a brief guide to doing business in south africa
TRANSCRIPT
A b r i e f g u i d e tod o i n g b u s i n e s si n s o u t h A f r i c A2 0 14
You think business in Southern Africa. We think the business of legal details.
Our horizons are as broad as your business vision.
1
Overview1. WHATARETHEKEYRECENTDEVELOPMENTS AFFECTINGDOINGBUSINESSINYOUR JURISDICTION?
Nationwideelectionsareduetobeheldin2014,which
theANCiswidelyexpectedtowin.
Theminingsectorisstillexperiencingsignificantand
ongoinglabourunrest.Thiswillhaveanimpacton
thebroadereconomyasjoblossesinthesectorare
anticipated.
ChangeshavebeenmadetotheBlackEconomic
Empowerment(BEE)regulations.FromOctober
2014,companieswillhavetoachieveaminimum
scoreforcertainBEEelementsinordertobeableto
countthatscoretowardsitsoverallBEErating.The
elementsofBEEinclude,amongothers,ownershipand
managementcontrolbyblackpersons,preferential
procurementandenterprisedevelopment.Currently,
companiesarescoredontheoveralltotalachievedfor
allBEEelements.
Ourlabourlegislationhasbeenunderreviewsince
December2010andamendmentBillstothethreemajor
piecesoflegislation,namelytheLabourRelationsAct,
theBasicConditionsActandtheEmploymentEquity
Acthavebeenpublished.Theamendmentsareanticipated
tocomeintoeffectduringthecourseof2014.
TheProtectionofPersonalInformationAct2013will
imposemandatorydataprotectionobligationson
datacontrollerswithregardtotheprocessingand
useofpersonaldataorconfidentialinformation.The
Acthasbeensignedintolawbuthasnotyettaken
effect.Onceitdoes,therewillbea12monthtransition
periodbeforeorganisationshavetocomplywiththe
Act.TheActissimilarinmanyrespectstotheEUData
ProtectionDirectiveandtheUKDataProtectionAct.
The Bowman Gilfillan Africa GroupBowman Gilfillan Africa Group is one of Africa’s premier corporate law firms, employing over 400 specialised lawyers. The Group provides domestic and cross-border legal services to the highest international standards across Africa, through its offices in South Africa, Botswana, Kenya, Madagascar, Tanzania and Uganda.
Differencesinlaw,regulationandbusinessculturecan
significantlyincreasetheriskandcomplexityofdoing
businessinAfrica.Ouraimistoassistourclientsin
achievingtheirobjectivesassmoothlyandefficiently
aspossiblewhileminimisingthelegalandregulatoryrisks.
Whilereliabletechnicallegaladviceisalwaysvery
important,theabilitytodeliverthatadviceinacoherent,
relevantwaycombinedwithtransactionmanagement,
structuring,negotiatinganddraftingskillsisessentialto
thesupplyofhighqualitylegalservices.
TheGrouphasofficesinAntananarivo,CapeTown,
DaresSalaam,Gaborone,Johannesburg,Kampalaand
Nairobi.OurofficeinMadagascarhasfrancophone
AfricancoverageinBenin,BurkinaFaso,Burundi,
Cameroon,Chad,CentralAfricanRepublic,Congo
Republic,Gabon,Guinea,IvoryCoast,Mali,Niger,
Rwanda,SenegalandTogo.
Wehaveabestfriendsrelationshipwithleadinglawfirm
UdoUdoma&Bela-Osagie,inNigeria,whichhasoffices
inLagos,AbujaandPortHarcourt.Wealsohavestrong
relationshipsandworkcloselywithlawfirmsacross
therestofAfricawhichenablesustoprovideorsource
theadviceclientsrequireinanyAfricancountry,whether
onasinglecountryormulti-jurisdictionalbasis.
Weactforcorporations,financialinstitutions,stateowned
enterprisesandgovernmentsprovidingclear,relevant
andtimelylegaladvicetoassistclientsachievetheir
objectivesandmanagetheirlegalrisks.
ThestrengthanddepthofalltheGroup’spracticearea,
geographicalandsectorspecificteamsareutilizedto
provideclientswiththehigheststandardsofservice.In
thecross-borderarenatheGrouphasextensiveexperience
intheresources,energy,infrastructure,financial
institutionsandconsumergoodssectors.
BowmanGilfillanAfricaGroup’sSouthAfrican,Kenyanand
UgandanofficesarerepresentativesofLexMundi,a
globalassociationwithmorethan160independentlaw
firmsinallthemajorcentresacrosstheglobe.This
associationgivesaccesstofirmswhichhavebeenidentified
asthebestineachjurisdictionrepresented.
2 3
Legal System2. WHATISTHELEGALSYSTEMBASEDON(FOR EXAMPLE,CIVILLAW,COMMONLAWORA MIXTUREOFBOTH)?
ThelegalsysteminSouthAfricaisbasedon:
Commonlaw.
Statute.
Caselaw.
Customarylaw.
SouthAfricahasafederalsystemofgovernmentwiththreetierscomprisingnational,provincialandlocalgovernment.Eachtierofgovernmenthaslegislativeandexecutiveauthorityinitsownsphere,andisdefinedintheSouthAfricanConstitutionasbeingdistinctive,interdependentandinterrelated.
Foreign Investment3. ARETHEREANYRESTRICTIONSONFOREIGN INVESTMENT(INCLUDINGAUTHORISATIONS REQUIREDBYCENTRALORLOCAL GOVERNMENT)?
Foreigninvestmentisactivelyencouragedinallsectors
oftheeconomyandthereare,generally,fewrestrictions
oninvestment.Therearecertainownershipandcontrol
restrictionsonforeignshareholders,andspecific
authorisationscanberequiredinregulatedsectorssuch
as:
Broadcasting.
Telecommunications.
Banking.
Insurance.
Defence.
Mining.
4. ARETHEREANYRESTRICTIONSONDOING BUSINESSWITHCERTAINCOUNTRIESOR JURISDICTIONS?
TheApplicationofResolutionsoftheSecurityCouncil
oftheUnitedNationsAct1993providesthatthe
PresidentoftheRepublicofSouthAfrica(RSA)mayby
proclamationdeclarethatanyresolutiontakenbythe
SecurityCouncilshallapplyinSouthAfrica.Asyet,no
suchproclamationshavebeenpublished.
SouthAfrica,asaMemberStateoftheUnitedNations,
isboundtocomplywithallresolutionspassedbythe
UnitedNationsSecurityCouncil.Thereareanumberof
SecurityCouncilresolutionsinrelationtoeconomic(and
other)sanctionswhicharebothbindingandapplicable.
(Foracatalogueoflinkstothelatestversionsofthe
SecurityCounciltargetedsanctionslists,includingthe
individualsandentitiessubjecttorelevantmeasures,see
www.un.org/sc/committees/list_compend.shtml.
AsamemberoftheAfricanUnion(AU),SouthAfrica
isrequiredtoenforcesanctionsimposedbytheAU.A
listofthecountriesagainstwhichtheAUhasimposed
sanctionscanbefoundatwww.au.int/en/member_
states/countryprofiles
5. ARETHEREANYEXCHANGECONTROLOR CURRENCYREGULATIONS?
TheSouthAfricanReserveBankimposesexchange
controlsonSouthAfricanresidents.Currencymustnot
betransferredbyaSouthAfricanresidentinto,orout
of,SouthAfrica,exceptinaccordancewiththeterms
oftheExchangeControlRegulations1961.However,
theExchangeControlRegulationsaregraduallybeing
liberalisedandinpractice,formostdeals,theprocess
ofobtaininganynecessaryexchangecontrolapprovalis
notamajorbarriertoinvestment
6. WHATGRANTSORINCENTIVESARE AVAILABLETOINVESTORS?
Manufacturingandexportincentivesexistforinvestment
withincertainareasofSouthAfrica.Theseapplyequally
toforeignandlocalinvestors.Inaddition,therearetax
incentivesthathavebeencreatedthroughstrategic
investmentprogramstofacilitateforeigninvestment.
