Doing Business in South Africa - Adams & Adams

Table of Contents
Introduction
Black Economic Empowerment
Company Law
Types of Business Entities
Mergers & Acquisitions
Corporate Governance
Overview Of The South African Tax System
Exchange Control
Employment Law
Work Permits & Visas
Competition Law
Data Protection
Intellectual Property
Information, Communication & Technology (ICT) Law
Agency, Licensing, Distribution & Franchising
PAGE
1
3
4
5
10
10
11
13
13
15
15
17
17
21
22

1
Information obtained from: www.southafrica.info/about/facts.htm (2012)
1.1 Key facts about South Africa1
1.1.1 General:
• Official name: Republic of South Africa
• Form of state: A federal state,
comprising a national government and
nine provincial governments.
• Legal system: Based on Roman-Dutch
law and the 1996 Constitution.
• Population: 51.8 million (Census 2011)
• Measures: metric system
• Currency: One rand (R) = 100 cents
• Time: Two hours ahead of GMT
• Internet domain: .za
1.1.2 Geography:
• Area: 1 219 090 square kilometres
• Agriculture: 81.6% of total land area
• Arable land: 12.1% of total
• Irrigated land: 10.15% of arable land
1.1.3 Capitals:
• Pretoria (administrative)
• Cape Town (legislative)
• Bloemfontein (judicial)
1.1.4 Languages
South Africa is a multilingual country. Its
constitution recognises 11 languages and
guarantees equal status to them.
These languages are:
• Afrikaans
• English
• isiNdebele
• isiXhosa
• isiZulu
• Sesotho sa Leboa
• Sesotho
• Setswana
• siSwati
• Tshivenda
• Xitsonga
1. INTRODUCTION
The purpose of this guide is to give readers a brief overview of key aspects of South African law. It is
aimed at organisations and persons from other countries who are interested in doing business in South
Africa.
This guide is not intended to be definitive on each and every aspect of South African law. It only gives
indications of applicable considerations from a commercial, tax and general regulatory point of view.
The content of this guide is for information only. It does not constitute legal advice, nor is it intended to
do so. Should you require legal advice, please do not hesitate to contact us at the details provided in
this guide.

1.1.6 Economy
• Currency: Rand (R)
• Real GDP growth rate (second quarter
2012): 3.2%
• Ranking in terms of GDP size: 25th
largest in the world (IMF)
• Consumer inflation rate (October 2012):
5.6% y/y (Statistics SA)
• Producer inflation rate (October 2012):
5.2% y/y (Statistics SA)
• Prime bank overdraft lending rate (July
2012): 9%
• Labour force (first quarter 2012): 17.95
million economically active (Statistics
SA)
• Unemployment (third quarter 2012):
25.5% (Statistics SA)
• Sovereign credit rating (October 2012):
Standard and Poor’s: BBB+/Standard
Fitch: BBB+/Negative
Moody’s: Baa1/Negative
GDP composition by sector (2011):
agriculture 2.5%, industry 31.6%,
services 65.9%
• Key industries:
Mining: (world’s largest producer of
platinum, chromium), automobile
assembly, metal-working, machinery,
textiles, iron and steel, chemicals,
fertilisers, foodstuffs, commercial ship
repair.
• Main trading partners (2011) (South
African Revenue Services):
Exports: China 12.77%, US 8.64%, Japan
7.88%, Germany 6.04%, UK 4.11%, India,
3.47%, Switzerland 3.24%, Netherlands
3.05%, Zimbabwe 2,52%, Mozambique
2.5%.
Imports: China 14.24%, Germany
10.69%, US 7.88%, Japan 4.74%, Saudi
Arabia 4.46%, India 4.03%, UK 4.02%,
Iran 3,74%, Nigeria 3.13%, Italy 2.7%
1.2 Key facts about Adams &
Adams
Adams & Adams is a leading South African law
firm specialising in corporate and commercial
legal services. The firm has grown into a South
African law icon. It has the largest intellectual
property law offering in South Africa.
The firm has been rooted in over 100 years of
legal excellence since its founding in 1908. The
firm is characterised by a strong commitment
to professionalism, and client care and partner
accessibility are two of the cornerstones of the
practice.
Adams & Adams is one of the leading law
firms in South African grounded in over 100
1.1.5 Provinces:
1/2
Province Provincial capital Largest city Area (km2
)
Population
(2011/2012)
Eastern Cape Bhisho Port Elizabeth 168 966 6 562 053
Free State Bloemfontein Bloemfontein 129 825 2 745 590
Western Cape Cape Town Cape Town 129 462 5 822 734
Gauteng Johannesburg Johannesburg 18 178 12 272 263
Northern Cape Kimberley Kimberley 372 889 1 145 861
North West Mahikeng Rustenburg 104 882 3 509 953
Mpumalanga Nelspruit Nelspruit 76 495 4 039 939
KwaZulu-Natal Pietermaritzburg Durban 94 361 10 267 300
Limpopo Polokwane Polokwane 125 754 5 404 868

years of legal excellence since its founding
in 1908. The firm has over 170 experienced
attorneys and candidate attorneys (which
includes 65 partners), with close on 430 support
staff members. The firm has offices in South
Africa (Pretoria, Johannesburg, Cape Town
& Durban), Mozambique (ARIPO), Angola,
Tanzania (Zanzibar), Lesotho, Botswana,
Swaziland, Namibia, Burundi & an OAPI office
based in Cameroon. Adams & Adams also has a
worldwide network of attorney correspondents
and associates, enabling the firm to handle
legal matters in any country where this may be
required.
2. BLACK ECONOMIC
EMPOWERMENT
Black Economic Empowerment (“BEE”) is
a prominent Government policy and socio-
economic process launched by the South
African Government. Its purpose is to redress
the inequalities of apartheid by giving previously
disadvantaged groups (black Africans,
Coloureds, Indians and some Chinese) with
South African citizenship economic privileges
previously not available to them. Through its BEE
policy, the South African Government aims to
achieve the following objectives:
• Empower more black people to own and
manage enterprises. Enterprises are
regarded as black-owned if 51% of the
enterprise is owned by black people, and
black people have substantial management
control of the business.
• Achieve a substantial change in the racial
composition of ownership and management
structures and in the skilled occupations of
existing and new enterprises.
• Promote access to finance for black economic
empowerment.
• Empower rural and local communities by
enabling their access to economic activities,
land, infrastructure, ownership and skills.
• Promote human resource development
of black people through, for example,
mentorships, learnerships and internships.
• Increase the extent to which communities,
workers, co-operatives and other collective
enterprises own and manage existing and
new enterprises, and increase their access to
economic activities, infrastructure and skills.
• Ensure that black-owned enterprises
benefit from the government’s preferential
procurement policies.
• Assist in the development of the operational
and financial capacity of BEE enterprises,
especially small, medium and micro
enterprises (SMMEs) and black-owned
enterprises.
• Increase the extent to which black women
own and manage existing and new
enterprises, and facilitate their access to
economic activities, infrastructure and skills
training.
In terms of the Broad Based Black Empowerment
Act, 2003, Codes of Good Practice on Broad
Based BEE may be issued. These Codes of
Good Practice on Broad Based BEE (“Codes”)
were approved by cabinet in 2006 and were
gazetted into law on 9 February 2007 to provide
a standard frame work for the measurement
of BEE across all sectors of the economy. The
Codes require that all entities operating in the
South African economy make a contribution
towards the objectives of BEE.
The first phase of the Codes encourages all
entities, public and private, to implement proper
BEE initiatives through the issuing of licences,
concessions, sale of assets and preferential
procurement. The second phase of the Codes
covers the seven components of the B-BBEE
scorecard, namely: ownership; management
control; employment equity; skills development;
preferential procurement; enterprise
development; and socio-economic development
2/3

