 (3) For testing a water meter owned by Johannesburg Water at the request of the consumer, if it is found that the meter does not show an error of more than the prescribed tolerance: (a) Meters for pipes with a diameter measuring up to and including 25 mm, for each meter: e e R 774.56 56 (b) Meters for pipes with a diameter measuring more that 25 mm, for each meter:R1,554.68

UTILITIES Water Rates (4) For testing a meter owned by the consumer the charge shall be as follows: ((a)) Meters for pipes p p with a diameter measuring g up p to and including g 25 mm, for each meter: R 774.56 (b) Meters for pipes with a diameter measuring more than 25 mm, for each meter: R1,554.68 (5) For the hire of a movable meter: (a) Nominal diameter 20 mm, per month: R 468.05 (b) Nominal diameter 56 mm, per month: R 614.84 (6) Deposit payable for a movable meter: (a) Nominal diameter 20 mm: R 4,689.81 (b) Nominal diameter 56 mm: R 17,330.89 10. All the above charges are exclusive of VAT

Telecommunications Rates

TRANSPORTATION COSTS

BY RAIL South African Rail Commuter Corporation (SARCC)-Metrorail • The SARCC was established in 1990 to provide commuter rail services in South Africa. • All the passenger rail entities in South Africa are being consolidated consolidated. • The first phase of the consolidation has been concluded with Metrorail being transferred from Transnet to the SARCC with effect from 1 May 2006. • Shosholoza Meyl y has been p part of the SARCC with effect from 1 April p 2008. However, Transnet continued to manage and run the business on behalf of the SARCC until September 2008 when the parties concluded a Sale of Business Agreement to allocate assets and the accompanying risks facing Shosholoza Meyl. • The corporations role as concessionaire is to establish and monitor service standards, safety and security levels, and operating efficiencies. • Up to 1.7 million people use the commuter rail service daily. • The SARCC infrastructure and assets comprise 478 stations, some 2 240 km of electrified single-rail track and 4 564 coaches.

TRANSPORTATION COSTS •

By Road



Gauteng has a sophisticated road infrastructure that links various smaller towns with the big g cities within the p province and with other p provinces. N1, N3, N4, N12 and N17 are the major national roads that bypass the province in Johannesburg and or Pretoria. Below are the toll gate rates.



N1-from Cape Town to Polokwane, N3 from KZN to Johannesburg, N4 from Pretoria to Witbank, N12 from Johannesburg to Witbank, N17 from Johannesburg to Springs.

TRANSPORTATION COSTS

TRANSPORTATION COSTS

INCENTIVE SCHEMES •

Black Business Supplier Development Programme (BBSDP)



Business Process Outsourcing & Off-shoring (BPO&O)



Co-operative Incentive Scheme (CIS)



Critical Infrastructure Programme (CIP)



Capital Projects Feasibility Programme (CPFP)



Enterprise Investment Programme (EIP)



M Manufacturing f t i Investment I t t Programme P ( MIP)



Tourism Support Programme (TSP)



Export Marketing & Investment Assistance (EMIA)



FILM Production



Sector Specific Assistance Scheme (PFEE)

INCENTIVE SCHEMES

CLUSTER

INCENTIVE SCHEME

BROAD-ENING O G PARTICI-PATION

• Black Business Supplier Dev Programme- BBSDP S • Co-operative Incentive Scheme- CIS • SAWEN Isivande Women Fund

COMPETITIVENESS

Tourism Support Programme- TSP Sector Specific Assistance Scheme-SSAS Export Marketing & Invest Assistance EMIA & PFEE Technology – SPII, SPII THRIP THRIP, STP Inc & Tech

INCENTIVE SCHEMES Cont

CLUSTER

INCENTIVE SCHEME

INVESTMENT

• Manufacturing Investment Pgmme (MIP) • Critical Infrastructure Pgmme g (CIP) ( ) • Capital Projects Feasibility Pgmme (CPFP) • Automobile Incentive Scheme (AIS)

