South Africa: Selling

Customs Procedures

Import Procedures

South Africa has a complex import procedure. South African Revenue Service (SARS) has about 90 000 product codes that strictly apply to all imports. Foreign exporters are strongly encouraged to seek a local agent for customs clearance with a good understanding of South African legislation.

Customs SA, a division of SARS, requires importers to register and obtain a SARS importer code. SARS uses a Single Administrative Document (SAD) to facilitate custom clearance for importers, exporters and cross-border traders. The SAD is a multi-purpose goods declaration form that covers imports, exports, cross-border and transit movements. The following documents are required to obtain the SAD:

• One negotiable and two non-negotiable copies of the Bill of Lading.
• A Declaration of Origin Form, DA59, is to be used in cases where a rate of duty lower than the general rate is claimed as well as for goods subject to antidumping or countervailing duty.
• Four copies and one original Commercial Invoice. Invoices from suppliers are not accepted as satisfying the requirements of the customs regulations unless they meet certain requirements of the SARS (see SARS website for more information).
• One copy of the insurance certificate (for sea freight)
• Three copies of the Packing List. Data contained in this document should agree with that in other documents.

After registering as an importer with the South African Revenue Service (Sars), one can apply for an import permit from the International Trade Administration Commission (ITAC), which ensures that imported goods comply with the country's safety, quality, environmental and health requirements. They must also comply with the provisions of international agreements.

Please visit the website of the South African Revenue Service for more information.

Specific Import Procedures

There are certain restricted items which require import licenses. A license (permit) is only valid in respect of the goods of the class and country specified. It is non-transferable and may only be used by the person to whom it was issued.

Import permits are valid only for the calendar year in which they are issued. Import permits required for specific categories of restricted goods are obtainable from the Director of Import and Export Control at the Department of Trade and Industry.

Importing Samples

For the entry of commercial samples, advertising materials and professional equipment, South Africa applies the ATA (Temporary Admission) Carnet system. Goods should be adequately marked for identification purposes so as to facilitate their passage through customs. South Africa is a member of the ATA Convention (see: ATA Carnet). Goods with an ATA Carnet are exempt from duty fees and VAT.

Customs Duties and Taxes on Imports

Customs threshold (from which tariffs are required)

Import goods with a value up to 500 ZAR are exempt of duty and VAT.

Average Customs Duty (Excluding Agricultural Products)

5.8%. Please consult data on tariffs in South Africa provided by the World Trade Organisation (pag 167).

Products Having a Higher Customs Tariff

Tariff rates mostly fall within eight levels ranging from 0 to 30%, but some are higher (e.g. most apparel items). The end rate for apparel is 40%, yarns 15%; fabrics 22%; finished goods 30%; and fibers, 7.5%.  The effective rated duty rates on cars, light vehicles, and minibuses is still at the high level of 34%, while the rate of duty on original motor parts is 20%.
South Africa is working towards lowering the custom tariff rate on these products.

Preferential Rates

Average Most Favored Nations (MFN) rate : 7.7%.
South Africa applies Most Favored Nation (MFN) rates to imports from the rest of the world, as well as preferential rates applied to products originating from trade partners with which it has negotiated trade agreements. South Africa has an Economic Partnership Agreement (EPA) with the European Union.  Tariff rates are detailed here and are part of the Southern African Customs Union arrangement. SACU comprises South Africa, Botswana, Lesotho, eSwatini (formerly Swaziland) and Namibia and administers a common external tariff for third parties.
ITAC is responsible for tariff investigations, amendments, and trade remedies in South Africa and on behalf of SACU.
In addition, South Africa has free-trade agreements with a number of countries. The country also belongs to the Customs Union of COMESA.

Customs Classification

South Africa uses a Harmonised System (HS).

Method of Calculation of Duties

Ad Valorem on the FOB price in the country of export, in accordance with the GATT Customs Valuation Code.

Method of Payment of Customs Duties

FNB, ABSA, Standard Bank and Nedbank are the banks through which payments can be made.

For details, refer to: South African Revenue Service. 

For details, visit:International Trade Administration Commission of South Africa

Import Taxes (Excluding Consumer Taxes)

None

Labeling and Packaging Rules

Packaging

Imported product should comply with quality or standards specification marking, set by The South African Bureau of Standards (SABS), a specialized agency of the Department of Trade and Industry.

Packaging made from natural materials and fibers must be accompanied by an official certificate stating that the material has been fumigated.

