I. Government procurement
South Africa has complex regulations on government procurement, with which foreign service outsourcing providers need to comply
(I) Legal system
Domestically, South Africa mainly has the following laws on government procurement:
Table: South Africa's Laws on Government Procurement
Law |
Objectives |
Public Finance Management Act, No.1 of 1999 | Establish the supervision framework for supply chain management, covering procurements by national and provincial departments and state-owned enterprises |
The Promotion of Administrative Justice Act, No.3 of 2000 | Establish a fair administrative process to allow people suffering from unfair administrative behaviors to request reasons from administrative bodies and response from administrative staff to such requests (If administrative staff fail to give response within stipulated time, such administrative behaviors will be presumed to be unjustified.) Establish a judicial review process for administrative behaviors and their remedies, including prohibiting administrative staff from certain behaviors, delaying administrative justice, correcting wrong behaviors and requiring administrative staff to pay compensation |
The Promotion of Equality and Prevention of Unfair Discrimination Act, No.4 of 2000 | Prohibit the country or any person from discriminating against any person on the grounds of race or gender, including refusing contractual opportunities to provide services and failing to take reasonable steps to meet needs of these people |
The Preferential Procurement Policy Framework Act, No. 5 of 2000 | Formulate preferential procurement policies |
Construction Industry Development Board Act, No. 38 of 2000 | Provide the following measures to the board to allow it to promote and implement policies, programs and projects for the purposes of procurement reform and procurement documents’ standardization and uniformity: 1. Register national contractors (including consultants and providers if necessary) to control procurement risks of the public sector and promote public procurement; 2. Register projects that exceed a certain financial value, and data related to successful bids, completed contracts and best practice assessment programs; 3. Best practice. Establish code of conduct for parties engaging in construction procurement |
The Broad Based Black Economic Empowerment Act, No.53 of 2003 | Establish sound practice rules to ensure: Development of eligibility criteria for issuing permits or franchise, sales of state-owned enterprises and cooperation with private enterprises; Formulation and implementation of preferential procurement policies. |
II. Credit policies
(I) Currency
South Africa began to use the rand as its currency unit in 1961, carried out a managed floating exchange rate regime in 1974, and abolished its two-tier exchange rate system in 1995 to adopt a unitary exchange rate system. Since a flexible exchange rate regime is adopted, the rand has been depreciating. Since 2015, South Africa rand to US dollar has been around 12:1.
(II) Foreign exchange
According to the Exchange Control Regulations, no South African company or individual may possess foreign assets or foreign loans without approval; foreign exchange controls are implemented through South African Reserve Bank and its designated banks. Non-residents are free to invest in South Africa, but capital removal is restricted.
South Africa has no restrictions on foreign companies that invest through stocks. Investors should note that, when buying stocks of listed companies in South Africa, the words "Non-resident" should be indicated on the stock certificate so that they can transfer dividends and other benefits overseas in the future. Generally, South Africa has no restrictions on non-residents’ transferring investment income overseas, but South African residents’ outward remittance for paying foreign loans need to obtain approved. Enterprises do not need the approval of South African Reserve Bank when paying dividends to South African residents. If the funds gained after enterprise cancellation or liquidation are to be remitted to non-residents, documents must be issued to confirm the facts.
(III) Banks in South Africa
South Africa has a developed banking system with strong supervision. Under regulations of South Africa government and financial laws, banks in South Africa adopt strict risk control mechanisms and sound company governance systems to conduct businesses, so they were much less affected by 2008 financial crisis compared with counterparts in other countries.
1. The central bank
South African Reserve Bank is the central bank of South Africa, responsible for formulating and implementing currency policies, adjusting currency supply, supervising other financial institutions and maintaining stability of the financial market.
2. Commercial banks
The main commercial banks in South Africa are Amalgamated Banks of South Africa, Standard Bank, First National Bank and Nedbank, which hold 84.6% assets in total of the whole private banking sector in South Africa and have branches around 9 provinces.
In addition, South Africa take efforts to attract foreign banks to invest in South Africa. Currently there are 15 registered branches of foreign banks and 2 mutual banks. 46 foreign banks have established representative offices in South Africa. Meanwhile, South Africa takes the lead in the world in terms of e-banking system, prepayment system, tax management and anti-fraud system.
3. Chinese-funded banks
Bank of China and China Construction Bank have branches in Johannesburg where Industrial & Commercial Bank of China, Export-Import Bank of China and CADFund have representative offices and China Development Bank has its Southern Africa Team.
4. Financing conditions
As of April 2016, South African Reserve Bank's benchmark interest rate had remained at 7% and the prime lending rate at 10.5%. Foreign-funded enterprises enjoy the same national treatment with local ones. Basic financing conditions include: whether an economic activity needs a license, permit or certificate; certificate of incorporation; company's credit information; other documents confirming the company’s legal operations; evaluation of a project's feasibility and risks; evaluation of the company's current financial performance; evaluation of financing necessity; confirmation of terms of loan.