Business Vehicles7. WHATARETHEMOSTCOMMONFORMS OFBUSINESSVEHICLEUSEDINYOUR JURISDICTION?
Themostcommonformofbusinessvehicleusedby
foreigncompaniesinSouthAfricaisaprivatelimited
liabilitycompany.Privatecompaniesaresimple
andcheaptoestablishandtherearenominimum
ormaximumsharecapitalrequirements.Private
companiescanbeestablishedwithonlyonedirector
andthatdirectorneednotberesidentinSouthAfrica.
Privatecompanieshavefewercorporategovernance
requirementsthanpubliccompanies.Forexample,
itisnotnecessaryforaprivatecompanytoappoint
acompanysecretaryortoholdanannualgeneral
meeting.Itisalsonotarequirementthataprivate
companyappointanauditorunlessitpassesapublic
interesttestintermsofregulationstotheCompanies
Act,2008.Thepublicinteresttestisrelatedtothe
company’sturnover,debtlevelsandnumberof
employees,amongotherthings
8. INRELATIONTOTHEMOSTCOMMON FORMOFCORPORATEBUSINESSVEHICLE USEDBYFOREIGNCOMPANIESIN YOURJURISDICTION,WHATARETHE MAINREGISTRATIONANDREPORTING REQUIREMENTS?
Registration and formation
Aprivatecompanymustregisterthefollowingwith
theCompaniesandIntellectualPropertyCommission
(Commission):
Itsname.
Anoticeofincorporation.
Itsmemorandumofincorporation.
Registrationofanewcompanygenerallytakesbetween
14and21daysfromsubmissionoftherelevant
documents.Itisalsopossibletobuyanoff-the-shelf
company(thatis,acompanythathasalreadybeen
registeredandisreadyforsale).Tooperatethrough
abranch,theforeignprofitornon-profitcompany
mustsubmitcertaininformationtogetherwithits
constitutionaldocumentstotheCommissionwithin
20businessdaysfromwhenitfirstbeginstoconduct
businessand/ornon-profitactivitiesinSouthAfrica.
Reporting requirements
AprivatecompanymustprovidetheCommissionwith
up-to-dateinformationon:
Constitutionaldocuments.
Registeredoffice.
Directors’details.
Secretarydetails(ifapplicable).
Auditordetails(ifapplicable).
Anyredemption,reductionorotheralterationof
capital.
Accountingreferencedate.
Certainspecialresolutions.
Companyname.
Anychangestothisinformationmustbeupdated
periodicallybysubmittinganannualreturn.Ifaprivate
companypassesthepublicinteresttest,itmustfileits
annualfinancialstatementswiththeCommissionandits
financialstatementsmustbeaudited.Thistesttakesinto
accountrelevantfactorssuchastheannualturnoverof
thecompany,thesizeofitsworkforce,andthenature
andextentofitsactivities.
Share capital
Aprivatecompanymusthavesharecapital,butthere
isnominimumormaximumamount.Sharesissuedin
accordancewiththenewCompaniesAct2008donot
haveanominalorparvalue.Anysharesofapre-
existingcompanythathavebeenissuedwithanominal
orparvalueundertheCompaniesAct1973continueto
havethenominalorparvalueassignedtothemunless
theyareconvertedtonon-parvalueshares.es.
4 5
Non-cash consideration
Companiescanissuesharesfornon-cashconsideration
(includingassetsandservicesrendered).Theboard
mustbesatisfiedthattheshareshavebeenissuedfor
adequateconsideration,butthisdeterminationdoes
notrequireaformalvaluationprocess.
Rights attaching to shares
Restrictionsonrightsattachingtoshares.There
arenorestrictionsontherightsthatcanattachto
shares,providedthesearespecifiedinthecompany’s
constitutionaldocuments.
Automaticrightsattachingtoshares.Eachshareholder
ofanyclassofissuedsharesinanycompanyhas
therighttovoteonanyproposaltoamendthe
preferences,rights,limitationsandotherterms
associatedwiththatshare.
Anypersonwhoholdsabeneficialinterestinany
sharesissuedbyanycompanyhastherighttoinspect
andcopy(withoutcharge):
Thecompany’smemorandumofincorporation.
Recordsrelatingtoacompany’sdirectors.
Reportstoannualshareholdermeetings.
Annualfinancialstatements.
Thenoticesandminutesofannualshareholdermeetings.
Theshareregisterofthecompany.
9. INRELATIONTOTHEMOSTCOMMONFORM OFCORPORATEBUSINESSVEHICLEUSEDBY FOREIGNCOMPANIESINYOURJURISDICTION, OUTLINETHEMANAGEMENTSTRUCTUREAND KEYLIABILITYISSUES.
Management structure
Privatecompaniesaremanagedbyaboardofdirectors
consistingofatleastonedirector.Thememorandumof
incorporationusuallyallowsdirectorstodelegatetheir
powerstoamanagingdirectororotherexecutivemanagers.
Management restrictions
Therearenorestrictionsonforeignmanagersunder
theCompaniesAct2008.TheCompaniesAct2008only
requiresthatacompany’srecordofdirectorsincludes
eachdirector’snationalityandpassportnumber,if
theyarenotaSouthAfrican.
Directors’ and officers’ liability
Adirectorcanbeheldpersonallyliableforanyloss,damageorcostssustainedbythecompanycausedbyanyofthefollowing(CompaniesAct2008):
Abreachoffiduciaryduty.
Afailuretoexercisetheproperdegreeofcareor
skillreasonablyexpectedofapersoncarryingout
thosefunctionsandwhohastheknowledge,skilland
experienceofthedirectorconcerned.
Wherethedirectorpurportstobindthecompany
withoutauthority.
Thedirectorcontinuestocausethecompanytotrade
whenthedirectorknows,oroughttoknow,thatthe
companycannotavoidinsolventliquidation.
Thedirectorsignsorcausesthepublicationoffalseor
misleadingfinancialstatementsorinformationinaprospectus.
Criminalliabilitycanapplyforbreachesofhealthand
safetyandenvironmentallaws.
Parent company liability
Aparentcompanyisnotgenerallyliableforthedebtsofits
subsidiariesunlessithasgivenaguarantee,indemnityorsurety.
EmploymentLaws, contracts and permits
10.WHATARETHEMAINLAWSREGULATING EMPLOYMENTRELATIONSHIPS?
EmploymentinSouthAfricaisregulatedbystatute,
commonlawandcontract.Ingeneral,SouthAfrican
employmentlawappliestoallemployeesworking
inSouthAfrica.Althoughchoiceoflawclausesare
recognised,theseareonlyenforcedwherethechosen
lawisalsothelawtowhichthecontractismostclosely
connected.Inmostinstances,iftheemployeeperforms
theworkinSouthAfricaandispaidthere,SouthAfrican
lawwillapply.Incertaincircumstances,itmayalso
applytoSouthAfricanemployeesworkingabroad.
Themainpiecesoflegislationregulatingtheemployment
relationshipare:
LabourRelationsAct1995(LRA).Thisgrantsemployees
protectionagainstunfairdismissalandunfairlabour
practices.Italsoregulatescollectivebargainingandthe
transferofundertakingsasagoingconcern.
BasicConditionsofEmploymentAct1997(BCEA).This
regulatesmostcontractsofemploymentinrelationto,
amongotherthings:
Workinghours.
Leave.
Theprohibitionofchildandforcedlabour.
Thepaymentofremuneration.
Noticeandpaymentsonterminationofemployment.
Partiescanagreedifferenttermstothosesetout
intheBCEAprovidedthesearenotlessfavourable
totheemployeethanwhattheBCEAprovides.In
addition,collectiveagreements,ministerialdecreesand
regulationsoftenvarytheapplicationoftheBCEA.
EmploymentEquityAct1998(EEA).Prohibitsunfair
discriminationinanyemploymentpolicyorpracticeon
groundssuchas:
Race.
Gender.
Sex.
Age.
Religion.
