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Compliance with labor regulations Black Economic Empowerment (BEE) - The government controls the BEE program through the Economic Strategy of 2003. Organizations must comply with BEE regulations if they want to qualify for several of the incentive schemes or obtain contracts from the government. The BEE strategy aims to empower previously disadvantaged blacks through management positions and ownership of businesses. According to the strategy, businesses must have a set percentage of black people in management, shareholding and partnerships. Any person or company who wishes to establish an operation in South Africa should get acquainted with the procedures and regulations.  Each sector has its own BEE scorecard that indicates how well a business has adapted to BEE requirements. The process of becoming BEE compliant was published by DTI in 2004. The plan outlines voting rights, economic interests, and accrual of bonus points, human resources, and investment policies regarding empowered entities. Businesses that are not BEE compliant will be penalized in the near future.  Enterprises are classified according to the total of blacks in top or ownership positions: Black enterprises have more than 50% black ownership. Black empowered businesses have 25% or more black ownership or one quarter of the managers are black people. Black influenced businesses have 5.1% black ownership. Black engendered enterprises have more than 25% black women managers. Black community endeavors have at least one black shareholder that represents the larger group. If you plan to open a business in South Africa, you should consider a BEE partner, as this will enhance your chances for obtaining large contracts and finance. Equal opportunity Although discrimination on the base of gender, religion, or race in the workplace is strictly prohibited, you may find many job advertisements stating that the company is an equal opportunity or affirmative action employer. This means that previously disadvantaged groups from Black, Indian, or Colored races will receive preference for the positions advertised. In many instances women receive preference over men for employment. It is a hotly debated issue in the country because many feel that it is pure tokenism and the policy doesn’t contribute to self-respect based on performance. Whether you agree with the policy or not, you will need to practice an equal opportunity hiring policy or face penalties in the near future.  Stating that you plan to follow affirmative action guidelines will benefit your application for opening a business in South Africa. The policy that was introduced in August 1999 states that employers with more than 50 workers must have a written affirmative action plan and must have a manager to oversee the implementation process. Occupational health The Occupational Health and Safety Act of 1994 govern the safety of employees while they are at work. According to the act, an employer must take steps to reduce the risk of injury at the workplace. All employers in certain industries must prepare a health and safety policy, and monitor adherence to it. All accidents at the workplace must be reported. Basic conditions that apply to employment The Labor Relations Act and the Basic Conditions of Employment Act protect the South African workforce. These two acts stipulate working conditions, hours, basic salaries, vacation time, sick leave, and the worker’s rights. It is best to consult with a labor law officer to make sure that your employment contracts include the minimum requirements and that the correct procedures in terms of retrenchment and dismissals are followed. Pension The country doesn’t have a national social security scheme. Employers and employees can contribute to a private scheme for retirement purposes. Medical aid South Africa doesn’t have a national health insurance scheme. Employers and employees normally contribute in equal proportion to private medical schemes. Some companies offer investment programs, hospital plans, and group schemes to their workers. You should consult with a labor officer for the minimum medical cover requirements. Business licenses in Johannesburg Although no trading licenses are required for most new businesses in Johannesburg, certain types of enterprises may not trade without proper trade licenses. The Business Act 71 of 1991 governs it. The following businesses need to obtain licenses: Health clinics, spa’s, saunas, and public baths Massage, laser, and ultraviolet treatment centers Escort agencies Adult shops Cinemas Nightclubs Pool rooms Arcades Any business with 3 or more vending or slot machines Hawkers Places that serve food, provides take-away or transport meals - Article Continued Below -

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1. Complete the application form for the issue of a license, obtainable from the city council offices.
2. Attach copies of the company memorandum and articles, or founding statement in the case of a close corporation, identity document or passport and visa certificates of all members or shareholders and the manager in charge of the business.
3. If the business is a restaurant, fast food outlet, or a coffee shop, you must also include a copy of the proposed menu.
4. Submit the form and pay the relevant license fee. The license must be renewed every year.
5. The trade license division provides verification of your application and payment, and then drafts a statement that is sent to the following divisions: Noise and Air Pollution Management; Building Inspection; City Planning; Community Safety, and Environmental Health.
6. Each of the divisions draft reports on their findings and a notice is sent to you about the minimum requirements to be met. Once you have complied with these, you arrange another inspection of the premises.
7. The license is then issued.

