Starting a Business as a foreigner in South Africa

Starting a Business as a foreigner in South Africa
Starting a Business as a foreigner in South Africa

Starting a business as a foreigner in South Africa can be an arduous task without enlisting professional help.

There are a number of ‘hoops’ that must be circumvented and the process can be time consuming and a distraction from the all important task of establishing your business.

Where to begin with starting a business as a foreigner in South Africa

Importantly and before you commit time and money, you should have an assessment of your circumstances and requirements carried out. Assessments, as with ourselves, should be free of charge and carry no obligation.

Very often, and understandably, people source information on the obvious, in this case the business visa. There is however a real alternative that should be considered, if for no other reason to ensure you have made an informed decision.

Below we look at the two routes for starting a business as a foreigner in South Africa and discuss the merits and pitfalls of each.

The different visas for starting a business as a foreigner in South Africa

In order to be able to set up, invest into and work within a business in South Africa as an immigrant there are two types of visa you can apply for:

  1. Business visa – Traditionally, for anyone starting a business as a foreigner in South Africa this category has been the most recommended.
  2. Independent Financial Permit – A very underused permit category that allows for the holder to commence a business, but also offers a host of other benefits over the business visa route.

Who can apply?

Business visas are for those individuals seeking to invest in a business, or an existing start up, and who will be working within the business.

The Independent Financial skills permit is a permit that is not restricted to a certain economic activity. As such it allows the holder total freedom to invest into a business, whether they will be working in it or not. There is also no obligation to invest, or start a business. In short the holder of the Independent permit is free to make their own decision as to whether they run a business, work or even retire.

Must there be local ownership?

No a business can be owned and run with 100% foreign ownership. However for those with a local partner this is also fine. This applies to both the business visa and independent financially independent.

Can I buy into or outright an existing business?

Yes, which ever permit or visa category you select you can do either or indeed set up one from scratch.

Is there a minimum shareholding a foreigner must own?

As a business visa holder you will need to typically own in excess of 25% of the business. A Financially Independent permit holder has no restrictions.

Is there a minimum amount of investment required?

For business visa holders you need to invest ZAR 5 million into the business unless you qualify for a waiver. You can read more about the minimum investment amount here.

There is no requirement for the holder of the Financially Independent permit to invest any set amount into as business, they are free to invest as little or as much as they desire. Note however, to successfully apply for a Financially Independent permit, you need to prove a net worth of the equivalent of ZAR12,000,000 (12 million) but these funds do not need to be brought into South Africa.

Can my partner or children work in the business?

Partners of the business visa holder can work in the business but not for remuneration. Children would not be able to work in the business unless a work visa was granted in their own right. If you have children still in education years a study visa would be required.

Partners of Independent Financial permit holders will need to secure residency in their own right which would involve a spousal or life partner visa application. Dependent children would require a study visa.

Must I employ South Africans?

There is a requirement that employees are at least 60% South Africans (citizens or permanent residency holders). These must be employed on a permanent basis in the business if you hold a business visa. There are no such requirements for the Independent Financial permit holder.

Can I apply for permanent residency?

Starting a business as a foreigner in South Africa, via the business visa route, would first mean obtaining temporary residency. Once in receipt of this, permanent residency can be applied for.

Independent Financial permit applicants may only apply for permanent residency. This of course has its attractions but the disadvantage can be that permanent residency takes longer for the Department to process.

What sort of company must I set up?

Typically a Pty Ltd would be the appropriate company structure and you can read more about the various business structures here.

I am in a permanent relationship / married to a South African – do I need a business visa?

Neither a business visa, not an Independent Financial Permit are required if you have a South African partner. Starting a business as a foreigner in South Africa with a South African partner requires you to have either a spousal visa or life partner visa which you can then endorse to set up and run a business.

If I am not working in the business, just investing, do I need a business visa?

Business visas are designed for the holder to work in the business. Foreign investors do not require a business visa. Any foreigner may own a business with no restriction. However should they intend to work within the business or come to live in South Africa a visa would be required.

How do I prove my business concept and my credentials?

When making a business visa application, part of the application’s supporting evidence is the submission of a comprehensive business plan. The business plan purpose is twofold – one, and in the traditional sense, to prove the business will be successful, and two, to highlight some of the home affairs requirements.

There is no requirement for a Financial Independent application to submit a business plan.

Would my business need to be audited?

There are requirements for businesses with a certain turnover to be audited and also others like estate agents are required from a regulatory prospective. There is also an argument for it being good practise for all businesses to be audited and you can read more on auditing here.

The decision, subject to these rules, is up to the business holder.

Can I set up an NGO in South Africa as a foreigner?

Yes, non profits are able to set be up and more information can be read here.

How long does the application process take?

There are two aspects to the application process:

  1. The compilation of the visa or permit application. The compilation of the business visa application is more time consuming as this stage involves not only the Home Affairs requirements but also supporting documentation such as the company registration paperwork and the memorandum of incorporation. In addition other departments such as the Department of Trade and Industry are involved. Compilation can therefore take 4 – 12 weeks.
  2. The Financially Independent application does not involve such third parties and can therefore be achieved much quicker. The second stage is the submission to the Department of Home Affairs and the Departments timing can vary from 4 weeks to 12 weeks usually for a business visa.

Here there can be a potential drawback for applicants for the Financially Independent as these have historically taken approximately 9 months.

Is there any other important distinctions?

You can see here for a summary breakdown of the business visa versus the Independent Financial Permit. But in summary, whilst the independent financial permit is a lot more flexible and carries little obligations with it either initially or on an ongoing basis there are 2 considerations that must be taken into account:

  1. The timing of your move. Permanent residency applications (Independent Financial Permits) take longer to process. If you plan in ample time this can be mitigated.
  2. The Department of Home Affairs levies an additional charge for successful applicants of the Independent Financial permit of ZAR 120,000. This is almost akin to a success fee as it is only payable if your application is approved.

How can Intergate Immigration help me?

Our team can assess your eligibility to apply for a business visa or financially independent permit. We can also refer you to an experienced business plan writer.

Why not try us for yourself – call us on any of the above numbers, request a call back or email your enquiry to us. You can expect a prompt response and to be treated as a client before you are one.

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