TheEEAalsoregulatestheimplementationofaffirmative
actionmeasures(thatis,measureswhichensurethat
employeesfromspecificdemographicgroupshave
equalemploymentopportunitiesandareequitably
representedintheworkplace).
SkillsDevelopmentAct1998.Thisaimstodevelopthe
skillsoftheSouthAfricanworkforce.Itestablishes
SectorEducationandTrainingAuthorities(SETAs)to
developandimplementaskillsplanforeacheconomic
sector.
SkillsDevelopmentLeviesAct1999.Thisimposesa
compulsorylevyonmostemployersofanamount
equalto1%oftheemployer’stotalpayrollamount,the
proceedsofwhichareusedtofundthevariousSETAs.In
certaincircumstances,employersmayclaimrebatesfor
theleviespaidtoaSETA.
UnemploymentInsuranceAct2001.Thisestablishesthe
UnemploymentInsuranceFund(UIF).TheUnemployment
InsuranceContributionsAct2002requiresemployers
andtheiremployeestomakecontributionstotheUIF.
EmployeesareentitledtobenefitsfromtheUIFifthey
losetheirjobsincertaincircumstances.TheUIFalso
providesbenefitstoemployeesforillness,maternity
leave,adoptionrightsanddependants.
OccupationalHealthandSafetyAct1993.Thisprovides
fortheminimumrightsanddutiesofemployersand
employeesinordertomaintainahealthyandsafe
workingenvironment.
CompensationforOccupationalInjuriesandDiseases
Act1993.UnderthisAct,employersmustpay
contributionstoafundwhichcompensatesemployees
foroccupationalinjuriesordiseasessustainedor
contractedinthecourseoftheiremployment.
Employeesinrespectofwhomrelevantcontributions
aremade,areprecludedfrominstitutingcivildamages
claimsagainsttheiremployersinrespectofoccupational
injuriesordiseases.
6 7
11.ISAWRITTENCONTRACTOFEMPLOYMENT REQUIRED?IFSO,WHATMAINTERMSMUSTBE INCLUDEDINIT?DOANYIMPLIEDTERMSAND/ ORCOLLECTIVEAGREEMENTSAPPLYTOTHE EMPLOYMENTRELATIONSHIP?
Althoughanoralemploymentcontractisnotinvalid,
theBCEArequiresthatcertaindetailsofemployment
mustbesetoutinwriting,suchas:
Thenameandaddressoftheemployer.
Adescriptionoftheworkperformed.
Workinghours.
Employmentcommencementdate.
Detailsofremuneration.
Writtenemploymentcontractsarealsorecommended
forcertaintyandtoavoiddisputes.
12.DOFOREIGNEMPLOYEESREQUIREWORKPERMITS AND/ORRESIDENCYPERMITS?
Foreignemployeesmustobtainaworkpermit(which
isregardedasatemporaryresidencepermit)before
startingworkinSouthAfrica.Therearevarious
categoriesofworkpermits,including:
Generalworkpermit.Thisisissuedtospecificcategories
ofemployeesandisvalidforuptofiveyears.
Corporatepermit.Thisisissuedtoacorporateapplicant
employingmultipleforeignemployeesandisvalidforup
tofiveyears.
Exceptionalskillspermit.Thisisissuedtoanindividual
whohasexceptionalskillsorqualificationsandto
membersofhisimmediatefamilyasdeterminedbythe
Director-General.
Intra-companytransferpermit.Thisisissuedtoan
employeeemployedabroadbyabusinessoperating
inSouthAfricaasabranch,subsidiaryoraffiliate
relationship,andwhoisrequiredtoworkinSouthAfrica
foraperiodnotexceedingtwoyears.
Themainconsiderationinissuingworkpermitsis
whetherornotaSouthAfricancitizenorpermanent
residentwiththeappropriateskillsisavailableto
takeuptheappointment.Thecostofapplyingfora
workpermitisaboutbetweenUS$1200andUS$2500
andittakesanywherefromtendaystoamonthto
obtain,dependingontheembassy,highcommissionor
consulatewheretheapplicationissubmitted.
Termination and Redundancy
13.AREEMPLOYEESENTITLEDTOMANAGEMENT REPRESENTATIONAND/ORTOBECONSULTEDIN RELATIONTOCORPORATETRANSACTIONS(SUCH ASREDUNDANCIESANDDISPOSALS)?
Theextentofconsultationwithemployeesinrelation
tocorporatetransactionsdependsonthenatureofthe
transaction.Forexample,employeesmustbeconsulted
ifredundanciesarecontemplated(seeQuestion15).
Theemployermustconsidertheviewsofemployees,
ortheirrepresentatives,ingoodfaith.However,
whereabusinessistransferredasagoingconcern,no
consultationobligationexists.Inmergers(asdefined
undertheCompaniesAct2008),theemployerisrequired
toinformtheemployees(andtheirrepresentatives,
includingtradeunions)inwriting,oftheanticipated
merger.TheCompaniesActgivesemployeessignificant
rightsofparticipationinthegovernanceofcompanies,
forexample:
Duringbusinessrescueproceedingstradeunionsmust
begivenaccesstocompanyfinancialstatements.
Atradeunionmustreceivewrittennoticeifthe
companyhasreasonablegroundstobelievethatitis
financiallydistressedbuthasnotadoptedaresolution
underthebusinessrescueprovisionsoftheCompanies
Act.Writtennoticemustalsobedeliveredtothose
employeeswhoarenotrepresentedbytradeunionsor
employees’representatives.
Aregisteredtradeunionorotheremployee
representativeofemployeesmayapplytocourtfor
anorderdeclaringadirectordelinquentincertain
circumstances(forexample,ifthedirectorgrossly
abusedhisposition).
Atradeunionorotheremployeerepresentativemay
applytocourtforanorderplacingadirectorunder
probation.
Tradeunions(andthereforenotonlyindividual
employees)areprotectedwhenmakingprotected
disclosures(forexamplethatadirectorhasfailedto
complywithastatutoryobligation),subjecttospecific
requirements.
Iftheboardauthorisesthecompanytoprovidedirector
indirectfinancialassistancetoadirectororprescribed
officer,thetradeunionmustbeprovidedwithacopyof
theresolution.
14.HOWISTHETERMINATIONOFINDIVIDUAL EMPLOYMENTCONTRACTSREGULATED?
Dismissal
Employeeshavetherightnottobeunfairlydismissed.
Anydismissalmustbebothsubstantivelyand
procedurallyfair.
Therearethreegroundsfordismissal:
Misconductoftheemployee.
Incapacityoftheemployee(forexample,poorwork
performanceorillhealth).
Theoperationalrequirementsoftheemployer.
Ondismissal,anemployeeisentitledto:
Accruedholidaypay.
Paymentinlieuofnotice(seebelow,Notice),unless
summarilydismissedorifrequiredtoworkthenotice
period.
Severancepayofaminimumofoneweek’ssalaryfor
everycompletedyearofservicewiththeemployer,if
thedismissalisasaresultofoperationalrequirements.
Anyotheramounttowhichtheemployeeis
contractuallyentitled.
8 9
Notice
Noticeperiodsarenormallyregulatedintheemployment
contract.However,theBCEAprovidesforthefollowing
minimumnoticeperiods:
Oneweek,iftheemployeehasbeenemployedforless
thansixmonths.
Twoweeks,iftheemployeehasbeenemployedformore
thansixmonthsbutlessthanoneyear.
Fourweeks,iftheemployeehasbeenemployedformore
thanoneyear.
Remedies for unfair dismissal
Theemployeecanbringaclaimforunfairdismissal.
IftheCommissionforConciliation,Mediationand
Arbitration,ortheLabourCourtfindsthatadismissalis
unfair,itcanordertheemployerto:
Reinstatetheemployee.
Re-employtheemployeeinotherreasonablysuitable
work.
Paycompensationtotheemployee.Compensationis
generallylimitedto12months’remuneration.Incertain
circumstances,suchasadiscriminatorydismissal,
compensationofupto24months’remunerationmaybe
ordered.