Advertising boards or signs
The erection of outdoor signs is subject to approval from the city council. Advertising boards may not be changed or any alterations made to the electrical wiring without their approval. You may not move the board, take it down, and erect it again, unless you have prior approval. The city council has stiff fines for any violations. The owner of the property, where the sign will be erected, must give a written approval and you will also need a registered deed of sale. The application form is submitted to the council together with an artist impression of the height and dimensions, the area and site plan, and the exact positioning. You don’t need approval when it is in a shopping center. The shopping centers normally have their own regulations.

Time frame for opening a business in Johannesburg 

The average time period for registering a business is about 38 to 40 days and there are nine steps involved for businesses with 50 or less workers. It takes about 170 to 180 days to complete a warehouse including licenses and building inspections. Obtaining trade licenses can take one to six months depending on the applicant’s adherence to requirements. 

Buildings

Don’t just demolish a building in Johannesburg before you made sure that it is not a protected building. Offenders face heavy penalties and even jail terms. Many of the buildings are protected for their historical or architectural value.

If you purchase property, make sure that it’s never vacant because when homeless people move in, it will still be your responsibility to maintain the building to such an extent that it can be used for housing. 

Immigration 

Foreigners must apply for a business permit and proof that they are willing to invest at least R2.5 million, which is around $430 000. Applicants without this investment capability must be able proof that their business will be viable in South Africa. Business permits cost around R1600 ($270).

If you plan to open a small retail outlet you should draw up a business plan, projections and a marketing strategy. You can make use of one of the many market research companies to prove that this type of business will succeed in South Africa. You may also consider buying an existing business with good financial records or a franchise. This will make the application process faster. 

The DTI assists foreigners in obtaining permits. Foreigners can call +27 12 3948500 for assistance.  If you are still in your country, you can apply for residency through the nearest South African consular services. 

Financing for businesses

The IDC provides assistance for financing of larger projects. You can write to 
IDC
P.O. Box 784055
Sandton
2146
South Africa.

There are numerous business financing corporations, but unless you have a black partner or your business is fully BEE compliant, your options will be much smaller. These types of financers will rather assist you when you purchase an already established business. 

Background information on Johannesburg

Property in the center of Johannesburg is very affordable and occupancy cost is very low. The northern parts of Johannesburg are more expensive with limited retail and office space. It is advisable to put your name on the waiting lists at the shopping centers together with a short business profile. You can also list your name at one of the many South African business brokers. Make sure that you have enough funds for a deposit in order to secure a shop. 

Building costs are around $700 to $900 per square meter for offices. Architectural fees amount to 5 to 8% of the value of a development while the engineering cost is 6.5 to 12.5% and surveyors cost ranges between 2.7 and 7.5%.

Electricity supply costs are lower than in most First World countries, but recent problems with electricity overload in Johannesburg necessitate a back up plan. Check whether buildings have power generators or purchase your own power generator in case of interruptions. The problem with electricity interruptions is also felt in other parts of the country and the soft fruit industry reported major losses in recent months.

Gauteng doesn’t have a lot of water and if you plan a water intense business you should consider another province in the country. At least 20% of the water is recycled.

At least one fifth of workers in South Africa are employed in Gauteng. It is the smallest province in the country but it contributes 30% of the GDP.

The road and transport infrastructure is well developed in Johannesburg and new developments are in the pipeline for the coming World Cup Soccer of 2010. The Johannesburg International Airport is able to handle thousands of visitors and large cargo.

Although the country has 11 official languages, English is the most understood and spoken language in Johannesburg.

Summary of the steps

The main steps for setting up a business in Johannesburg is application for immigration or a business permit, registering the business, registering with SARS, VAT registration, labor regulation compliance, BEE compliance, obtaining a trading license if applicable, and financing if you need it. Apply for all types of incentives and make use of DTI in order to speed up the process of investment.
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