The Department of Trade, Industry and Competition is assessing new ways of lowering the barrier to entry for investors from abroad. In a nutshell: investors will more easily be able to set up their businesses in South Africa and obtain a Business Visa.
The current immigration legislation requires that a foreigner who wishes to start their own business in South Africa, must comply with the requirements for a Business Visa in accordance with Section 15 of the Immigration Act. This comes with numerous challenges and has historically made it difficult for smaller businesses, particularly in the tech space, to be granted Business Visas in South Africa.
However, after years of dialogue, it appears in recent interactions with the Department of Trade, Industry and Competition (DTIC) that there is a shift in sentiment and they are increasingly valuing smaller investors; actively reaching out to various stakeholders including the Forum of Immigration Practitioners of South Africa (FIPSA) and selected immigration firms to gather ideas on how to make South Africa a more attractive foreign investment destination.
This comes as a welcome development as dated requirements and strict policies have restricted foreign investors in establishing successful businesses in South Africa or obtaining Business Visas in the past.
One of the greater challenges has been, that investments in excess of R5 million in book value of the organisation, would generally qualify the business for the relevant visa. This has been a large barrier to entry for many businesses and it appeared that the DTIC was more interested in larger, green-field investments, marginalising businesses in the e-commerce, app development, tech or IT consulting industries. Fundamentally, these businesses have often fallen short of the investment amount, or this has not been a business need or focus. It is possible that the DTIC did not recognise the scaling opportunities of e-commerce businesses or the potential value-add to the economy in the past.
In addition, as is common in the tech sector, the investments were often not originating from the foreign applicant, but rather from Venture Capitalists or third parties. These factors have collectively presented major hurdles and resulted in missed opportunities for growth and development in the past.
Our attempts to inform and engage
Over the past few year years, we have voiced our opinion that the internal guidelines for a Business Visa recommendation were not taking the modern economy into account and that the requirements have been too demanding for many businesses.
Therefore, in an attempt to positively impact policy change, IBN has put forward suggestions and ideas to the department. These include:
- Lowering the R5 million investment criteria to R1 million.
- Accepting third party private funding, on the condition that it is a foreign direct investment.
- In the case of smaller start-ups in the greater tech sector, assessing businesses on the experience and credentials of the founder, rather than on capital.
- Retaining a 60% staff complement of local nationals as well as creating local employment opportunities as this should remain a key focus in attracting foreign investment to South Africa.
- Lastly, re-evaluating the waiver option to introduce a blanket waiver for sectors in high demand including: - Digital support services - E-commerce businesses - Fin-tech businesses - AI services - Cybersecurity consultancies - App developers and app development agencies
While our opinions had seemingly fallen on deaf ears in the past; fortunately, since the May 2019 elections, we have seen a wave of change in the Department of Trade and Industry regarding immigration legislation and it appears that policy improvements are imminent.
At IBN we are passionate about enabling opportunities for growth in the South African business landscape, particularly from the perspective of increasing local employment figures. Thus, we are optimistic about the change in sentiment and look forward to seeing improvements in legislation, which will result in increased foreign investment into the country.
Stay updated on changes in policy by signing up for our newsletter HERE.
Have questions? Contact us directly for more information.
by Andreas Krensel