Languages Permitted on Packaging and Labeling

English. Pictures and/or diagrams often supplement English user instructions.

Unit of Measurement

All imported goods as well as transport documents can show any standard units of measurement and weight. However the Metric System of measurement is frequently used.

Mark of Origin "Made In"

It is not mandatory, except in the case of foodstuffs, drinks, textiles, shoes and bags and also where preferential import duties are claimed.

Labeling Requirements

It requires that the labels contain the following information:

• Name, trade name or description

• Name and complete address of manufacturer/packer, importer, country of origin of the imported food

• Net weight, number or volume of contents

• Distinctive batch, lot or code number

• Month and year of manufacture and packaging

• Month and year by which the product is best consumed

Information about pharmaceutical and industrial products must be in English. If food products have been genetically modified (GM) this must be indicated in the label.

Specific Regulations

The labeling regulations in South Africa are well-developed.

Distribution Network

E-commerce

Internet access

With a population of 55.9 million people, South Africa is experiencing a boom in internet access, totaling roughly 28.5 million online users in 2017. However, the penetration rate of 50% is still low when compared to other developed countries. Although there are about 29 million smartphones in use in South Africa, only 21 million devices access the internet. The number of users connecting only through mobile is 7 million. Almost two-third of South African internet users access the internet daily, while only 4% do it less than once per month. Google is the most popular web search engine in the country, with a market share of 93.6%, followed by Bing and Yahoo, at 4.7% and 1.4% respectively.

E-commerce market

The e-commerce market is constantly growing in South Africa: e-commerce revenue across all product categories was estimated at US$ 2.69 billion in 2017, at around 1% of total retail sales. Among the major players in the country’s market are South Africa’s biggest online fashion store Zando; Takealot (a platform that offers a wide range of products, including home entertainment, kitchen appliances, toys, books, personal care goods, etc.); the online auction site and marketplace Bid or Buy; Next and Spree in the fashion industry; Loot for electronics. Online shoppers are increasingly opting to make purchases on their mobile devices, with a preference for apps over mobile websites. Cross-border online spending is common: according to a research by Ipsos, an estimated 1.4 million South Africans online shoppers purchased from foreign websites, the main drivers encouraging them to buy cross-border being free shipping, availability of local currency for payment and secure ways to pay, together with the possibility to buy products that are not available in South Africa. The main countries of origin for online-purchased products were the U.S., China and the U.K.

Social media

In South Africa, around 32% of the population makes use of social media platforms. Of these, 13 million users do so purely from mobile, with a 24% penetration rate. The increase between 2016 and 2017 has been notable, with an additional 2 million (15%) new active social media users, and 3 million (30%) new active social users on mobile. With almost 16 million users, Facebook is the most utilised social media platform, followed by YouTube (8.7 million) and Twitter (8 million). Instagram sees adoption from just over 3.8 million users, while the professional social networking platform LinkedIn has 6.1 million users. Looking at Facebook, the 18-24 and 25-34 age groups are by far the largest groups of users, with a similar trend for other social networks.

Direct Selling

Evolution of the Sector

According to Euromonitor International, the South Africa direct selling segment has grown due to the volatility of the country's currency, lower consumer confidence, rising energy costs and increasing unemployment rates; the industry has grown in importance since it provides a way to supplement household income. About 1,353,200 South Africans participate in direct selling, 72% of them women. In fact, women making a full-time living from the industry increased 30% in 2016 (DSASA). However, active male sellers increased by 51% in the same period.

The World Federation of Direct Selling Associations calculated 2016 South African retail sales at USD 613 million, an 18.3% increase compared to 2015. Avon remains the strongest company with a 25% value share in 2016 and strong brand loyalty. The most important regions in terms of sales volume are Gauteng (42%), KwaZulu-Natal (12.8%), and the Western Cape (10%).

Commercial Intermediaries

Trading Companies

 

• Type of Organization

There are a number of different choices when considering the most appropriate method of entering the South African market. These include direct and indirect export (selling to a middleman such as a trader in your domestic market); licensing or contracting; joint ventures and wholly owned subsidiaries. The choice of entry strategy will depend on the specific characteristics of the market for the product in South Africa including the route that the competitors have taken and the specific characteristics of the product.

Wholesalers

 

• Type of Organization

Wholesalers take the shape of Distributors in South Africa. A distributor buys, carries stock and sell products directly to retailers. Leading distributors often have branches throughout the country.