(including industry-specific and corporate social
investment initiatives).
The Strategy on B-BBEE, released in 2003,
assigns points values to the seven elements of
the B-BBEE scorecard as follows:
The B-BBEE Act, 2003 makes the Codes binding
on all state bodies and public companies, and
the government is required to apply them when
making economic decisions on:
• procurement,
• licensing and concessions,
• public-private partnerships, and
• the sale of state-owned assets or businesses.
Private companies must apply the Codes if
they want to do business with any government
enterprise or organ of state – that is, to tender
for business, apply for licences and concessions,
enter into public-private partnerships or
buy state-owned assets. Companies are
also encouraged to apply the Codes in their
interactions with one another, since preferential
procurement will affect most private companies
throughout the supply chain.
The Codes provide for the concept of “equity
equivalents”, in order to address concerns
raised by multinationals operating in South
Africa (in relation to the ownership aspect of
BEE compliance). In particular, the Codes
acknowledge that there may be multinationals
whose global practices prevent them from
complying with the ownership element of
B-BBEE through the traditional sale of shares to
black South Africans. In such cases, the Codes
allow for contributions in lieu of a direct sale of
equity. These contributions, known as “equity
equivalent” contributions, count towards the
ownership element of B-BBEE. The value of
these contributions may be measured against
25% of the value of a multinational’s South
African operations, or against 4% of the total
revenue from its South African operations
annually over the period of continued
measurement. Foreign multinationals can submit
proposals for Equity Equivalent Programmes
to the Department of Trade and Industry for
approval by the Minister of Trade and Industry.
More information, including guidelines and
application forms, are available on the web page
of the Department of Trade and Industry’s (DTI’s)
Equity Equivalent Secretariat.
The South African Government has approved
substantial revisions to the BEE Act and the
Codes which have been gazetted for public
comment. The new amendments are designed
to increase the focus on certain elements of BEE
including enterprise development, to establish
enforceable remedies to sanction “fronting” and
to provide for minimum thresholds in respect of
each element of BEE. The new amendments are
expected to take effect during 2013.
3. COMPANY LAW
South African company law recently underwent
a radical transformation with the introduction of
the new Companies Act, 2008 which came into
force with effect from 1 May 2011 (“Companies
Act”). The Companies Act replaced the
Companies Act of 1973 (“Old Act”). Amongst
other things, the Companies Act:
• introduced new types of companies
(discussed above);
3/4
B-BBEE SCORECARD
Element Points
Ownership 20
Management control 10
Employment equity 15
Skills development 15
Preferential procurement 20
Enterprise development 15
Socio-economic development 5
TOTAL 100

• introduced stricter accounting requirements
for companies, especially public companies;
• streamlined the company formation process
(which includes combining the
constitutional documents of a company into
one document);
• increased the disclosure, transparency and
reporting requirements on companies; and
• introduced a new regime for mergers and
acquisitions (discussed below).
While the Old Act was modelled on English
company law, the Companies Act is based on
Canadian and American company law principles.
For example, the Companies Act introduced a
business rescue regime which is intended, as the
name suggests, at “rescuing” businesses that
find themselves in difficulties. In drafting this part
of the legislation, the drafters of the Companies
Act relied heavily on the American chapter 11
principles.
From a governance perspective, as with
comparative legislation in most other
jurisdiction, the Companies Act makes provision
for a board of directors. It does not prescribe
the maximum number of directors but private
and personal liability companies are required to
have at least one director whereas state-owned
and public companies are required to have at
least three directors. A company can, through its
constitutional directors, increase the minimum
number of directors the company is required to
have.
The Companies Act does not require that any
of the directors be South African residents or
citizens or even that they be based in South
Africa. Provided that that a person is not
disqualified from being a director in terms of the
Companies Act or the companies constitutional
documents, anyone is entitled to be a director.
The Companies Act also does not place any
restrictions on shareholding and shareholders.
Companies can have any number of
shareholders who can be of any nationality.
There is no requirement under South African law
that a certain shareholding in a company should
be held by a South African citizen. However, any
shareholding in a South African Company by a
non-South African citizen must be approved by
the South African Reserve Bank. This approval
is evidenced by an endorsement on the share
certificate of the non-South African shareholder.
From an enforcement perspective, the primary
enforcement agency is the Companies and
Intellectual Property Commission (CIPC) and the
Companies Act contains several mechanisms
through which the CIPC can enforce provisions
of the Companies Act, including issuing
compliance notices.
4. TYPES OF BUSINESS
ENTITIES
In South Africa there are a number of different
legal entities which can and are often used to
conduct business. The relative suitability or
unsuitability of any particular entity will largely
depend upon the main reasons why such entity
has been established. Other factors such as the
existence of limited liability and/or whether or
not a particular entity has perpetual succession
may also be important considerations.
Business in South Africa is ordinarily conducted
using one or more of the following entities:
• companies (either profit or non-profit);
• close corporations;
• associations and body corporates;
• partnerships;
• business trusts; or
• sole proprietorships.
Under the Companies Act 71, 2008 (the
“Companies Act”), profit companies are further
categorised into one of the following categories:

• state-owned companies;
• private companies;
• personal liability companies; or
• public companies.
The Companies Act also permits the existence
of two further categories of companies,
namely:
• domesticated companies; and
• external companies.
The last two categories of companies are
particularly relevant for foreign companies that
intend doing business in South Africa.
4.1 Companies
4.1.1 Overview and Background
Under South African law, companies
are regarded as having separate juristic
personality. That means that they
can enter into contracts in their own
names, sue and be sued and generally
exist completely separately from their
shareholders and/or the individuals who
set them up. This means that a company
would be liable for its own debts and
its shareholders would normally have
limited liability in relation to the debts
of the company in which they hold
shares. Companies also enjoy perpetual
succession which means that they will
continue to exist even if one or more of
their shareholders sell their shares and/
or die.
A brief overview of the various
categories of companies and other
business entities follows below.
4.1.2 Profit Companies
Profit companies have shareholders and,
as the name suggests, have been set
up for financial gain with the intention
of making profits for the company and
its shareholders. These are the various
types of profit companies:
4.1.3 State-owned Companies
These entities are companies that are
listed as public entities in the Public
Finance Management Act 1 of 1999 or
companies owned by municipalities.
The Companies Act requires that the
name of every state-owned company
should have the abbreviation “SOC
Ltd.” at the end of its name.
4.1.4 Private Companies
A private company may not offer
securities (shares, debentures and
other instruments) to the public and
the transfer of its securities must be
restricted. These restrictions must
be recorded in a private company’s
memorandum of incorporation (“MOI”).
A MOI is essentially a founding
document which is equivalent to a
combined memorandum and articles of
association. This companies (along with
existing close corporations, see below)
are the most commonly used entities for
business purposes in South Africa.