15. AREREDUNDANCIESANDMASSLAYOFFS REGULATED?
Redundancies,whetherindividualorcollective,must
bebothsubstantivelyandprocedurallyfair.Substantive
fairnessdemandsthattheredundanciesarerequired
foroperationalreasonssuchasstructural,technological
oreconomicneeds.
Proceduralrequirementsincludeaconsultation
processwiththepotentiallyaffectedemployeesor
theirrepresentatives.Anemployermustprovidethe
potentiallyaffectedemployees,ortheirrepresentatives,
withalltherelevantinformationinwriting.Section
189AoftheLRAregulatesmassredundanciesand
additionalconsultationrequirementsapplyinthese
circumstances.
TaxTaxes on employment
16.INWHATCIRCUMSTANCESISANEMPLOYEE TAXEDINYOURJURISDICTIONANDWHAT CRITERIAAREUSED?
SouthAfricahasaresidencebasisoftax,whichmeans
thataSouthAfricanresidentistaxedonanyincome
sourcedfromanywhereintheworld.Anaturalperson
qualifiesasaSouthAfricantaxresidentifheisordinarily
residentinSouthAfricaorsatisfiestherequirementsof
thephysicalpresencetest,thatis,ifheorshehasbeen
physicallypresentinSouthAfricafor:
Morethan91daysinthetaxyearinquestion.
Morethan91daysineachofthefivetaxyearsbefore
thecurrenttaxyear.
Morethan915daysoverthepreviousfivetaxyears.
ApersonwhoqualifiesasaSouthAfricanresidentin
termsofthephysicalpresencetestceasestobeaSouth
Africanresidentifheorsheisphysicallyoutsideof
SouthAfricaforacontinuousperiodof330fulldays
immediatelyafterthedayonwhichheorsheceases
tobephysicallypresentinSouthAfrica.Theperson
isdeemednottohavebeenaSouthAfricanresident
fromthedayonwhichheorsheceasedtobephysically
presentinSouthAfrica.
17.WHATINCOMETAXANDSOCIALSECURITY CONTRIBUTIONSMUSTBEPAIDBYTHEEMPLOYEE ANDTHEEMPLOYERDURINGTHEEMPLOYMENT RELATIONSHIP?
Tax resident employees
Taxresidentemployeesaresubjecttopersonalincome
taxontheiremploymentincome.Inrespectofincome
earnedforservicesrenderedinSouthAfricaandfora
SouthAfricantaxresidentemployer,theincometaxis
deductedbytheemployerandpaiddirectlytotheSouth
AfricanRevenueService(SARS).Forthe2013/2014tax
year,thetaxthresholdsapplicabletoindividualsareas
follows:
Forpersonsunder65yearsthetaxthresholdis
ZAR67,111.
Forpersons65yearsandolderthethresholdis
ZAR104,611.
Forpersonsaged75yearsandolderthetaxthresholdis
ZAR117,111.
Thepersonalincometaxyearofindividualsrunsfrom1
Marchto28February.Theratesthatapplytoindividuals
rangefrom18%foremployeeswhoseincomedoes
notexceedZAR165600and40%foremployeeswhose
incomeexceedsZAR638600peryear.
Taxresidentemployeesalsocontribute1%oftheir
monthlyremunerationtotheunemploymentinsurance
fund(asocialsecurityequivalent),subjecttoa
maximumofZAR148.72.Thisamountisdeductedbythe
employerfromtheemployees’remuneration.
Non-tax resident employees
Generally,non-residentemployeesareliablefortax
onincomederivedfromasourcewithinSouthAfrica,
subjecttothetermsofanyDoubleTaxationTreaty(DTT)
concludedbetweenSouthAfricaandtheemployees’
countryofresidence.Anemployeemightbesubjectto
incometaxinSouthAfricadependingontheprovisions
oftheDTT,ifany,concludedbetweenSouthAfrica
andtheforeignemployee’scountryofresidence(see
Question25).
Iftheemployeeisemployedbyaforeigncompanyand
issecondedtoSouthAfrica,theincometaxcanbe
withheldbyarepresentativeoftheemployerinSouth
Africa.Iftheemployerdoesnothavearepresentative
inSouthAfrica,theemployeeisresponsiblefor
ensuringthatthetaxisfullypaidtoSARS.Non-resident
employeesaresubjecttothesameratesasresident
employees,unlessaDTTprovidesotherwise.
Non-residentemployeeswhoenterSouthAfricatocarry
outacontractofservicewithinSouthAfricaandwho,
ontheterminationofthecontractmustleaveSouth
Africadonothavetocontributetotheunemployment
insurancefund.
Employers
Employerspaycorporateincometax(CIT)ontheir
income.BothSouthAfricanresidentandnon-resident
companiespayCITataflatrateof28%,exceptthat
non-residentcompaniesonlypayincometaxinSouth
Africaifthey:
DeriveincomefromSouthAfrica;and
Inthecaseofcompanieswhichareresidentinacountry
whichhasconcludedaDTTwithSouthAfrica,havea
permanentestablishment(PE)inSouthAfrica(thatis,a
fixedplaceofbusinessthroughwhichbusinessiscarried
out,whetherwhollyorinpart,forexample,abranch).
SouthAfricanresidentemployerscontribute1%of
theiremployees’monthlygrossremunerationtothe
unemploymentinsurancefund,subjecttoamaximum
ofZAR148.72peremployee.Intotal,theemployermust
paythetotalcontributionof2%(1%contributedbythe
employeeand1%contributedbytheemployer)tothe
unemploymentinsurancefundwithintheprescribed
period.
Certainemployerswhopayanannualremunerationof
morethanZAR500,000payaskillsdevelopmentlevyof
1%oftheirgrossmonthlypayroll.
10 11
Business Vehicles18.WHENISABUSINESSVEHICLESUBJECTTOTAXIN YOURJURISDICTION?
Tax resident business
Legalentitiesqualifyastaxresidentsiftheyare
incorporated,established,formedoreffectively
managedinorfromSouthAfrica.
Non-tax resident business
Non-residentbusinessvehiclesareonlytaxedonSouth
African-sourcedincome.Iftheentity’scountryof
residencehasaDTTwithSouthAfrica,thevehiclewill
onlybetaxedonitsincome(businessprofits)inSouth
AfricaifithasaPE,andonlyonincome/profitswhich
is/areattributabletothePE’sactivities.Non-resident
companiespayincometaxat28%.Asisthecasewith
SouthAfricanresidentcompanies,66.6%ofthenet
capitalgainderivedbyanon-residentcompanyis
includedinitstaxableincomeandsubjectedtocapital
gainstax(CGT)atarateof28%,(thereforeresulting
inaneffectiveCGTrateof18.67%)onsomeoftheir
capitalgains.
19.WHATARETHEMAINTAXESTHATPOTENTIALLY APPLYTOABUSINESSVEHICLESUBJECTTOTAXIN YOURJURISDICTION(INCLUDINGTAXRATES)?
TaxresidentcompaniespaythefollowingtaxesinSouth
Africa:
CITontheirworldwideincomeat28%.Non-resident
companiespayCITof28%onSouthAfricansourced
income.
CGTontheirworldwidecapitalgainsat18.67%.Non-
residentcompaniespayCGTat18.67%oncertainof
theircapitalgains.
Dividends, Interest and IP Royalties20.HOWARETHEFOLLOWINGTAXED:
Dividendspaidtoforeigncorporateshareholders?
Dividendsreceivedfromforeigncompanies?
Interestpaidtoforeigncorporateshareholders?
Intellectualproperty(IP)royaltiespaidtoforeign
corporateshareholders?
Dividends paid
Dividendsreceivedbyoraccruedtoanyperson,
aresubjecttoa15%withholdingtaxondividends
(Dividendstax).Dividendstaxisleviedinrespectof
dividendspaidbyacompany.TherateofDividends
taxmaybereducedbythetermsofaDTT.Intermsof
theIncomeTaxAct(ITA),cashdividendspaidbylisted
companiesaredeemedtobepaidonthedateofactual
payment.Cashdividendspaidbyunlistedcompaniesare
deemedtobepaidontheearlierofthedateonwhich
thedividendsarepaidorbecomedueandpayable.