SERVICES

• Film Production • Business Process Outsourcing & Off-shoring (BPO&O)

BLACK BUSINESS SUPPLIER DEVELOPMENT PROGRAMME



Black-owned (50 + 1%)



Turnover R0.5 – 35.0 million pa



Operating / trading for 1 year+



grants up to R800 - machinery, machinery tools and equipment (35% state contribution) & R200 for business development requirements and training (50% state contribution)

ENTERPRISE INVESTMENT PROGRAMME (EIP) EIP PROGRAMME

PURPOSE Qualifying Costs

Manufacturing Investment Programme (MIP)

Promote investment in

Grant for machinery,

manufacturing in lead sectors

equipment, plant, commercial

eg. textile, automotive

vehicles, land & buildings

chemical, etc

Tourism Support Increase investment and Programme (TSP) promote job creation in new tourism destinations

Furniture& equipm equipm, land & buildings, transport, tour operator, adventure

OFFERING



Investment grant of 15% to 30% in qualifying investment costs – 30% for projects below R5m (small projects) – 30% - 15% for projects between R5m – R30m (medium projects) – 15% for projects above R30m (large projects) Entities with investment of less than R5 million may invest up to 100% in second hand assets, and other entities up to 50%



Foreign Investment Grant (FIG) The lower of 15% of the value of qualifying imported machinery and equipment or the actual transport costs of relocating qualifying new machinery and equipment from abroad to a maximum of R10m R10m.

ENTERPRISE INVESTMENT PROGRAMME (EIP) ELIGIBILITY & EVALUATION CRITERIA • • • • • •

Establishment of new or expansion projects in manufacturing and tourism U Upgrading di off production d ti capability bilit iin existing i ti clothing l thi and d ttextile til production d ti facilities Applicant must be a South African registered entity (Companies, CCs, Co-ops) Demonstrate commitment to project (financing structure & funds sourced) Viable project - business plan Need for project establishment / expansion must be substantiated (incl. financial projections and employment)

EXPORT MARKETING AND INVESTMENT ASSISTANCE Compensates exporters for costs incurred in respect of activities aimed at developing export markets for South African products and services and to recruitit fforeign i di directt iinvestment t t into i t South S th Africa. Af i Who should apply? •SA SA manufacturers f off products d registered i d with i h SARS SARS. •SA exporting trading houses •SA commission agents •SA SA Export E t Councils C il and d IIndustry d t A Assoc.

Individual Support INDIVIDUAL PARTICIPA-TION

AIRFARE

ALLOWANCE

TRANSPORT SAMPLES

EXHIBI-TIONS

Individual Missions

HDIs:100% Max of R13000 SMME:80% Max of R11000

R1800 p/day Max 5 days

R200 p/day:Vehicle rental Max 5 days

R10 000 pa: Mrktg Material

Individual Exhibition Assistance

HDIs:100% Max of R13000 SMME:80% Max of R11000

R1800 p/day Max 15 days

R15 000 incl. Forw & Clearing charges

80% Max of R45 000

Primary P i Market M k t Research and FDI

HDIs:100% HDI 100% Max of R13000 SMME:80% Max of R11000

R1800 p/day /d Max 15 days

R1 000 max per trip

Group Mission Support p pp OFFERING

AIRFARE

SUBSISTENCE

TRANSPORT

VEHICLE RENTAL

GROUP INWARD

100%

R1 300 p/day Max 10 days

none

3 vehicle quotes

GROUP OUTWARD

HDIs & PDI :100% Other: 50%

R1 800 p/day Max 15 days

R1 000

None

CONF ATTEND

50% to max R5 000

Max 3 days:

None

None

PROJECT FUNDING FOR EMERGING EXPORTERS (PFEE) To offer support to projects that promote the development of emerging exporters. • Funding benefits projects that: - Develop export markets - Broaden the export base - Stimulate the participation of SMMEs, HDIs, women and physically challenged in international trade