A private company must have the
words “Proprietary Limited” or the
abbreviation “(Pty) Ltd.” at the end of
its name.
4.1.5 Personal Liability Companies
A personal liability company is a profit
company, but its shareholders have
personal liability. This type of entity is
most often utilised by organisations
which offer professional services to their
clients, such as engineering, accounting
or law firms.

A personal liability company must
have the words “Incorporated” or the
5/6

abbreviation “Inc.” at the end of its
name.
The past and present directors of such
companies are co-debtors with the
company. In circumstances where a
director settles a claim brought against
the company, such director would have
an automatic right of recourse against
each of his fellow directors for their
proportionate share of any such liability.
4.1.6 Public Companies
A public company is a profit company
which is not a state-owned company, a
private company or a personal liability
company. In addition, it differs from a
private company in that its MOI does
not need to restrict the transferability
of its securities and/or prohibit it from
offering its securities to the public.
The Companies Act requires that
the name of every public company
should have the word “Limited” or the
abbreviation “Ltd.” at the end of its
name.
Public companies whose securities
are listed on South Africa’s main stock
exchange, the Johannesburg Stock
Exchange, or on any other national or
international stock exchange are known
as “listed public companies”. It is also
possible for a public company not to
list its securities, in which case it will be
known as an “unlisted public company”.
4.1.7 Domesticated Companies
The Companies Act defines a “foreign
company” as an entity incorporated
outside of South Africa, irrespective of
whether it is a profit or non-profit entity
and/or carrying on profit-making or
non-profit making activities within the
country. The Companies Act also allows
any foreign company to transfer its
registration from its overseas country of
incorporation to a registration in South
Africa. Once the necessary steps have
been taken and the transfer registered,
the foreign company will be known as
a “domesticated company” and the
CIPC will issue such company with a
registration certificate indicating that
the company has been incorporated
under the Companies Act. From
this point, the company will have the
same status and be treated as if it had
originally been incorporated in South
Africa.
4.1.8 External Companies
Under the principles of international
private law, a body corporate
incorporated in one country is usually
recognised as a body corporate in other
countries. In South Africa, an entity
generally becomes a body corporate
when it is registered with the CIPC.
An “external company” is also a foreign
company (as discussed above), but its
registration is not transferred to South
Africa so that it is treated as if it had
been originally incorporated in South
Africa. Where a foreign company is
carrying on either profit-making or
non-profit making activities within South
Africa, it is required to register with the
CIPC within 20 business days after it
first begins to conduct such activities.
Such company will be regarded as
conducting these activities when it has
entered into one or more employment
contracts or when its activities over the
past 6 months would lead a person to
reasonably conclude that the company
has continually engaged in profit-
making or non-profit making activities

within the country. Upon registration as
an external company with the CIPC, the
company will be issued with a unique
registration number. The CIPC may
issue a compliance notice to a foreign
company which has failed to register,
requiring such company to register
within a period of 20 business days after
receiving such notice or to cease all
activities within the country.
Each external company is required
to continuously maintain at least one
registered office within South Africa
and/or to register the address of its
principal office if it has more than one
office in the country.
4.1.9 Non-Profit Companies
By contrast to profit companies, non-
profit companies often have (but are
not required to have) members and
are generally set up for certain public
benefit, charitable, cultural, social,
communal and/or group interest
purposes. Any income or assets of
such a company may not at any stage
be distributed to the incorporators,
members, directors and/or officers of
such entity.
The Companies Act requires that the
name of every non-profit company
should have the abbreviation “NPC” at
the end of its name.
The incorporators of a non-profit
company are its first directors and its
first members, where its MOI provides
for it to have members. The MOI
should also set out at least one object
of the company, which object must
be either a public benefit or an object
which relates to a charitable, cultural,
social, communal and/or group interest
purpose. The courts have, in addition,
held that the phrase “communal or
group interests” should relate to
cultural or social activities and should
exclude activities of a purely commercial
nature.
The mere incorporation of a company
as a non-profit company and
compliance by such company with the
requirements of the Companies Act
does not necessarily mean that such
company would have any particular
status, classification or treatment by the
South African Revenue Service and/
or under the Income Tax Act, 1962 (or
under any other legislation), except
where any such legislation provides
otherwise.
In addition, the incorporator, member
or director of a non-profit company
may not directly or indirectly receive
any financial benefit or gain from
such company, aside from reasonable
remuneration for work done or
reimbursement for reasonable expenses
incurred.
It is important to bear in mind that
certain sections of the Companies
Act which apply to all forms of profit
companies, do not apply to non-
profit companies. However, non-profit
companies have the same statutory
duties as private companies under the
Companies Regulations (as discussed
above).
4.2 Close Corporations
Close corporations are juristic persons
incorporated under the Close Corporations
Act 69, (“Close Corporations Act”). Before
the current Companies Act came into force,
7/8