Non-cashdividends(dividend in specie)aredeemedto
bepaidontheearlierofthedateonwhichtheyarepaid
orbecomedueandpayable.TheliabilityforDividends
taxoncashdividendsfallsonthebeneficialownerof
thecashdividends(shareholder)andtheliabilityfor
DividendstaxondividendsinspeciefallsontheSouth
Africanresidentcompanypayingthedividendsin specie.
Dividends received
FForeigndividends(dividendsreceivedfromforeign
companies)caneitherbefullyexemptfromincome
taxorpartiallyexemptfromincometax.Theyare
fullyexemptfromincometaxifcertainspecific
requirements(suchastheparticipationexemption)are
met.Foreigndividendswhicharenotfullyexemptfrom
incometaxarepartiallyexemptfromincometaxin
termsofaformulaprovidedforintheITA.Theeffect
oftheformulaisthattherateofincometaxleviedon
foreigndividendscanneverbemorethantherateof
Dividendstax(15%).
Interest paid
Thereisgenerallynoincometaxpayableoninterestpaid
tonon-taxresidentlenders.However,interestinthe
formofanannuityandinterestwhichisattributableto
aPEissubjecttoincometax.SouthAfricanresidentsare
subjecttotaxoninterestincome.From1January2015,
withholdingtaxoninterestpaidbyaSouthAfrican
residenttoanon-SouthAfricanresidentwillbesubject
toawithholdingtaxof15%unlessreducedbythe
provisionsofaDTT.
IP royalties paid
Until31December2014,royaltiespaidtonon-residents
fromaSouthAfricansourcearesubjecttoawithholding
taxat12%.Thisratemaybereducedbytheprovisions
ofaDTT,ifany.Witheffectfrom1January2015,
royaltiespaidbyaSouthAfricanresidenttoanon-
residentwillbesubjecttoroyaltywithholdingtaxof
15%unlessreducedbytheprovisionsofaDTT.
Groups, Affiliates and Related Parties21.ARETHEREANYTHINCAPITALISATIONRULES (RESTRICTIONSONLOANSFROMFOREIGN AFFILIATES)?
InSouthAfrica,generalarmslengthprovisionsare
usedtodeterminethincapitalisation.Inessence,the
sequenceofquestionsposedisasfollows:
whetheranaffectedtransaction(forinstance,a
transactionbetweenaSouthAfricanresidentanda
non-resident)hasbeenenteredinto;
whetherthepartiestotheaffectedtransactionare
connectedpersonsinrelationtoeachother;
whethertheaffectedtransactionhasgivenrisetoatax
benefitforoneoftheparties;and
whethertheaffectedtransactionwasenteredintoon
arm’slengthornon-arm’slengthtermsorconditions.
Iftheanswerstofirstthreequestionsareinthe
affirmativeandtheanswertothefourthquestion
isthattheaffectedtransactionwasenteredintoon
non-arm’slengthtermsandconditions(forinstance,
anexcessiverateofinterestwasagreed),SARSwilltax
thepartythatderivesataxbenefitfromtheaffected
transactionasiftheaffectedtransactionhadbeen
enteredintoonarm’slengthtermsandconditions.Any
differencebetweentheamountcalculatedaftertaking
intoaccountarm’slengthtermsorconditionsand
anyamountcalculatedonthebasisofthenon-arm’s
lengthtermsorconditionsistreatedasanon-arm’s
lengthloanfromtheSouthAfricantaxpayertothe
non-resident.TheSouthAfricantaxpayerwillbe
requiredtocalculateanarm’slengthinterestrateon
thedeemedloanandtheinterestwillbedeemedtobe
payableuntilthedeemedloanisrepaidtotheSouth
Africantaxpayer.Thedifferencewillnotbetreatedas
aloanifitisrepaidtotheSouthAfricantaxpayerby
theendofthetaxyearinwhichitisdetermined.Ifthe
loanremainsunpaid,interestwillaccruetotheSouth
Africantaxpayerandwillcontinuetoaccrueeverytax
yearuntilthedeemedloanisrepaid.
12 13
Financialassistanceprovidedbyanon-residentto
aheadquartercompanytoenabletheheadquarter
companytoprovidefinancialassistancetoaforeign
companyinwhichitholdsatleast10%oftheequity
sharesandvotingrights,isexemptfromthethin
capitalisationrules.Financialassistanceprovidedbya
headquartercompanytoaforeigncompanyinwhich
itholdsatleast10%oftheequitysharesandvoting
rightsisalsoexempt.
Financialassistanceprovidedbyanon-residenttoa
headquartercompanytoenabletheheadquarter
companytoprovidefinancialassistancetoaforeign
companyinwhichitholdsatleast10%oftheequity
sharesandvotingrights,isexemptfromthethin
capitalisationrules.Financialassistancebyaheadquarter
companytoaforeigncompanyinwhichitholdsatleast
10%oftheequitysharesandvotingrightsisalsoexempt.
22.MUSTTHEPROFITSOFAFOREIGNSUBSIDIARY BEIMPUTEDTOAPARENTCOMPANYTHATIS TAXRESIDENTINYOURJURISDICTION (CONTROLLEDFOREIGNCOMPANYRULES)?
Controlledforeigncompanyrulesapplyinrespectof
SouthAfricanresidentsthatholdparticipationrightsin
foreigncompanies.TherulesapplywhereSouthAfrican
residents(otherthanheadquartercompanies(see
Question21)holdorexercisemorethaneither:
50%ofthetotalparticipationrightsinaforeign
company;or
50%ofthevotingrightsofaforeigncompany.
Participationrightsaredefinedastherightstoparticipate
inallorpartofthebenefitsoftherights(otherthan
votingrights)attachingtoashare,oranyinterestof
asimilarnatureinaforeigncompany.Ifnoperson
holdsparticipationrightsorifnosuchrightscanbe
determinedforanyperson,votingrightsconstitutea
participationright.
Therulesimputetheincomeoftheforeigncompanytothe
SouthAfricanresidentshareholdersinproportiontotheir
participationrights,andtaxthemontheimputedamount
23.ARETHEREANYTRANSFERPRICINGRULES?
Therearetransferpricingrulesandtheseapplyin
respectofaffectedtransactionsenteredintobetween
connectedpersons,atnon-arm’slengthtermsand
conditionsandasaresultofwhichoneofthepartiesto
theaffectedtransactionderivesataxbenefit.Interms
oftherules,wherethecircumstancessetoutinthe
rulesprevail,SARSwilltaxthepartythatderivesatax
benefitfromtheaffectedtransactionasiftheaffected
transactionhadbeenenteredintoonarm’slengthterms
andconditions.Anydifferencebetweentheamount
calculatedaftertakingintoaccountarm’slengthterms
orconditionsandanyamountcalculatedonthebasis
ofthenonarm’slengthtermsorconditionsistreated
asaloanfromtheSouthAfricantaxpayertothenon-
resident.TheSouthAfricantaxpayerwillberequiredto
calculateanarm’slengthinterestrateonthedeemed
loanandtheinterestwillbedeemedtobepayableuntil
thedeemedloanisrepaidtotheSouthAfricantaxpayer.
Thedifferencewillnotbetreatedasaloanifitisrepaid
totheSouthAfricantaxpayerbytheendofthetaxyear
inwhichitisdetermined.Iftheloanremainsunpaid,
interestwillaccruetotheSouthAfricantaxpayerand
willcontinuetoaccrueeverytaxyearuntilthedeemed
loanisrepaid.
Customs Duties24.HOWAREIMPORTSANDEXPORTSTAXED?
Goodsimportedinto,orexportedfrom,SouthAfrica
areliableforVATandcustomsduty,subjecttothe
availabilityofrebatesandrefunds.Directexports
(wheretheSouthAfricansellersuppliesthegoods)are
subjecttoVATat0%andindirectexports(where,for
example,aclientofaSouthAfricansellerarrangesfor
thedeliveryofthegoodstotheclient’scustomerinthe
countrytowhichthegoodsareexported)aresubjectto
VATat14%.
