Starting A Small Business In South Africa – Infographic: A breakdown of SA’s SMME landscape Half of South Africa’s SMME sector is subsistence operations, says International Finance Corporation Article by The MiNDSPACE Team – Oct 30, 2019 – Read Time: 2 min
Entrepreneurship and small businesses are said to be the biggest source of jobs in South Africa, but over half are survival businesses, says a recent report by the International Finance Corporation that measured the size of South Africa’s small business sector and looked at key barriers to small businesses.
Starting A Small Business In South Africa
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How To Start A Business In South Africa With No Money
Ready to Save2gether? Share your company details and we’ll be in touch. 1. Is your company registered in South Africa with correct registration documents? YES, my company is officially registered in SANO, my company is not officially registered (in other words, it is an informal business) NO, my company is only registered in another country, not SA 2. Do you have more than 5 and less than 100 employees in your company? YES, I have between 5 and 100 employees NO, I have less than 5 employees NO, I have more than 100 employees 3. How long has your company been in operation? Less than 3 years More than 3 years 4. Do you own and run (operate) the business? YES, the business is owner-managed NO, the business is owned and run/run by different people 5. What is your company registered as? Sole ProprietorClose CompanyPrivate Company OR (eg Partnership, Trust, NGO) 6. Do you already have a company pension fund for your employees? JANEJ Please fill in your contact information below and click send.*All fields are mandatory. Although it may be less involved than executing a good business plan, regulatory requirements must be followed to ensure the business is legal.
Below is a list of requirements that new entrepreneurs in South Africa need to look at when starting out on the entrepreneurial path.
For many new businesses, the easiest way to become a legal entity is to set up a private company, also known as a (Pty) Ltd. By ensuring that the legal obligations rest with the company, there are fewer personal risks for those starting the business. .
Both for-profit and not-for-profit companies must register the company with the Companies and Intellectual Property Commission (CIPC), with the first step being to register as a CIPC customer. To note, the CIPC requires all registered companies to submit an annual return and pay an annual fee to remain registered.
Starting A Small Business In South Africa
In the case of non-legal entities, the way is open to trading as a sole proprietorship or partnership. These do not need to be registered with the CIPC. For more information on the tax requirements for different business entities, download the South African Revenue Service (SARS) Tax Guide.
In order for companies to be able to do business with authorities or certain suppliers, certification with broad-based Black Economic Empowerment (B-BBEE) is required. Basic B-BBEE certificates can be obtained through the CIPCeservices website or some self-service terminals. If your certification requirements are more complex, the services of a B-BBEE verification agency would need to be obtained.
Importantly, small businesses are listed as exempt micro-enterprises if they have a turnover of less than R10 million. These entities simply need to complete an affidavit (to be signed by a sworn commissioner), which can be provided instead of a B-BBEE certificate.
As your business grows and you want to employ people, it is important to comply with South Africa’s labor laws. Here, the Basic Employment Conditions Act is the most important piece of legislation. It discusses the details of how to act as an employer, with all the dos and don’ts of hiring and firing, compensation and what is considered regular or overtime.
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Having an employment agreement in place with each employee is crucial, as it protects both you as the employer and the employee. Such an agreement describes the terms of employment and provides more detailed information about the employee’s duties, remuneration, leave and more. An employment contract must be treated carefully, and it is recommended to consult with a legal practice to do so. Reynolds Attorneys can assist in drafting employment contracts on behalf of employers.
It is important that you as an employer are responsible for the health and safety of your employees. Here, the Work Environment Act describes the most general workplace conditions needed to ensure the safety of employees and those who visit the workplace. The Department of Labor has a much more accessible document on workplace health and safety available here.
Speaking of which, if you employ people, the Department of Labor requires you to register with the Compensation Fund, in the event of workplace injuries and illnesses.
Most businesses start with a big idea, and it’s important to nurture this idea as it becomes more tangible. There are ways to protect your intellectual property (IP) to ensure it is not stolen, with the CIPC administering the register of trademarks, as well as looking after patents, designs and copyright in South Africa. They also provide more information on how to enforce your IP rights when you believe infringement may have taken place.
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It is strongly recommended that before disclosing your IP to other companies, you get them to sign a confidentiality and non-disclosure agreement, obliging them to treat the information as confidential and not use or resell it.
And if you hire consultants or subcontractors to build on your idea (like software developers), it’s important to make sure your contract with them records that you become the sole owner of the IP they build or create for you. Just because you pay them doesn’t always mean you solely own what they create.
Key provisions of the powerful Personal Data Protection Act (POPIA) came into force on 1 July 2021, giving consumers unprecedented privileges in how companies handle and protect their data. However, this places the burden on the business owner to ensure that data and privacy breaches do not take place. It’s a big responsibility and when you look at the penalties involved it can be costly when not followed.
The Basics Of Registering A New Small Business
The old adage of “death and taxes” is still true. Once your business is registered, it will appear on South African Tax Revenue’s (SARS) radar. New companies must register with SARS for corporation tax purposes and to obtain an income tax reference number. This would require form IT77 to be completed for registration purposes within 60 days. SARS does a good job of providing more information on taxes for small businesses.
Once money flows into your account, there are a few more responsibilities. If your business is set to have a turnover of R1 million or more per annum, you would need to register as a VAT vendor, with certain VAT payments due throughout the year.
Importantly, when you employ people full-time, you must also register with SARS within 21 working days for employee tax. Through what is known as Pay-As-You-Earn (PAYE), tax is deducted from an employee’s remuneration and paid to SARS. A guide to registering for PAYE through SARS eFiling is available here.
Similarly, the employer must also register with SARS for payments to the Unemployment Insurance Fund (UIF) to ensure employee benefits when they are on maternity leave, or when they are unemployed or ill.
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There are a few businesses that are more likely to thrive in South Africa than others. Here is a list of 10 that meet the needs of the country’s people.
Brand South Africa believes that despite a slowing global economy, South Africa remains one of the most promising growth markets in the world. It is also Africa’s most sophisticated and diverse economy, according to the organization.
This diverse composition of the South African market and the discerning tastes of consumers, which vary from region to region and province, represents a good opportunity for the alliance-minded to capitalize on.
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So why not start a business that caters to the particular needs of South African customers? Here are some business ideas that can be started with a relatively low capital investment:
You can open a take away shop or start a food truck or deliver “on-demand” to office buildings. Whichever way you do it, you can build a successful business that feeds South Africans’ appetite for Bunny Chows and Kotas.
Marks Mahudi started his Kota business, Marks Bunny Chow, in Orlando East, Soweto, after he lost his job as a tour guide driver in 2007. He was unemployed for three months when he decided to start his own small business. But only him
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