close corporations were used to great
effect by a number of smaller businesses.
This was due mainly to their relatively low
administration and maintenance requirements
(in comparison with companies under the
previous Companies Act) and the fact that
they did not need to be audited.
Close corporations in existence as at 1
May 2011 (the commencement date of
the current Companies Act) will continue
to exist. However, from this date, no new
close corporations may be incorporated and
companies may no longer be converted into
close corporations as and from this date. The
Companies Act also made certain significant
changes to the Close Corporations Act.
4.3 Associations and Body
Corporates
Under South African common law, an
association of natural persons may exist
is a universitas (a body corporate). The
characteristics of such a body are that it is
capable of owning property separate from
its members and that it enjoys perpetual
succession. It is important that its constitution
explicitly states that it should have these
characteristics, in order for such entity to have
the capacity to sue and be sued in its own
name and to have perpetual succession. In
the event that this is not the case, such entity
will not have the same status as a person
in the eyes of the law and will simply be an
unincorporated body, that is to say, it will
simply be regarded as an aggregation of
natural persons who are acting in concert.
4.4 Partnerships
A partnership is a common law institution and
does not have limited liability since it does
not have a legal personality separate from its
various partners. There is no maximum limit
on the number of partners which a partnership
may have. There are no formalities to form
a partnership although it is quite common
for the partners to enter into a partnership
agreement which sets out certain essential
elements.
It is important to bear in mind that
partnerships do not offer limited liability nor
do they enjoy perpetual succession. This
means that each partner would be jointly and
severally liable for the debts and losses of the
partnership.
4.5 Business Trusts
Business trusts are another form of entity
which can, on occasion, be the means by
which a business is operated. A “trust” is
defined in the Trust Property Control Act,
1988 as an arrangement through which the
ownership of the property of one person
is made over or bequeathed to another
person (the trustee) in whole or in part to be
administered or disposed of in accordance
with the provisions of the trust instrument for
the benefit of the person or class of person
designated (the beneficiary(ies)) in the trust
instrument.
As with associations and body corporates,
business trusts are not frequently used for
business purposes. Despite this, a few other
types of trusts are often used in South Africa
for estate planning purposes.
4.6 Sole Proprietorships
A large number of early stage businesses
often start conducting operations as sole
proprietorships. A sole proprietorship does
not have limited liability or separate legal
personality and is therefore merely viewed
as an extension of the sole proprietor him or
herself.

5. MERGERS AND
ACQUISITIONS
With the coming into effect of the Companies
Act, the regulatory regime governing mergers
and acquisitions has undergone a fundamental
transformation. For example, where in terms
of the previous Companies Act, no provision
was made for mergers or amalgamations,
the new Companies Act now has specific
provisions dealing with these aspects.
Under the Companies Act, statutory mergers
and amalgamations form part of a broader
category of transactions which is referred to
in the Act as “fundamental transactions”. In
addition to mergers and amalgamations,
fundamental transactions also include
disposals of all or the greater part of the
assets or undertaking of a company as well as
schemes of arrangement.
The Companies Act sets out specific
requirements which must be complied
with when any of these transactions is
implemented. Common to all fundamental
transactions is the requirement that the
transactions must be approved by the
shareholders of the relevant company.
If the transaction which is being undertaken
is, in addition to being a fundamental a
transaction, a so called “affected transaction”
then compliance with the South African
Takeover Regulations is also required.
Whether or not a transaction would constitute
an “affected transaction” is a function
primarily of the type and size of the company
involved as well as the number of shares (as
a percentage of the total issued share capital
of the company) involved. The chances of a
transaction being an “affected transaction”
are greater where one is dealing with a large
public (or widely held) company as opposed
to a small private (or closely held) company.
In the area of mergers and acquisitions, the
Companies Act also provides some protection
for minority shareholders. Most notably, where
a company has undertaken a fundamental
transaction against the wishes of its minority
shareholders, provided that the minority
shareholders have complied with certain
requirements, the minority shareholders can
essentially force a company to buy back its
shares from those shareholders.
6. CORPORATE
GOVERNANCE
The object of corporate governance rules is
to improve the quality of leadership which
boards provide to the businesses under their
control. Guidelines on corporate governance
assist directors to understand what corporate
governance requires of them. The King
Report on Corporate Governance for South
Africa, 2009, the King Code of Governance
Principles for South Africa, 2009, and Practice
Notes to the King Report, are widely accepted
as the authoritative works on corporate
governance in South Africa.
The King III report applies to all entities
regardless of the manner or form of
incorporation or establishment and whether
in the public, private or non-profit sectors.
Although not legislated, compliance with
the King Report also forms part of the listing
requirements of the Johannesburg Stock
Exchange.
The legal duties of directors and company
officers and corporate governance are
interlinked and complimentary. Corporate
governance mainly involves the establishment
of structures and processes that enable
directors to discharge their legal obligations.
9/10

The South African courts have held that the
principles contained in the King III Report are
relevant in determining what is regarded as an
appropriate standard of conduct for company
directors. As a general proposition, corporate
governance practices, codes and guidelines
have raised the bar when it comes to what is
regarded as appropriate standards of conduct
for directors. Consequently, any failure to
meet a recognised standard of governance,
albeit not legislated, may render a board or
individual director liable at law.
The key aspects of King III revolve around
leadership, sustainability and corporate
citizenship.
Sustainability: business society and nature
are recognised as being interconnected
in a number of complex ways and, the
sustainability of the company in its
environment is recognised to be a primary
moral and economic imperative.
Corporate citizenship: companies in their
capacity as persons are obliged to operate in
a sustainable manner and in accordance with
the principles contained in the Constitution.
Leadership: effective leadership is at the
core of corporate governance and includes
ethical values of responsibility, accountability,
fairness and transparency. Responsible
leaders should move company strategies
and operations in line with the imperatives of
achieving sustainable economic, social and
environmental performance.
The King III Report has also placed
great emphasis on an integrated report,
which provides a holistic and integrated
representation of the company’s performance
in terms of both its finance and its
sustainability.
7. OVERVIEW OF THE
SOUTH AFRICAN TAX
SYSTEM
South Africa has a national tax system, mostly
governed through the provisions of the
Income Tax Act (“ITA”). Residents of South
Africa are taxed on a residence basis, whilst
non-residents are taxed on a source basis.
The effect of this is that any income accruing
from a South African source is taxable within
South Africa, and residents are taxed on their
worldwide income, with relief granted for
taxes paid in other jurisdictions.
Resident companies are taxed at a flat rate of
28%, and non-resident companies which trade
in South Africa through a branch, is subject to
taxation at a rate of 33%.
Under the general deduction formula
contained in the ITA, expenditure and
losses actually incurred by the taxpayer in
the production of the taxpayer’s income
are deductible, provided that they are not
of a capital nature and only to the extent
that they are laid out or expended for the
purposes of trade. In addition, a number of
specific deductions and capital allowances are
provided for in the ITA.
An assessed tax loss can be carried forward
and set off against the taxpayer’s taxable
income in the following year. Since companies
within a group are treated as separate entities
for tax purposes, the losses suffered by one
company within the group cannot be set off
against another company’s profits within the
group.
Any net capital gain which arises from the
disposal or deemed disposal of assets of a
resident and from the disposal or deemed
disposal of certain assets of a non-resident are