Ifgoodsareimportedfromoneofthecountriesfalling
withintheCommonCustomsArea(Namibia,Botswana,
LesothoandSwaziland),theyareexemptfromcustoms
dutybutnotVAT.
Double Tax Treaties25.ISTHEREAWIDENETWORKOFDOUBLETAX TREATIES?
SouthAfricaiscurrentlypartytoapproximately80
doubletaxtreaties,includingwiththeUnitedStates
andtheUnitedKingdom,andiscurrentlyinthe
processofre-negotiatingandratifyinganumberof
othertreaties.
Competition 26.ARERESTRICTIVEAGREEMENTSANDPRACTICES REGULATEDBYCOMPETITIONLAW?ISUNILATERAL (ORSINGLE-FIRM)CONDUCTREGULATEDBY COMPETITIONLAW?
Competition authority
CompetitionlawinSouthAfricaisregulatedbythe
CompetitionAct1998(asamended)(CompetitionAct)
andtheregulationspromulgatedintermsofthe
CompetitionAct.TheCompetitionActisenforcedby
theCompetitionCommission(Commission),the
CompetitionTribunalandtheCompetitionAppeal
Court.Seewww.compcom.co.zaand
www.comptrib.co.za.t.
Restrictive agreements and practices
TheCompetitionActappliestoalleconomicactivity
within,orhavinganeffectwithinSouthAfrica.
Sections4and5oftheCompetitionActregulate
horizontalrelationships(relationshipsbetween
competitors)andverticalrelationships(relationships
inthesupplychain),respectively.Forpartiesina
horizontalrelationship,threecategoriesofconduct
(cartelconduct)areper seprohibited(section 4(1)(b) Competition Act):
Directlyorindirectlyfixingapurchaseorsellingpriceor
anyothertradingcondition.
Dividingmarketsbyallocatingcustomers,suppliers,
territoriesorspecifictypesofgoodsorservices.
Collusivetendering.
Forpartiesinaverticalrelationship,thepracticeof
prescribingaminimumresalepriceisper seprohibited
(section 5(2) Competition Act).
Otheragreementsorconcertedpracticesbypartiesin
eithertypeofrelationship(i.e.horizontalorvertical)are
onlyprohibitediftheyhavetheeffectofsubstantially
preventingorlesseningcompetitioninamarket(but
maybejustifiedonaruleofreasonbasis).
14 15
Partiesfoundtohaveengagedincartelconductor
minimumresalepricemaintenancearesubjecttoan
administrativepenaltyforafirst-timecontravention
(uptoamaximumof10%ofturnover).Forother
contraventions,anadministrativepenaltyisonly
competentiftheconductissubstantiallyarepeatby
thesamefirmofconductpreviouslyfoundtohave
contravenedtheCompetitionAct.
WhentheCompetitionAmendmentAct1of2009comes
intoforceinitsentirety(thisActhasbeensignedby
thePresidentbuttheprovisionsbelowhavenotyet
comeintoforceandthereisnoindicationwhenthis
willoccur),itwillbeacriminaloffenceforacompany
directororapersonengaged,orpurportingtobe
engaged,byacompanyinapositionwithmanagement
authoritytoeither:
Causethecompanytoengageincartelconduct.
Knowinglyacquiesceinthecompanyengagingincartel
conduct.
Anypersonconvictedofthisoffenceisliablefor:
AfineofuptoZAR500,000.
Imprisonmentforuptotenyears.
Bothafineandimprisonment.
Unilateral conduct
Unilateral(orsingle-firm)conductisregulatedbythe
CompetitionActtotheextentthatthecompanyis
dominant.
Adominantcompanymustnot(section8,CompetitionAct):
Chargeanexcessivepricetothedetrimentofconsumers
(section8(a)).
Refusetogiveacompetitoraccesstoanessentialfacility
whenitiseconomicallyfeasibletodoso(section8(b)).
Engageinanyofthefollowingexclusionaryacts,unless
thecompanyconcernedcanshowtechnological,
efficiencyorothergainswhichoutweightheanti-
competitiveeffect(i.e.aruleofreasonstandardof
analysis)(section8(d)):
requireorinduceasupplierorcustomernottodealwith
acompetitor;
refusetosupplyscarcegoodstoacompetitorwhen
supplyingthosegoodsiseconomicallyfeasible;
sellgoodsorservicesonconditionthatthebuyer
purchasesseparategoodsorservicesunrelatedto
theobjectofacontract,orforceabuyertoaccepta
conditionunrelatedtotheobjectofacontract;
sellgoodsorservicesbelowtheirmarginaloraverage
variablecost;or
buyupascarcesupplyofintermediategoodsor
resourcesrequiredbyacompetitor.
Engageinanyexclusionaryactotherthanthoselisted
above(assetoutinsection8(d))iftheanti-competitive
effectoftheactoutweighsanytechnological,efficiency
orpro-competitivegains(section8(c)).
Adominantcompanymustnotengageinprohibited
pricediscrimination(section9,CompetitionAct).
Subjecttocertaindefences,anactionisprohibitedprice
discriminationif:
Itislikelytohavetheeffectofsubstantiallypreventing
orlesseningcompetition.
Itrelatestothesale,inequivalenttransactions,ofgoodsor
servicesofsimilargradeandqualitytodifferentpurchases.
Itinvolvesdiscriminatingbetweenpurchasersinterms
ofprice,anydiscount,allowance,rebateorcreditgiven,
theprovisionsofservicesorthepaymentforanyservice.
Forexample,prohibitedpricediscriminationmay
occurwhereasellerchargesadifferentunitpricefora
productorservicetocustomerswithoutanydifference
inthecostofsupply.
Partiesfoundtohavebreachedsections8(a),(b)or
(d)maybesubjecttoanadministrativepenaltyfora
first-timecontravention(uptoamaximumof10%of
turnover).Partiesfoundtohavecontravenedsections
8(c)or9(1)willonlybesubjecttoanadministrative
penaltyiftheconductissubstantiallyarepeatby
thesamefirmofconductpreviouslyfoundtohave
contravenedtheCompetitionAct.
27.AREMERGERSANDACQUISITIONSSUBJECTTO MERGERCONTROL?
Thecompetitionauthoritiesmustbenotifiedifa
transaction:
Constitutesamergerundersection12ofthe
CompetitionAct(thatis,whenoneormorefirms
directlyorindirectlyacquireorestablishdirector
indirectcontroloverthewholeorpartofthebusiness
ofanotherfirm).
Thepartiesmeetcertainassetandturnoverthresholds
(discussedbelow).
ThemergerhasaneffectwithinSouthAfrica.
Therearetwocategoriesofmandatorynotifiable
mergers,namelyintermediateandlargemergers:
Toconstituteanintermediatemerger,theacquiring
groupandthetargetcompanymusthavecombined
assetsorturnoverinSouthAfrica(whichever
combinationisthehigher)ofequaltoorgreaterthan
ZAR560millionandthetargetcompanymusthave
assetsorturnoverinSouthAfrica(whicheveristhe
higher)ofequaltoorgreaterthanZAR80million.
Toconstitutealargemerger,thesevaluesarereplaced
withZAR6.6billionandZAR190million,respectively.
Incalculatingtheturnoverandassetvaluesoftheparties,
theonlyrelevantassetsareassetsinSouthAfricaand
theonlyrelevantturnoveristurnoverin,intoorfrom
SouthAfrica.Importantly,theentireacquiringgroup
istakenintoaccountintheassetandturnovercalculations.
Forthetargetcompany,onlythecompanythatis
transferredistakenintoaccount.Theassetsandturnover
mustbecalculatedwithreferencetothemostrecent
auditedfinancialstatementsofthemergingparties.
MergersbetweencompaniesthathavenoSouthAfrican
presence,exceptforsalesintoSouthAfrica,mayalso
requirenotificationiftheymeettheaboverequirements.