Useful Resources

National Consumer Commission
Department of Trade and Industry (DTI)
Wolff Wholesalers: Wholesale Packaging Distributor

Using a Commercial Agent

The Advantages

The most commonly used intermediary to start business in South Africa is an Agent (also known as a Commission Sales Representative or CSR). Agents work on a commission basis after obtaining orders from customers; while as the distributors buy, carry stock and sell products directly to customers. Agents often distribute durable and non-durable consumer goods, as well as some industrial raw materials. They may be particularly appropriate when products are highly competitive and lack a large market.
It is common to appoint a single agent capable of providing national coverage either through one office or a network of branch offices. In addition to their role as the local representatives, agents should be able to handle the necessary customs clearances, port and rail charges, documentation, warehousing, and financing arrangements.

Where to Be Vigilant

Make sure that the local agent is registered with the Director of Import and Export Control of the Department of Trade and Industry.

It is important to visit South Africa to gain firsthand knowledge of the market and personal appraisal of the appointed prospective agent.

It is also imperative to maintain close contact with the local agent so that one is aware of any import procedural change.

Most important, when appointing a agent in South African, take care to find out if the agent or any of his sister companies handles a competing product.

Elements of Motivation

Agents work on a commission basis. They are sometimes paid a retainer fee plus costs plus an incentive on deals.

The Average Amount of Commission

Commission rates range from 3 % to 25 % per concluded transaction.

Breach of Contract

It depends upon the terms and conditions of the contract. But, in case the local agent goes to court, it may be time consuming for the foreign company and favorable results cannot be always guaranteed.

Finding a Commercial Agent

DTI, Department of Trade and Industry
Alibaba

Setting Up a Commercial Unit

The Advantages

With its growing domestic market, it makes sense to set up an office in the country.

Where to Be Vigilant

Setting up a commercial unit in South Africa should be considered in case the foreign company has long term business interests in the country. While setting up an office in the country, one must be vigilant about the below given aspects:
1.The rules & regulations applicable to the related industry.
2.Cost and availability of power.
3.Law & order situation.
4. Other factors to take into account include labor availability and cost, labor relations and work culture, and proximity to resources and/or markets.

Different Possible Forms of Settlement

 

• A Representative Office

The purpose of such an office is to obtain market information, provide necessary promotional & service support, and explore further opportunities for business and investments.

A representative office is not allowed to undertake any commercial activity and cannot earn any revenue in South Africa.

• A Branch Office

South Africa does not consider a branch to be a separate legal entity and needs to be registered as an ‘external company’. The rules and procedures for establishing a branch are similar to those for setting up a locally incorporated company. A branch pays no withholding tax on profits remitted to its head office. A branch office may take and fill orders and carry out a full marketing program, including advertising, recruiting a sales force, and performing promotional activities.

Being considered as local companies, subsidiaries and branches are subject to exchange control by the SARB. This institution also controls the payment of royalties and licence fees for non-residents where non-local manufacturing is involved and controls the sale of South African-owned intellectual property rights.

Local agents must register with the Director of Import and Export Control of the Department of Trade and Industry.

• A Company

Setting up a wholly-owned corporation will involve more time and expense, but it can offer an effective means of guaranteeing better protection for proprietary information, obtaining credit, and penetrating the South African market more effectively.

Franchising

Evolution of the Sector

According to the latest available data collected by the Franchise Association of South Africa (FASA), in 2017, the franchise sector in South Africa employs approximately 400,000 people through 757 franchise systems and their 35,111 franchise outlets. Franchise sector contributes around 13.3% to South Africa's gross domestic product (GDP), is an important driver in the country's economy, in addition to having one of the highest business success rates. The franchise industry’s turnover was estimated at R587 billion in 2017, compared to 2014’s R465 billion. This is evidence of the positive growth that the sector has seen in recent years.

Quick Service Restaurants and Restaurants (25%), Retail (15%) remain the largest contributing sectors according to the South African Franchise Association. Education has become a very popular choice for franchisees in South Africa, and makes up 9% of the sector.

Some Big Franchises

Tasty Gallos, Fast Food
Cash converters, Business
Kip McGrath education center, Education
Multiserv, Retail

For Further Information

Franchise Association of Southern Africa
Which Franchise – franchises opportunities

Finding Assistance

Export Trading Companies

Export Help, Assistance for exporting in South Africa.

Recommended Resource

Department of Trade and Industry (DTI).

South Business Portal for Africa