subject to tax in South Africa. Although this
tax is colloquially referred to as “capital gains
tax” (“CGT”), the net capital gain is actually
not taxed separately from normal income but
rather as an integral part of income tax.
Dividends tax is levied at a rate of 15% of the
amount of any dividend paid by any company,
except for a headquarter company. Despite
the fact that dividends tax is a tax on the
shareholder, the ITA provides that the amount
of the tax, must be withheld by the company.
The dividend is deemed to be paid by the
earlier of the date on which the dividend is
paid, or becomes payable by the company
that declared the dividend. If a company
distributes an asset in specie, the amount of
the dividend is the market value of the asset
on the date that the dividend is deemed to
be paid.
The ITA has a sophisticated anti-avoidance
and reportable arrangements structure
based on developed common law principles
supported by extensive case law. Entering into
a tax avoidance arrangement in itself, is not
illegal, however the ITA specifically sets out
impermissible tax avoidance, and in addition,
sets out reportable arrangements, which if not
reported, is subject to penalties.
With effect from 1 October 2012 the Tax
Administration Act has been implemented,
which aims to simplify and consolidate all
aspects of tax administration over all the taxes
and legislation which falls under the control of
the South African Revenue Service (“SARS”).
Transfer pricing, thin capitalisation and
similar matters are addressed as part of a
singular, anti-avoidance, approach under the
provisions of the ITA. The ITA enables SARS to
recalculate the taxable income of each person
that derives a tax benefit who is party to an
affected transaction. Thin capitalisation is not
specifically addressed, but is enforced under
the same provisions in a move aimed to align
South Africa’s thin capitalisation and transfer
pricing rules with that of its international
counterparts.
Donations tax is levied at a flat rate of 20%
on the value of property donated by South
African individuals and companies. Certain
donations are exempt from donations tax,
such as donations made by a public company,
donations made between spouses and
charitable donations. Donations tax is payable
by the donor. Donations to an offshore trust
will be subject to donations tax, although non-
residents are not liable for donations tax.
The principal source of indirect taxation
revenue in South Africa is value-added tax
(“VAT”). VAT liability is assessed and regulated
in terms of the Value-Added Tax Act (“VAT
Act”). At present, the standard rate of VAT is
14%, although South African exported goods
and services are subject to VAT at a rate of
0%. A person who carries on an enterprise and
provides “taxable supplies” in excess of
ZAR1 000 000 per year is required, in terms of
the VAT Act, to register as a vendor.
Transfer duty is levied in terms of the Transfer
Duty Act, which provides that the transfer of
immovable property (land) by an individual,
company, trust or any other entity is subject to
transfer duty.
The Securities Transfer Tax Act, provides for
the payment of securities transfer tax (“STT”)
on the transfer of beneficial ownership of all
shares in companies incorporated in South
Africa as well as foreign companies listed on a
South African stock exchange. The rate of tax
is 0,25% of the higher of the market value or
consideration paid for the shares. STT is not
payable on the issue of shares.
11/12

8. EXCHANGE CONTROL
South Africa has an exchange control system
in place which regulates the transferring of
capital (goods or money) in and out of the
South Africa. Exchange control is regulated
by the Exchange Control Regulations, 1961
(promulgated in terms of the Currency
and Exchanges Act 9 of 1933) (“Excon
Regulations”) together with certain orders,
rules and rulings, promulgated in terms of the
Regulations.
The National Treasury has delegated the
administration of exchange control to the
South African Reserve Bank (“SARB”), which is
responsible for the day to day administration
and regulation of exchange control. SARB
has, in turn, delegated some of its powers in
relation to exchange control matters to certain
banks, which are known as authorised dealers
in foreign exchange.
A transaction dealing with the in or outflow
of capital from South Africa may require
exchange control approval from SARB. As
such and in order to avoid an instance where
an agreement relating to foreign exchange is
void or penalties are enforced, it is imperative
that one ascertains whether exchange control
may be applicable to a transaction, as the
policy underlying exchange control is one of
complete prohibition, except with approval of
SARB. Exchange control approval is required
for; inter alia, dealings in non-resident owned
securities and an outward transfer of capital by
residents.
It is important to note that the definition
of capital has been amended to include
intellectual property. Consequently, any
transfer of intellectual property rights from a
resident to a non-resident constitutes outflow
of capital and will therefore require prior
exchange control approval.
Regulation 14 of Regulations state that, no
person may acquire or dispose of a controlled
security without the permission of SARB. A
controlled security is any security which is
registered in the name of a non-resident or
of which a non-resident is the owner, or in
which a non resident has an interest. The
control over the acquisition or disposal of
controlled securities is exercised by placing
the endorsement “non-resident” on all
securities owned by non-residents or in which
non-residents have an interest. The purpose
of this form of control is to ensure that the
proceeds of any sale are remitted abroad or to
the relevant non-resident.
A South African resident, for purposes of
exchange control, is any person (i.e. natural
person or legal entity) who has taken up
permanent residence i.e. domiciled or
registered, in South Africa, irrespective of
whether that person is of South African
nationality or not. A non-resident is a person
whose normal place of residence is outside of
the common monetary area (i.e. RSA, Lesotho,
Swaziland and Namibia).
Exchange control is not intended to interfere
with the operation of the commercial,
industrial and financial systems of South Africa,
but it is intended to effectively control the
available foreign exchange reserves and to
ensure that it is applied in the best interest
of the country. Be that as it may, one should
not disregard the importance exchange
control to a transaction, as it may result in
the nullification of an agreement relating to
foreign exchange or bring about penalties.
9. EMPLOYMENT LAW
In South Africa, employment law was originally
based primarily on the common law which
focused on freedom of contract within the
broad limits of legality and the good morals

of society. However, employment legislation
has reduced the ability of parties to an
employment relationship to regulate their
respective rights and duties. When dealing
with labour and employment law in South
Africa, the most relevant and applicable
legislation includes the Labour Relations
Act, 1995 (“LRA”), the Basic Conditions of
Employment Act, 1983 (“BCEA”) and the
Employment Equity Act, 1998 (“EEA”).
The LRA applies to all employers and
employees, except for members of the
South African National Defence Force, South
African National Intelligence Agency, South
African Secret Service, South African National
Academy of Intelligence and COMSEC. Its aim
is to “advance economic development, social
justice, labour peace and the democracy of
the workplace”. The LRA therefore provides
the necessary framework to:
• regulate the organizational rights of trade
unions;
• promote and facilitate collective bargaining
at the workplace and at sectoral level;
• regulate the right to strike and the
recourse to lock-out in conformity with the
Constitution;
• promote employee participation in
decision-making through the establishment
of workplace-forums;
• provide simple procedures for the
resolution of labour disputes through
statutory conciliation, mediation and
arbitration (for which purpose the
Commission for Conciliation, Mediation
and Arbitration was established), and
through independent alternative dispute
resolution services accredited for that
purpose;
• establish the Labour Court and Labour
Appeal Court as superior courts, with
exclusive jurisdiction to decide matters
arising from the Act;
• provide for a simplified procedure for the
registration of trade unions and employers’
organizations, and to provide for the
regulation to ensure democratic practices
and proper financial control;
• give effect to the public international law
obligations of South Africa relating to
labour relations; and
• provide for incidental matters.
The BCEA both establishes and enforces
basic conditions of employment and
regulates the variation of basic conditions of
employment and is applicable to all employers
and employees (save for members of the
National Intelligence Agency, the South
African Secret Service and the South African
National Academy of Intelligence, unpaid
volunteers working for an organization serving
a charitable purpose and the directors and
staff of COMSEC). For example, it regulates
leave, working hours, employment contracts,
deductions, salary advice slips and termination
of employment.
The EEA came into effect on 1 December
1999. This act recognises that apartheid and
other discriminatory laws and practices caused
disparities in employment, occupation and
income within the national labour market
and that these disparities create pronounced
disadvantages for certain categories of people
that cannot be redressed simply by repealing
such discriminatory laws. Its purpose and
objective is therefore to eliminate unfair
discrimination in employment and to ensure
the implementation of employment equity
to redress the effects of discrimination
through affirmative action measures. The
provisions in respect of the prohibition
of unfair discrimination in Chapter II finds
application to all employees and employers
(save for members of the National Defense
Force, the National Intelligence Agency, the
South African Secret Service or the South
African National Academy of Intelligence
13/14

