2.1 Legislation on trade and investment

2.1.1 Legislation on trade administration

Legislation concerning foreign trade administration in South Africa includes the International Trade Administration Act, the Import and Export Control Act, and the Customs and Taxation Act. In 2005, South Africa amended its Customs and Taxation Act.

2.1.2 Legislation on investment administration

The Export Credit and Foreign Investments Re-insurance Act and the Exchange Control Amnesty and Amendment of Taxation Laws Act are the two major legislation on foreign investment in South Africa. Other laws pertinent to foreign investment include the Companies Act, the Income Tax Act, the Financial Institution (Investment Funds) Act, and the Labor Act. All the areas of foreign investment come under these laws.

In 2005, South Africa revised, inter alia, its Exchange Control Amnesty and Amendment of Taxation Laws Act and its Income Tax Act.

Another legislation related to foreign investment in South Africa is the Competition Act, which provides strict criteria for approval of mergers and aims to encourage competition between businesses.

In addition to the above-mentioned legislation, investment-related laws in South Africa include the Environment Act as adopted on 31 May 2004.

2.2 Trade administration

2.2.1 Tariff system

According to its WTO accession commitments, South Africa has significantly reduced its tariff. South Africa's average tariff stands at 5.8 percent at present, with an average tariff of 9.1 percent and 5.3 percent for agricultural and non-agricultural products respectively. In 2005, South Africa cut its import tariff on acetate, acetyl cellulose and related products as well as on some imports subject to specific duties.

According to the Customs Union Agreement signed by South Africa, Botswana, Lesotho, Namibia and Swaziland in 2002, these five countries have established a Southern African Customs Union (SACU) administering a uniform tariff. After the agreement went into effect, member countries divide tariff receipts among themselves according to a pre-arranged formula. The supreme decision-making body for SACU is the Council of Ministers (COM).

2.2.2 Import administration

Any company registered in South Africa's Department of Trade and Industry can engage in import trade, with no need to apply for special trading rights. The import of most products has been liberalized in South Africa, but certain special products are subject to licensing administration. In accordance with the Import and Export Control Act, these products include, among others, fish and fishery products, certain vegetables and other agrarian products, certain dairy products, certain red teas, fermented beverages, alcoholic beverages, petroleum and certain petrochemical products, radioactive mineral products, certain footwear, all kinds of waste products, certain medicines and pharmaceutical products, environmentally hazardous products, gambling devices, and arms. Importers should apply for a license before importing any of these products and no shipment should be made overseas prior to the granting of the import license. Importers should submit import license application to the relevant authorities at least two weeks before shipment to allow sufficient time for the approval. Application materials include the name of the imports and any information demanded by the authorities to be made available about the imports. Once issued by the Import and Export Administration Bureau, the import license is to remain valid for 12 months.

2.2.3 Export administration

It is required that South African exporters be registered in the Customs House. Export licensing administration is imposed on strategic products, non-regenerable resources, agricultural products, scrap metals and so on. The catalog of products coming under licensing is determined by the South African Minister of Trade and Industry and published on government bulletins. The exporters of diamond should register in South African Diamond Commission. According to South African regulations, the export of waste metals, which are deemed national resources, is placed under restriction. Before an export license is granted, waste metals should first be made available to South African lower stream enterprises at a discounted rate of their export prices, normally 15 percent discount for non-ferrous metals and 7.5 percent discount for ferrous metals. The government can only issue export licenses if the lower stream enterprises do not respond to the offer or do not need the waste metals. In addition, although no clear regulation in this regard exists, the export of ostrich and its breeding eggs is still prohibited.

2.2.4 Other related systems

South Africa has now abolished its foreign exchange control under the current account. However, to guard against financial fraud and money laundering, South African banks have, as required by the Financial Intelligence Center Act, tightened their monitoring over the funds of their clients.

2.3 Investment administration

South Africa has tried to promote investment, particularly foreign investment, through a number of state-initiated programs. As from 1 January 2001, South Africa has adopted the policy of taxation according to residence. According to the agreements with other countries on the avoidance of double taxation, non-residents in South Africa are still subject to taxation on their earnings in South Africa. The South African taxation categories fall into two broad types – direct taxation and indirect taxation. The former includes income tax, corporate secondary tax, capital earnings tax, and endowment tax, whereas the latter covers value-added tax, real estate inheritance tax, stamp tax, consumption and import tax, circulatory securities tax, district service consulting fees, and skill development fees.

The South African corporate income tax currently stands at 30 percent and value-added tax at 14 percent. The rate of excise duties is 10 percent except that office equipment and motorcycles have a duty at 5 percent; specific excise duties are levied on tobacco and tobacco products, alcoholic and nonalcoholic beverages.

South Africa places no restriction upon stock investment by foreign investors. Foreign investors buying stocks of publicly listed companies in South Africa should confirm that authorized dealers endorse “Non-resident” on stock certificates so that stock returns such as dividends could be remitted home in the future. Generally speaking, no restriction is imposed upon the remittance abroad of investment earnings by non-residents.

2.4 Competent authorities

The Department of Trade and Industry (DTI) and the International Trade Administration Commission (ITAC) regulate foreign trade in South Africa. The Department of Trade and Industry conducts foreign economic relations and trade negotiations, signs bilateral and multilateral trade agreements, keeps in touch with provincial economic development agencies, and coordinates trade and investment relations between provinces in the country. On the other hand, the International Trade Administration Commission carries out anti-dumping and countervailing investigations in the SACU region, is responsible for import and export administration, licensing administration, restructuring the tariff regimes, supervision of preferential industrial policies, and has the authority to require local importers and exporters to provide information regarding their business activities.

Other governmental agencies relating to trade and investment administration include the National Economic Development and Labor Council and the Board for Regional Industrial Development.