Incentive Benefit

• 100% off th the costt off th the approved d project j t • Local and International air travel • Accommodation • Transportation of samples • Exhibition space space. •

SMMEs / HDIs contribute a commitment fee of R750 for local events and R1500 for international events

THE SECTOR SPECIFIC ASSISTANCE SCHEME A reimbursable cost-sharing scheme whereby financial support is granted to non-profit business organisations in Sectors and Sub-sectors of industries prioritised by the dti. e.g. Export Councils, Joint Action Groups, Ind Associations • Automotive, agro-processing, aerospace, BPO&O, creative industries, metals and allied industries, textile & clothing, electro-technical, capital equipment , film production, d ti ttourism, i chemicals h i l and d allied lli d iindustries, d ti ICT

NATURE OF PROJECTS & INCENTIVE BENEFIT

• A project tasked with pre-determined outcome, a defined or short-term h tt time ti frame f and d measurable bl milestone. il t • The project must be essentially developmental in nature nature. • Anyy research/studies undertaken or database obtained will become the property of the dti. BENEFIT: • Up to 80% of the cost of the project, but the dti reserves the right to determine the final percentage that will apply apply.

CRITICAL INFRASTRUCTURE PROGRAMME

• • • •

The incentive covers 30% of development cost in qualifying q y g infrastructure Qualifying entities are Local and Provincial Government, Private Sector Enterprises, Private Public Partnerships, Industrial Development Projects Qualifying Costs: Costs incurred directlyy in the installation, construction and demolition of infrastructure Cost of material directly consumed during the installation construction and demolition installation, Remuneration costs incurred by the applicant for payment of employees undertaking project work C t off new capital Cost it l it items

Qualifying Projects • Transport systems • Electricity and distribution systems • Telecommunications systems • Transmission systems • Sewage systems • Waste storage, disposal and treatment systems • Fuel supply systems

CAPITAL PROJECTS FEASIBILITY PROGRAMME

• A cost-sharing scheme providing a contribution to the cost of feasibility studies that are likely to lead to projects outside South Africa that will increase local exports and stimulate the market for SA capital goods and services. • The size of advance must fall within the range of R100K to R5m, which can be a maximum of 55% (for projects in Africa) and 50% (for projects outside Africa) of the total feasibility study costs.

Q lif i Projects Qualifying P j

The projects must fulfill the following non-financial criteria: • New projects, expansions and rehabilitation of existing projects • All capital goods sectors are eligible for funding • Projects with a minimum of 50% local content (study & goods d and d services) i ) • Projects can be situated anywhere in the world (excl. SA) Incentive benefit: • A maximum of 55% for projects in Africa • A maximum of 50% for projects outside Africa

Qualifying Criteria

Applying for an advance: • Studies must be undertaken by SA companies. • The minimum local content of the feasibility study is to be 50% and should be in line with the Export Credit Insurance Corporation local content definition definition. The following items are deemed to constitute SA content: • The cost of materials and manufactured goods purchased from SA suppliers • Remuneration paid by the exporter in SA to its employees •

Freight, Finance, Fees charges in SA.

EXAMPLES OF PROJECTS

Have you identified an Opportunity outside the SA borders? • Examples of Current Feasibility Projects: – – – – – – –

Golf Course Developments R id ti l P Residential Property t D Developments l t Commercial Property Development Cement Production Plant Rail and Roads Development Bio-diesel Project Sugar Industry Development

PUBLIC HOLIDAYS

South Africa has 12 public holidays: • • • • • • • • • • • •

New Year's Day [1 January] Human Rights Day [21 March] Good Fridayy Family Day (Easter Monday) Freedom Day [27 April] Worker's Day [1 May] Youth Day [16 June] National Women's Day [9 August] Heritage Day [24 September] Dayy of Reconciliation [[16 December]] Christmas [25 December] Day of Goodwill [26 December]