or to the directors and staff of COMSEC).
Chapter III deals with affirmative action and
finds application only to designated groups
(meaning black people, women and people
with disabilities) and designated employers
(meaning a person who employs 50 or more
employees; a person who employs fewer than
50 employees that has a total annual turnover
that is equal to or above the applicable annual
turnover of a small business; a municipality;
an organ of State but excluding local spheres
of Government, the National Defence Force,
the National Intelligence Agency and the
South African Secret Service; and an employer
bound by collective agreement in terms of
Section 23 or 31 of the LRA which appoints it
as a designated employer and to the extent
provided for in the agreement).
In addition to the above, other relevant
employment legislation includes:
• Occupational Health and Safety Act, 1993
which aims to provide and regulate health
and safety at the workplace for all workers;
• Skills Development Act and Regulations,
1998 which aims to develop and improve
the skills of the South African workforce;
and
• Skills Development Levies Act, 1999
which prescribes how employers should
contribute to the National Skills Fund.
10. WORK PERMITS
AND VISAS
The immigration laws of South Africa control
the movement of people out of and into
the country. In order to work in South Africa,
foreign persons need ensure that they have
the necessary permits to do so. A variety of
permits are available.
A foreign person possessing exceptional skills
may apply for an exceptional skills permit at
a Home Affairs office or at a South African
representative if their applying from abroad.
These permits are issued to foreign persons
who excel in their field of specialisation.
This type of work permit is valid for three
years and the person can also apply for
permanent residence whilst in possession of
an exceptional skills work permit.
A general work permit may be issued by the
Director-General to foreign persons not falling
within the category of persons possessing
exceptional skills or qualifications.
A quota work permit may be issued to a
foreign person if the person falls within a
specific professional category or within a
specific occupational class determined by the
government.
An intra-company transfer work permit may
be issued to a person employed abroad by a
business that operates a branch of its business
within South Africa, either as subsidiary or
affiliate relationship. The person may by
reason of their employment be required to
conduct work within South Africa. The permit
is valid for a period not exceeding two years
and cannot be extended. The person can only
do such work as specified on their permit.
The employer has to furnish the prescribed
financial guarantees to settle deportation and
other costs should such person fail to depart
when they are no longer allowed to visit in the
Republic.
A corporate permit may be issued to a
corporate applicant who wants to employ
foreigners to conduct work for it. A corporate
permit is a temporary residence permit and it
offers the possibility to employ a large number
of foreign employees. Proof needs to be
provided the corporate applicant that the skills
required for the jobs are not available from
South African applicants. When the corporate

permit has been approved, the individual
employees may then obtain work permits in a
fast–tracked and cost saving procedure.
A foreign person intending to establish a
business or invest in an existing business
in South Africa must apply for a business
permit at their nearest Home Affairs offices
or South African representative abroad.
This will also apply where someone will be
employed by a South African business which
they have established or invested in. The
person must undertake to comply with the
relevant registration requirements set out in
the law and administered by the South African
Revenue Service (SARS).
It must be kept in mind that there are detailed
requirements relating to the various types of
work permits. These requirements change
from time to time and we have not dealt with
the requirements in the summary above. One
should always check the current requirements
to make sure that they can be met.
Unless a person has a valid work permit, they
must produce a valid visa in order to enter
South Africa (except if they are from a country
that is exempted from visa control). The
maximum period for a visitor’s visa is 90 days,
but it can be extended for another 90 days.
Visas are not issued on arrival at a port of entry
and a person will be refused admission if they
cannot produce a visa.
11. COMPETITION LAW
Competition law in South Africa is regulated
by the Competition Act, 1998 (“Competition
Act”). The Competition Act does not only
apply to all economic activity within South
Africa, but also includes economic activity,
regardless of where it takes place, which has
an effect in South Africa.
The main goal of competition legislation
in South Africa, as in other developed
countries, is the promotion and maintenance
of competition and the regulation of anti-
competitive behaviour. However, competition
legislation in South Africa is also endowed
with another, rather unique, purpose – that of
correcting past economic injustices.
The provisions of the Competition Act are
enforced by the competition authorities, which
consists of the Competition Commission, the
Competition Tribunal and the Competition
Appeal Court.
11.1 Prohibited Practices
The Competition Act regulates prohibited
practices, which can be divided into three
categories: horizontal restrictive practices,
vertical restrictive practices and abuse of
dominance.
11.2 Horizontal and Vertical
Restrictive Practices
Firms in a horizontal or vertical relationship
are prohibited from entering into agreements
or engaging in conduct which will prevent
or lessen competition between them, unless
they can show that there are pro-competitive
gains that outweigh the anti-competitive
effect of the practice. However there are
certain restrictive practices which are per se
prohibited – these practices are by their very
nature considered to be so blatantly anti-
competitive that they cannot be justified with
economic arguments.
Examples of horizontal restrictive practices
which are per se prohibited include price
fixing, market allocation and collusive
tendering. By contrast the only per se
prohibited practice in respect of vertical
restrictive practices is that of minimum resale
15/16