Forexample,twomergingforeignfirms,generating
salesinSouthAfricaintheprecedingfinancialyearof
ZAR480million(fortheacquiringgroup)andZAR90
million(forthetargetfirm)wouldberequiredtonotify
themergerinSouthAfrica.
Intermediateandlargemergersmustreceive
competitionapprovalbeforetheycanlawfullybe
implemented.Implementationofanotifiablemerger
withoutapprovalmayresultinanadministrative
penaltybeingimposed(uptoamaximumof10%of
turnover).Inaddition,thepartiestothemergermaybe
orderedtosellanyshares,interestorotherassetsthey
haveacquiredaspartofthemergeri.e.tounwindthe
transaction.
Itisnotmandatorytonotifyamergerwheretheparties
donotmeetthenotificationthresholdssetoutabove
(i.e.asmallmerger).However:
TheCommissionmaycallonthepartiestonotifyasmall
mergerwithinsixmonthsoftheimplementationifitis
oftheopinionthatthemergermaysubstantiallyprevent
orlessencompetitionorcannotbejustifiedonpublic
interestgrounds;and
IntermsoftheCommission’sGuidelineonsmallmerger
notification,smallmergersshouldbenotifiedwhere(i)
atthetimeofenteringintothetransactiononeofthe
partiesinvolved(orafirmwithintheirrespectivegroups)
mustbesubjecttoaprohibitedpracticeinvestigation
(e.g.pricefixingormarketdivision);or(ii)berespondents
topendingproceedingsrelatedtoaprohibitedpractice
referredbytheCommissiontotheTribunal).
Mergersareassessedtoseeiftheysubstantiallyprevent
orlessencompetitionandwhethertheyraiseany
adversepublicinterestgrounds.Whendetermining
whetheramergercanorcannotbejustifiedonpublic
interestgrounds,theCommissionortheTribunalmust
considertheeffectthatthemergerwillhaveon(i)a
particularindustrialsectororregion;(ii)employment;
(iii)theabilityofsmallbusinesses,orfirmsowned
bypreviouslydisadvantagedpersons,tobecome
competitive;and(iv)theabilityofnationalindustriesto
competeininternationalmarkets.
.
16 17
Intellectual Property28.OUTLINETHEMAINIPRIGHTSINYOUR JURISDICTION.
Patents
Definitionandlegalrequirements.Foraninventionto
bepatentable,itmust:
Benew.
Involveaninventivestep.
Becapableofindustrialapplication.
Notbespecificallyexcludedfromprotectionasapatent.
Apatentholderhastherighttoexcludeothersfrom
making,using,disposingorimportingtheinventionso
thattherightholderenjoysallthebenefitsrelatingto
theinvention.
Registration.Apatentmustberegisteredwiththe
SouthAfricanRegistrarofPatentstobeprotected.
Enforcementandremedies.Patentdisputesaredealt
withbytheCommissionerofPatentsortheHighCourt.
Thefollowingreliefsareavailableforinfringement
(PatentsAct1978):
Interdicts.
Deliveryupoftheinfringingproduct.
Damages.
Length of protection.Protectionlastsfor20yearsfrom
thedateofapplication,providedannualrenewalfees
arepaid.Apatentcannotberenewed.
Trade marks
Definition and legal requirements.Trademarksmust
becapableofdistinguishingthegoodsorservicesof
oneundertakingfromthoseofotherundertakings.The
rightholderisentitledtopreventunauthoriseduseofan
identicalorsubstantiallysimilarmarkusedinthesame
typeofindustryasthatinwhichthetrademarkhas
beenregistered.
Protection.Trademarkscanberegisteredwiththe
SouthAfricanRegistrarofTradeMarks.Unregistered
markscanbeprotectedunderthecommonlawaction
ofpassingoff.
Enforcement and remedies.Wheretherehasbeenan
infringement,theHighCourtcan(TradeMarksAct1993):
Grantinterdicts.
Ordertheremovaloftheinfringingmarkandthe
deliveryupoftheproductsbearingthemark.
Awarddamages.
Length of protection and renewability.Trademarksare
registeredfortenyearsbutcan,onapplication,berenewed
foranunlimitednumberofadditionalten-yearperiods.
Registered designs
Definition. Aregistereddesignisgenerallyusedto
protectthephysicalappearanceofanarticle.Thedesign
maybeaestheticorfunctional.Anaestheticdesign
mustbenewandoriginal.Afunctionaldesignmust
benewandnotcommonplaceintheartconcerned.
Registrationofadesigngrantstotherightholderthe
righttoexcludeotherpeoplefrommaking,importing,
usingordisposingofanyarticleincludedintheclassin
whichthedesignisregistered,sothattherightholder
enjoysallthebenefitsrelatingtothedesign.
Registration.DesignscanberegisteredwiththeSouth
AfricanRegistrarofPatents.Designsforarticlesthat
arenotintendedtobeproducedinlargequantitiesby
industrialprocesscannotberegistered.
Enforcement and remedies. Ifadesignrightis
infringed,arightholdercanseek(DesignsAct1993):
Aninterdict.
Deliveryupoftheinfringingproduct.
Damages.
Areasonableroyalty.
Length of protection and renewability.Registered
aestheticdesignsareprotectedfor15years.Registered
functionaldesignsareprotectedfortenyears.The
registrationofadesigncannotberenewed.
Unregistered designs
Unregistereddesignsarenotprotectedbylegislation.
However,copyrightexistsoverthedesignandprotection
maybefoundintermsofcopyrightlaw(seebelow,
Copyright).
Copyright
Definition and legal requirements.Thefollowingare
eligibleforcopyrightprotection,providedtheyareoriginal:
Literaryworks.
Musicalworks.
Artisticworks.
Cinematography.
Soundrecordings.
Broadcasts.
Programme-carryingsignals.
Computerprograms.
Publishededitions.
Therightholderisentitledtotheexclusiverightto
reproduce,publish,perform,broadcastoradaptthework
inquestion,dependingonthenatureoftheworkprotected
bycopyright.
Protection.Noregistrationisrequired,ascopyrightsubsists
automatically.
Enforcement and remedies.Theownerofcopyrighted
materialcaninstituteanactionfor(CopyrightAct1977):
Aninterdict.
Damages.
Deliveryupofinfringingcopies.
Areasonableroyalty.
Length of protection and renewability.Protectionfor
literary,musicalandartisticworkslastsfor50yearsfrom
theendoftheyearinwhichthecreatordies.Protectionfor
allotherworkslastsfor50yearsfromtheendoftheyearin
whichitisfirstreleased.
Plant breeders’ rights
Nature of right. Newvarietiesofplantsdevelopedby
plantbreedersdonotconstitutepatentablesubject
matter,unlesstheyareproducedbyaprocesswhich
ismicrobiologicalinnatureorwhichisnotessentially
biologicalinnature,andprotectionforsuchnew
varietiesofplantsisgrantedintermsofthePlant
Breeders’RightsAct1976.Thelegislationgivesthe
holdertheexclusiverightto:
Produceorreproducetheplantvariety.
Conditionitforpropagation.
Sellormarketit.
Exportorimportit.
Stockitforanyofthesepurposes.
Protection.Protectioncanbeobtainedforanyplant
varietywhichisdefinedas:
New.
Distinct.
Uniform.
Stable.
Theapplicationforaplantbreeder’srightismadetothe
departmentofagricultureandmorespecificallytothe
RegistrarofPlantBreeders’RightsandPlantImprovement.
Enforcement.Therightholdercanrequirethatprior
writtenauthoritymustfirstbeobtainedduringthe
periodofprotectiontoperformanyofthefollowing
acts:
Producingorreproducingthevariety(multiplication).
Conditioningitforpropagation.
Selling/marketingit.
Exportingorimportingit.
18 19
Stockingpropagatingmaterialorunauthorised
harvestedmaterialforanyoftheabovepurposes.
Thisalsoappliestovarietiesderivedfromtheprotected
variety.Wherenopriorwrittenconsentintheformof
alicenceisobtained,theholderoftherightcansuefor
infringementoftheright.
Length of protection. Protectionis25yearsforvines
andtrees,and20yearsforallotherplants.
