South Africa: Explaining the Business Visa

South Africa How to Apply for a Business Visa

Today we would like to share our wealth of experience of 20 years on how to apply for a Business Visa in South Africa.

What is the Business Visa?

The Business Visa is not for your business travel. It’s for the people who want to start a business in South Africa, want to own a business, purchase of business, or work in the business. We could also call it Entrepreneurial Visa, or the Investor Visa, but let’s stick to the technical term Business Visa.

It’s important to understand that we at IBN Immigration Solutions have done many Business Visas, and we do think it’s very important to choose an immigration company which has vast experience of understanding the businesses and therefore compiling the applications correctly.

What are the legal requirements to qualify for Business Visa in South Africa?

If you start a new business, you’re supposed to invest more than 5 million South African Rand into the book value of the business. This money needs to come from overseas, so you cannot approach a local South African bank for it.

The second requirement is that 60% of your workforce needs to be local, meaning South African citizens or permanent resident holders. If you as a foreigner work in it, ideally you have another two employees that are local. These are the only two requirements.

Sounds simple, isn’t it? Yes, sounds simple. But in practice, obviously, it’s a bit trickier than that.

What sector must the business be in?

The good news is that, unlike Mauritius, for instance, or other African nations, you can start any business in any sector in South Africa. There are three sectors free businesses are prohibited, but in 20 years I’ve never found a client who wanted to start in them, so I’m not going to mention them. So, in principle, you’re not limited, or you’re not prescribed a certain sector where you need to start your business.

What are the steps to apply?

The first step is always to apply for a recommendation letter from the Department of Trade and Industry. Number two could be potentially to apply at the Department of Home Affairs. This is a very high chance that if the Business Visa gets approved and even your waiver, step number two and three will be positive. As a matter of fact, we have never had, after positive DTI recommendation, the waiver or the business visa rejected.

The DTI is the critical application in this process, in order to qualify for the South African Business Visa. What does the DTI want? They want to understand the business plan. If you’re buying an existing business, it’s easier because you have financial statements. You have customer reports, numbers, etc. But if you want to start a new business, they want to understand your business needs. This needs to be at least a short business plan and we would incorporate this business plan in the application form of the DTI.

Then you need to also show the availability of the funds. As we said, in principle, you need to invest more than 5 million Rand into the book value of the business. Internationally, that’s quite a lot.

Mauritius is $50,000USD, Kenya is $100,000USD I think maybe the South African government should rethink this figure and lower it, but now, the 5 million stands and the crucial point is really the availability.

We have a lot of clients, private clients, who want to sell the house overseas first, and the transfer needs to go through and they’re going to ask me, “Can I use the binding legal sales agreement because that’s binding as available funds?” The answer is no, you cannot, the money needs to be available.

You can, of course, use a loan overseas because South Africa is interested in foreign direct investment. They are only interested in the 5 million coming from overseas: from outside South Africa into South Africa. This also answers the typical question, “Can I take a local loan?” You can’t it: doesn’t count as foreign direct investment. Ideally, it’s available in cash.

Using business capital as investment

In practice, there’s a couple of hurdles. Let’s imagine you are founder of a company in Europe. The company is 20 years old and it’s doing very well. Now the company wants to invest in South Africa, not you as the founder and your private capacity, but the company. The good news is that the DTI is quite lenient towards this scenario.

If you can prove that you are the founder of the investing company, or a majority shareholder, or you have a controlling interest in it, then they will deem the investment by the company from overseas as your private investments in Africa and you as the individual can apply for the Business Visa. Obviously, your company don’t need a Business Visa in South Africa; you need it because you’re the foreigner living here.

Business Visa and start-ups

We struggle sometimes with start-ups. Typically, a founder has a great idea. They put in equity, but then they’re financed by third parties, VCs, etc – that’s a problem now with a DTI. We’re in constant negotiations and discussions.

I cannot always speak badly about the DTI at all. They are always open for arguments; they stand to certain positions which we need to accept. They are mostly based on reason and a certain portion of goodwill. The DTI is interested in you investing in South Africa and I like this general positive attitude.

But there is a problem potentially for third-party funding for the main applicant.

Availability of funds

The availability of the funds must be confirmed by a South African chartered accountant, not by a German Wirtschaftsprüfer, a South African chartered accountant. We work with one or two who have vast experience and strongly recommend that you use our chartered accountant.

In practice, we have a lot of clients who want to use their own accountant and then they do something wrong, and we have problems afterwards. Now the chartered accountant’s certificate and a couple of other documents will be sent to the DTI. They take about two months, sometimes faster, and then hopefully approve the application and issue their recommendation letter.

With that recommendation letter, you can then move on to step two. If you have invested more than 5 million Rand into the book value of the business, there is no step two: you don’t need the waiver or lower the capital requirement. But if you invest less then you need to apply at the Department of Home Affairs. That can be through the South African mission or through a local VFS office here in South Africa for reduction of the 5 million. That waiver application can take up to six months. Yes, you heard right – we want to invest in South Africa and the DTI takes two months and the DHA takes six months.

We are very welcoming to foreign investors, but these delays make it difficult. Apparently, everybody has time to wait for 12 months to invest in South Africa. So that’s a problem. I hope it’s going to be reduced at some stage, maybe somebody is listening to these videos and puts this change forward. Six months is too long for a waiver.

The last step is really to apply for the Business Visa itself. You will need lots of private documents like all the other immigration permits or visas into South Africa. Then you submit that at the South African mission in your country of residence and their processing times vary between two and eight weeks. In total, you can look at 9 months or 10 months, so that’s too long, especially if you need this waiver. Ideally, we would like to circumvent the waiver.

Do I have to follow my business plan?

The other important questions I always get asked is, “What if I say in the business plan, I want to do this and this and that and I can’t stick to it or I wanted to invest 6 million, but the business already was flying after 3 million in investments. What about my other 3 million? Do I need to deliver on the promise I made in the DTI application?”

For the first three years you get the Business Visa issued it doesn’t really matter. You need to create employment, that’s for sure, but when you want to apply for permanent residence, or for an extension of the Business Visa, you need the recommendation letter from the DTI and then the DTI will actually check what have you done.

If there were good reasons why the business did so much better that you didn’t need all the investment, you can argue this and show it in the numbers and financial statements, and then they’re open to the to the argument. But obviously if you say you’re going to invest 10 million in the tourism sector and you’re going to invest 1 million into a consulting business that’s not going to fly for renewal?

Other countries in the world are very, very similar. You can’t completely change your intentions, but nevertheless, be aware that the enforcement of your plan plays a role when you want to renew, or extend, or apply for permanent residence.

Overall, it’s a good concept. It takes a little bit too long now, but it is viable route, and we would be glad and happy to help. We have a team of experts that have done numerous Business Visas over the last 10 years, so we know what we’re doing!

How IBN Immigration Solutions can help you

IBN Immigration Solutions has assisted numerous clients in successfully receiving their Business Visa and would love to assist you too! We are familiar with all the requirements for applications, possible red-flags, and hold-ups with the government’s immigration department, meaning that you’ll be in safe hands.

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