price maintenance, where the minimum resale
price is not merely a recommendation made
by the supplying firm.
11.3 Abuse of Dominance
Dominance itself is of course not prohibited,
however a dominant firm may not abuse
this dominance in order to prevent or lessen
competition in a market. The Competition
Act provides that a firm will be dominant if it
possesses at least 45% of a market but even
if a firm possesses less than this it may still
be deemed to be dominant in terms of the
Competition Act in certain instances.
Examples of conduct which a dominant
firm is prohibited from engaging in include
charging excessive prices to the detriment of
consumers and refusing competitors access to
an essential facility where granting such access
would be economically feasible.
11.4 Mergers
In terms of the Competition Act, merging
parties are compelled to notify the relevant
competition authority, where the proposed
transaction is classified as an intermediate
or large merger based on the monetary
thresholds put forth in the Competition Act.
A merger is defined in such a manner so as
to include the direct or indirect acquisition
of direct or indirect control over the whole or
part of the business of another firm.
Where the merger in question is found to
be intermediate or large, the competition
authorities must decide whether or not to
allow the merger based on the two-stage
test set out in the Competition Act. The
overarching question, when deciding whether
to allow the merger, is whether the merger
will probably substantially lessen or prevent
competition.
11.5 Enforcement and Penalties
If a firm is found to have engaged in
prohibited conduct or to have implemented a
merger without the necessary permissions, the
Competition Act sets forth a number of orders
which may be made by the Competition
Tribunal. The vast majority of the penalties are
civil in nature although imprisonment may also
be imposed in a limited number of instances.
The authorities may impose administrative
penalties of up to 10% of the firm’s annual
turnover in, and its exports from, South Africa
during its preceding financial year.
11.6 Consumer Protection
South Africa has put two specific pieces of
legislation in place in order to protect the
rights of consumers. They are discussed
below.
11.7 Consumer Protection Act,
2008 (“CPA”)
The CPA has a significant effect on the
marketing and supply of goods and services
to consumers. It also regulates the relationship
between suppliers and consumers in detail.
The CPA applies to all consumer transactions,
unless one of the exemptions applies. For
instance, the act will not be applicable if the
consumer is a juristic person and its annual
turnover or asset value exceeds the threshold
set from time to time.
One of the most controversial provisions of
the CPA relates to the liability of suppliers. If
someone supplies goods, and those goods
cause harm to the consumer, the supplier
will be liable for the harm. This will be the
case even if the supplier was not negligent.
Furthermore, all parties in the supply chain can
be held liable by the consumer. This includes

the manufacturer, the wholesaler and the
business that sells the goods to the public.
The CPA contains standard warranties that
apply when goods are supplied to consumers.
A supplier must also ensure that its packaging
and/or labelling complies with the CPA’s
requirements. In addition, the CPA has strict
requirements relating to the disclosure of
prices of goods.
When it comes to promotional competitions,
suppliers must ensure that they follow
the provisions of the CPA in this regard.
For instance, the CPA contains certain
requirements regarding the rules of
promotional competitions. It also regulates
the consideration payable by consumers for
entering into competitions.
11.8 National Credit Act, 2005
(“NCA”)
This act protects consumers in the context
of credit granting and credit agreements.
The NCA codifies a number of basic rights of
consumers with regard to the credit market.
The NCA introduces new rights for consumers
and establishes measures that assist
consumers in making informed decisions
before entering into a credit transaction. Some
of these consumer rights under the NCA
include, amongst others, the following:
• the right to apply for credit free of
discrimination against the borrower;
• the right to receive a copy of a credit
agreement;
• the right to privacy regarding consumers’
personal information; and
• the right to assistance by a debt counsellor
to assist over-indebted consumers with
restructuring debts to prevent unnecessary
forfeiture of assets.
The NCA also regulates aspects such as the
content of credit agreements, automatic
credit limit increases, the practice of reckless
lending, as well as the fees and interest
allowed with regards to credit agreements.
12. DATA PROTECTION
As at the date of this publication, South
Africa does not have specific data protection
legislation. However, this situation will change
once the Protection of Personal Information
Bill, 2009 (“POPI”) comes into force.
The purpose of POPI is to protect personal
information processed by public and private
bodies and aims to provide minimum
requirements with which the processing of
personal information must comply.
POPI establishes eight conditions for the
lawful processing of personal information:
accountability, processing limitation, purpose
specification, further processing limitation,
information quality, openness, security
safeguards and data subject participation.
There are a number of exclusions from
the application of POPI and there are also
some instances when exemptions from the
information protection principles may apply.
POPI will establish an Information Protection
Regulator who may issue codes of conduct.
It also contains provisions regulating direct
marketing by means of unsolicited electronic
communications, directories and automated
decision making.
13. INTELLECTUAL
PROPERTY
There are four main types of intellectual
property rights in South Africa: patents,
registered designs (sometimes called utility
17/18

models), trade marks and copyright. These
rights do not exist in isolation, but each right
overlaps or is intertwined with another in one
way or the other.
13.1 Patents
A patent is granted in respect of inventions
in order to protect the underlying functioning
thereof.
In order to be registrable, an invention must
be new, inventive and capable of being used
or applied in trade, industry or agriculture.
There are a number of things that are
specifically excluded from the definition of
an invention, such as discoveries, scientific
theories and mathematical methods. Literary,
dramatic, musical and artistic works are also
excluded, as these are protected by copyright.
South Africa’s patent system is depository,
and not examinatory. This means that the
Commissioner of Patents (previously called the
Registrar of Patents) only examines a patent
application to determine whether it complies
with the formal requirements of a patent,
and not as to whether it complies with the
registrability requirements. It is therefore very
important for the patent specifications (which
set out exactly what is claimed to be new and
inventive about the invention) to be drafted
very precisely, as they will only be tested if
somebody attacks the patent registration.
A patent registration gives the proprietor
thereof the right to prevent others from
making, using, exercising, disposing or
offering to dispose of, or importing the
invention in South Africa. A patent registration
is valid for twenty years from the date of the
application, subject to the annual payment of
renewal fees.
13.2 Registered Designs
The purpose of a registered design is to
protect the physical appearance of a product.
There are two types of designs: aesthetic
designs and functional designs.
An aesthetic design is any design (a pattern,
shape, configuration, ornamentation or a
combination of these) applied to an article in
any way that appeals to and is judged solely
by the eye, irrespective of its aesthetic quality.
In order to be registrable, an aesthetic design
must be new and original. A feature of an
article cannot be registered as an aesthetic
design if it is necessitated by the function that
the article must perform or if it is a method or
principle of construction. The former should
be registered as a functional design, and the
latter as a patent.
A functional design is a design (a pattern,
shape, configuration or combination of these)
applied to any article by any means and
having features which are necessitated by the
function that the article is to perform. In order
to qualify for registration, a functional design
must be new and not commonplace in the
art in question. Spare parts are specifically
excluded from being registrable as functional
designs.
Like patents, design applications are only
examined to determine compliance with the
formal requirements of the Designs Act, and it
is therefore also advisable to get professional
help when filing an application.
A design registration gives the proprietor
thereof the right to exclude others from the
making, importing, using or disposing of any
article embodying the registered design or
a design not substantially different from it.
A registration for an aesthetic design is valid

