Starting Business In South Africa – Starting a business in SA costs less than R200 – cheaper than most countries in the world, according to research

According to the World Bank Group’s Doing Business study, it costs just R175 to start a business in South Africa, which is cheaper than 90 percent of the world.

Starting Business In South Africa

Starting a business in South Africa is cheap. It costs less than R200 to reserve a company name and register it with the Companies and Intellectual Property Commission (CIPC). These are the only procedures based on the costs associated with starting a business in South Africa, as revealed in Doing Business’ company registration study using 2020 data.

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Opening a Special Bank Account, Income Tax Registration, Withholding Tax – Payroll Tax (PAYE), Unemployment Insurance Fund (UIF), Skills Development Allowance (SDL) – Initial payments with VAT and Compensation Fund are not charged.

However, these processes come with a lot of paperwork and take a relatively long time to complete, which lowers South Africa’s overall Doing Business (MB) rating.

This DB rating is based on 11 areas of business, including building permits, property registration, purchasing electricity, obtaining credit, trading across borders, fulfilling contracts and resolving insolvency. simple.

South Africa is 84 out of 190 countries surveyed and has the highest score in the tax department – measuring the number of taxes and contributions paid – and starting a business.

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READ |10 things you need to know about starting a business in SA – from registering your company to paying taxes

Using data from its database, recently converted the costs of starting a business into US dollars and created a global comparison. In addition to the initial start-up costs, the MB study continues by calculating the minimum capital requirement as a percentage of average national income per capita.

South Africa ranks tenth in terms of its starting price, with the total cost being 3% of the average monthly income. Most neighboring countries have much higher expenditure-to-income ratios, with Namibia at 116%, Mozambique at 213% and Zimbabwe at 501%.

But South Africa is not the most convenient country to start a business on the African continent. Rwanda ranks first at 0%, with no start-up fee for SMEs for at least two years.

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Although the African continent includes countries with the cheapest start-up process, it also has the Republic of Congo, which, in contrast, is the most expensive place to start a business in the world in terms of average income per capita. . Startup fees in the Republic of Congo total $1,232 (Rs. 18,000) compared to a salary of $48 (Rs. 710), resulting in a return on revenue of 2.554%.

In Venezuela, reserving a company name, registering, announcing your presence in the local newspaper, and various other formalities costs only 21¢ (R3.11).

It costs $725 (R10,700) to start a business in the United States (US), which is 16% of the average income. Starting a business in the UK is relatively cheap – only $17 (R251) – just 1% of average income per capita.

While startup costs are generally lower in developing countries, countries in Africa, South America and Southeast Asia have much higher cost-to-income ratios, making it less affordable for local populations due to high levels of poverty.

The Cost Of Starting A Business In South Africa

Although South Africa scores well on the affordability index, the total processing time, defined as the total number of days required to successfully register a company, is more than twice the average for sub-Saharan Africa . All procedures in South Africa take a minimum of 40 days.

South Africans need more procedures than those in high-income countries, as defined by the Organization for Economic Co-operation and Development (OECD). In comparison, registering a company in New Zealand can be done in less than a day.

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There are many reasons for entrepreneurs to start a business in South Africa – to bring innovation to life, to create jobs or to make money.

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Entrepreneurship also contributes to economic development, helps to eliminate poverty and unemployment. The Small Business Institute’s (SBI) report, ‘Tackling the Disability Environment’ for Economic Growth, Small Business and Jobs, explains the contribution of SMEs to the economy.

“Under the right circumstances, a strong and thriving SME community can foster competition, entrepreneurship, job growth and spur economic efficiency and innovation.”

However, starting a business in South Africa is not without challenges. South African entrepreneurs are forced to start new businesses at a time of low economic growth and low business confidence worsened by the COVID-19 pandemic.

Additional challenges that first-time entrepreneurs face are the high cost of business compliance and limited access to start-up capital.

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There are many regulatory frameworks that new businesses must adhere to. These are contained in the Small and Medium Businesses of South Africa report, Assessing South Africa’s SME Landscape: Challenges, Opportunities, Risks and Next Steps.

“South Africa’s highly regulated business environment includes extensive red tape related to labor laws, taxation, annual registration and industry regulations that hinder small business development.

Access to capital is a similar challenge to small business development. Many entrepreneurs struggle to get financing. This is predicted to become more difficult as many financial institutions become more exposed to risks as a result of COVID-19.

However, there are still some opportunities for entrepreneurs willing to take on these challenges. Below are important considerations for entrepreneurs looking to start a business in South Africa. Learn how to access funding, legal requirements and business ideas to get started.

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A business plan is essential for all businesses, whether your business is starting up or already established, and provides a roadmap for future growth. It also helps you assess the viability of your business and attract potential investors.

According to the SME Toolkit website, some essential elements that a typical business plan should include are a vision statement; your team; business profile; economic assessment; cash flow estimation; marketing plan, expansion plans and damage control plan.

An important part of running a compliant business is ensuring your business is registered with the Companies and Intellectual Property Commission (CIPC).

Some of the benefits of registering your business in South Africa are business name protection, business compliance and access to government tax breaks and financial assistance.

The Easiest And Cheapest Way To Register Your Business In South Africa

Registering your business is very simple. Entrepreneurs can register a new company online at the Companies and Intellectual Property Commission (CIPC) website or at An alternative way to register your company is through one of the major banks, such as First National Bank and Nedbank.

There are implications for different types of entities that entrepreneurs should be aware of, such as “different levels of liability, such as reporting, compliance, tax positions or exposure to personal liability.”

The legal structure you choose should match your growth strategy, growth potential, nature, complexity of your business model, and planned exit.

See also: For guidance on choosing the right ownership structure READ: Choose the right type of ownership for SMEs

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As a business owner, you have legal obligations that you should be aware of. The three main legal issues that most business owners must deal with are business compliance, intellectual property protection, contracts, and tax.

It is a legal requirement to prepare annual financial statements within a certain period. There are additional rules and laws that a business must comply with: industry registration (depending on the industry you operate in); zoning laws; licensing and permits and labor law for employers.

All businesses are required to keep accurate financial statements for each year of assessment to ensure that the taxes declared and paid by your company are correct.

Businesses that expect to generate a turnover of more than R1 million in a 12-month period must register as a VAT vendor. Small businesses with an annual turnover of less than 1 million rubles have a turnover tax. It is a simplified tax system aimed at making it easier for micro-businesses to fulfill their tax obligations

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Contracts are important because they not only “guide the relationship between the parties at different stages of the relationship, but they also provide a level of protection if things don’t go according to plan,” British lawyer and CEO Reneke, Cezanne explains in a British Legal article. Tips for fulfilling contracts.

Renecke continues: “A contract sets the ground rules for entrepreneurs to do business with others – and vice versa. A contract can clearly state the terms of the agreement between the parties when it comes to what is expected (responsibilities and obligations for each party).

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