Other
WhereintellectualpropertyiscreatedusingSouth
Africanpublicfundstherearestrictrulesgoverning
ownershipandtransferofsuchrights,aswellan
obligationtocommercialisetheintellectualproperty.
Lawsareimminentwherebytraditionalknowledgeand
localculturalheritagewillbeprotectedasintellectual
property.
Exchangecontrolapprovalisrequiredbeforelocal
intellectualpropertyandroyaltiesrelatedtosuch
intellectualpropertycanbetransferredoffshore.
Marketing Agreements29.AREMARKETINGAGREEMENTSREGULATED?
Agency
Theprinciplesofagencyareregulatedbycommonlaw
andcontract.
Distribution
Thereisnospecificlegislationrelatingtotheappointment
ofdistributors.Distributionagreementsareunlikelyto
breachcompetitionlawunlesstheycontainexcessive
restrictionssuchaspricefixing(seeQuestion26).
Franchising
Franchiseagreementsmustbe(ConsumerProtectionAct
2009):
Inwriting.
Includecertaininformation(forexample,thatthe
franchiseemaycancelthefranchiseagreementwithout
costorpenaltywithintenbusinessdaysaftersigningthe
agreementbygivingwrittennoticetothefranchisor).
Neutralinitsdurationorterms.
Afranchisormustprovideadisclosuredocumenttoa
prospectivefranchiseeatleast14daysbeforeafranchise
agreementissigned.Thisdocumentmustincludecertain
specifiedfinancialinformationandanorganogram
(organisationalchart)settingoutthesupportsystem
inplaceforfranchisees.Franchiseesareentitledtofile
complaintswithanumberofdisputeresolutionbodies
responsibleforenforcingtheConsumerProtectionAct.
E-commerce30.ARETHEREANYLAWSREGULATINGE-COMMERCE (SUCHASELECTRONICSIGNATURESAND DISTANCESELLING)?
E-commerceisregulatedbytheElectronic
CommunicationsandTransactionsAct2002(ECTA),
whichdealswith:
Electronicsignatures.
Cryptography.
Theprotectionofpersonalinformation.
Domainnameadministration.
Theliabilityofserviceproviders.
Cybercrime.
TheECTAcontainsbasicconsumerprotectionprovisions
relatingtothesaleofgoodsorservicesovertheinternet.
Advertising
31.OUTLINETHEREGULATIONOFADVERTISINGIN YOURJURISDICTION.
TheAdvertisingStandardsAuthority(ASA)isaself-
regulatorybodythathasbeenestablishedtoregulate
advertisinginSouthAfrica.Alladvertisingcompanies,
advertisingmediasuppliersandindustrybodiesthat
aremembersoftheASAareboundbytheprovisions
oftheCodeofAdvertisingPractice,whichisbasedon
theInternationalCodeofAdvertisingPracticecompiled
bytheInternationalChamberofCommerce.The
AdvertisingCodeisthensupplementedbyindividual
codesdeterminedbythevariousmemberorganisations
oftheASAornegotiatedwithgovernment.Advertising
onelectronicbroadcastmediaissubjecttothe
ElectronicCommunicationsAct2005,whichprovides
thatbroadcastersmustadheretotheAdvertisingCode
asdeterminedandadministeredbytheASA.Outdoor
advertisingisregulatedatalocalgovernmentlevelin
termsofby-lawsadoptedbyeachmunicipality.
Data Protection
32.ARETHERESPECIFICSTATUTORYDATA PROTECTIONLAWS?IFNOT,ARETHERELAWS PROVIDINGEQUIVALENTPROTECTION?
TheProtectionofPersonalInformationAct2013has
beensignedintolawbythePresidentbuthasnotyet
takeneffect.TheActisexpectedtotakeeffectduring
2014andtherewillbea12monthtransitionperiod
beforeorganisationshavetocomplywiththeAct.The
Actwillimposemandatorydataprotectionobligations
ondatacontrollerswithregardtotheprocessingand
useofpersonaldataorconfidentialinformation.The
ActissimilarinmanyrespectstotheEUDataProtection
DirectiveandtheUKDataProtectionAct.
UntiltheActtakeseffect,theprocessingofconfidential
informationiscurrentlyregulatedintermsofsection
14oftheConstitutionoftheRepublicofSouthAfrica
1996(therighttoprivacy)andthecommonlawrightto
privacyofSouthAfrica,whichisprotectedunderthe
lawofdelict(tort),aswellasrequirementsthatemanate
fromcertainothersectororactivity-specificlegislation
suchasemploymentlegislation,creditlegislationand
financialservicesadvisorylegislation.
Product Liability
33.HOWISPRODUCTLIABILITYANDPRODUCT SAFETYREGULATED?
TheConsumerProtectionActhasintroducedthe
conceptofnofaultliability.Aproducer,importeror
retailerofgoods(orallofthemjointlyandseverally)can
nowbeheldliableforanyharmcausedbysupplying
unsafegoods,productfailureorinadequateinstructions
orwarnings.Undercommonlawandcontractlaw,a
personcanonlybeheldliablefornegligencewhere
heshouldreasonablyhaveforeseenalikelihoodof
harm,althoughstrictliabilityexistsforlatentdefects
inproductswherethelatentdefectmakestheproduct
whollyorpartiallyunfitforitspurpose.
20 21
Main Business OrganisationsThe Department of Trade and Industry of the Government of the Republic of South Africa ( DTI)www.thedti.gov.za
Main activities.Focusesonindustrialdevelopment,
trade,exportandinvestment,broadeningparticipation
intheSouthAfricaneconomythroughbroad-based
blackeconomicempowermentandonthedevelopment
andimplementationofacoherent,predictableand
transparentlegislativeandregulatoryframework.
Companies and Intellectual Property Commission (CIPC)www.cipc.co.za
Main activities.EstablishedintermsoftheCompanies
Act,2008,itsmainactivityistoregisterandmaintain
theregistrationofcompaniesandintellectualpropertyrights.
Takeover Regulation Panel (TRP)www.trpanel.co.za
Main activities.Aregulatorybodyestablishedinterms
oftheCompaniesAct,2008,itsmainactivitiesareto
regulateaffectedtransactionsandtakeoversintermsof
theCompaniesActandtoinvestigatecomplaintswith
respecttoaffectedtransactionsandtakeoveroffers.
South African Revenue Service (SARS)www.sars.gov.za
Main activities.EstablishedintermsoftheIncomeTaxAct
tocollectrevenueandensurecompliancewithtaxlaw.
Financial Services Board (FSB)www.fsb.co.za.
Main activities.TheFinancialServicesBoardisan
independentinstitutionestablishedintermsofthe
FinancialServicesBoardAct1990tooverseetheSouth
AfricanNon-BankingFinancialServicesIndustryinthe
publicinterest.
Contributor ProfilesAshleigh halePartner
BowmanGilfillan
Tel+2711669-9342
Fax+2711669-9001
www.bowman.co.za
Professional qualifications SouthAfricanqualified,1999
Areas of practice Mergers&Acquisitions;
jointventures;corporateand
commercial
talita LaubscherPartner
BowmanGilfillan
Tel+2711669-9522
Fax+2711669-9001
www.bowman.co.za
Professional qualifications SouthAfricanqualified,2001
Areas of practice Employmentandemployee
benefits
Magola MakolaPartner
BowmanGilfillan
Tel+2711669-9398
Fax+2711669-9001
www.bowman.co.za
Professional qualificationsSouthAfricanqualified,2003
Areas of practice Tax
Jean Meijer
PartnerandCo-Headof
Competition
BowmanGilfillan
Tel+2711669-9384
Fax+2711669-9001
www.bowman.co.za
Professional qualificationsSouthAfricanqualified,1994
Areas of practice Competition/Anti-Trust
darren olivier, PartnerAdamsandAdams
T+27118951011
F+27117842889
www.adamsadams.com
Professional qualifications SouthAfricanqualifiedattorney
Areas of practice Areasofpractice.Trademark
registrationandprosecution,
licensing,commercialIP
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