19/20
for fifteen years and a functional design for
ten years, subject to the payment of annual
renewal fees.
13.3 Trade Marks
A trade mark is a sign capable of being
represented graphically that is used or
proposed to be used to distinguish the goods
or services of the proprietor of the trade mark
from those of others in the course of trade.
In order to be registrable, a trade mark must
not only possess the necessary distinctiveness
as mentioned above, but it must also not be
identical or confusingly similar to a trade mark
for which an application or registration already
appears on the Register. The Trade Marks Act
also sets out a number of other factors that
would make a trade mark unregistrable, such
as similarity to well-known foreign trade marks,
deceptiveness or functionality (in the case of
a trade mark consisting of a container or the
shape of the goods themselves).
Trade mark applications are examined both
as to formal and substantive requirements.
An application will be refused if it does not
comply with the registrability requirements set
in the Act.
The owner of a trade mark registration has
the right to prevent others from using in trade
a trade mark that is identical or confusingly
similar to his in relation to the same or similar
goods or services in relation to which it is
registered, or in relation to any goods or
services if such use is likely to take advantage
of or be detrimental to the distinctive
character or repute of his trade mark. A trade
mark registration is valid for ten years from the
date of the application, but can be renewed
for additional periods of ten years at a time
subject to the payment of renewal fees.
13.4 Copyright
It is not possible to register copyright (other
than in cinematograph films) in South Africa.
It is therefore very important to keep precise
records of the person who created the work
and when it was created, as these things will
need to be proven in the event of litigation
based on the infringement of the copyright in
that work.
Copyright vests automatically in the physical
form of a “work” as defined in the Copyright
Act if it is original and if the author is a
qualified person (i.e. a citizen or resident of
South Africa or one of the member states
of the Berne Convention) or if the work was
first published in South Africa or a Berne
Convention country. The works that qualify for
copyright are literary works, musical works,
artistic works, cinematograph films, sound
recordings, broadcasts, programme-carrying
signals, published editions and computer
programs.
Each type of work has its own list of acts that
are reserved for the copyright owner. However,
in general copyright gives the owner the right
to prevent others from reproducing, copying
or adapting his work.
Copyright in technical drawings (which
are a type of artistic work) is not infringed
by a three-dimensional reproduction of
the drawings that was created by reverse
engineering an authorised three-dimensional
reproduction of those drawings. In such a case,
the owner of the copyright in the drawings
should file an application for a functional
design.
The term of copyright also depends on
the nature of the work. For literary, musical
and artistic works other than photographs,

copyright subsists for fifty years after the death
of the author. For the other works, it subsists for
fifty years from the date it is made available to
the public, published, broadcasted or emitted,
depending on the type of work.
14. INFORMATION,
COMMUNICATION &
TECHNOLOGY (ICT) LAW
There are a couple of pieces of legislation that
are relevant for the ICT field. These include the
Electronic Communications and Transactions
Act, 2002 (“ECTA”), the Regulation of
Interception of Communications and Provision
of Communications–Related Information
Act, 2002 (“RICA”), as well as the Electronic
Communications Act, 2005 (“ECA”).
14.1 ECTA
The objective of this Act is to enable and
facilitate electronic communications and
transactions, by providing a framework
of certainty around which transactions
and communications can be conducted
electronically. ECTA defines “data messages”
and deals with the rights and obligations
which follow from the communication of data
messages. ECTA deals, amongst other things,
with the following:
• the recognition of data messages, the
requirements of law for certain information
to be in writing, signature requirements
of electronic messages, as well as the
admissibility and evidential weight of data
messages;
• the information and validity of agreements
concluded by way of data messages,
the time and place of communications,
despatch and receipt of data messages and
the acknowledgement of receipt of data
messages.
• cyber inspectors and cyber crimes.
14.2 RICA
The RICA generally prohibits the monitoring
and surveillance of communications, subject
to certain exceptions provided for in the act.
Some examples of such exceptions include
situations where the surveillance will prevent
serious bodily harm or where one of the parties
to the communication has provided consent for
such interception.
14.3 ECA
The ECA has been promulgated in order to
promote the convergence in the broadcasting,
broadcasting signal distribution and
telecommunications sectors. It provides a
legal framework for the convergence of these
sectors.
The act also contains detailed provisions
regarding the physical location and
characteristics of electronic communication
facilities relating. It also sets standards for
technical equipment.
The ECA regulates the granting of licences
in the electronic communications arena,
such as broadcasting licences and electronic
communication network licences. It also
deals with the type approval of electronic
communication equipment.
The Independent Communications Authority
(ICASA) has been established by the ECA to
perform various functions, including the issuing
of the licences mentioned above.

15. AGENCY, LICENSING,
DISTRIBUTION &
FRANCHISING
When conducting business in South Africa, an
entity can establish amongst other things, an
agency, licensing, distribution or franchising
relationship with another party, depending on
the parties’ specific requirements.
There is no specific legislation that deal with
agency, licensing and distribution agreements.
However, the CPA regulates franchising in part
and will, to an extent, also be applicable if an
agent, distributor or licensee qualifies as a
consumer in terms of the CPA’s provisions.
15.1 Overview of agency, licensing
and distribution
An agency relationship is an arrangement where
the agent carries out certain obligations on
behalf of the principal. In terms of an agency
agreement, the principal will be bound by acts
and/or omissions of the agent, as if such acts
and/or omissions were made by the principal
personally.
A licence agreement is an agreement in terms
of which the licensor provides the licensee with
permission to exercise some kind of right which
the licensor possesses, for example copyright or
a trade mark. As consideration for such licence,
the Licensee usually pays a royalty to the
Licensor. A licence agreement also regulates
the rights and obligations of the parties
pertaining to the licence.
A distribution agreement is an agreement
in terms of which the manufacturer grants
the distributor the rights to distribute the
manufacturer’s product.
15.2 Franchising
In order to establish a franchise, a written
franchise agreement must be concluded.
Franchise agreements are specifically regulated
by the CPA. In terms of a franchise agreement,
the franchisee is granted the rights to carry on
business under the franchisor’s business system
and trade marks. In consideration for this, the
franchisee must normally pay franchise fees to
the franchisor.
The CPA prescribes specific information and
provisions that must be included in a franchise
agreement.
The CPA also requires that a franchisor
must provide a franchisee with a disclosure
document. This must be done no later than
14 (fourteen) full days before signature of the
franchise agreement. The minimum content of
the disclosure document is prescribed by the
CPA and, in short, must provide a summary of
the franchise to potential franchisees.
21/22

Doing Business in South Africa - Adams & Adams

Recommended

Recommended

More Related Content

What's hot

What's hot (19)

Viewers also liked

Viewers also liked (9)

Similar to Doing Business in South Africa - Adams & Adams

Similar to Doing Business in South Africa - Adams & Adams (20)

More from TAG Alliances

More from TAG Alliances (20)

Recently uploaded

Recently uploaded (20)

Doing Business in South Africa - Adams & Adams