1998 SOUTHERN AFRICA ECONOMIC ... - National Treasury

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S O U T H A F R I C A Ta x a t i o n Some important aspects of the tax system are : - Income in South Africa is taxed at sourc e. - VAT is levied on goods and serv i c e s , except for some basic fo o d s t u f f s .E x p o rts are also zero - r a t e d .The current VAT rate is 14 perc e n t . - A tax loss incurred by a company in any business activity may be carried fo r w a rd and set off against future profits until e x h a u s t e d ,as long as the company continues to do business. - P rofits may be repatriated and are not subject to withholding t a x . - T h e re is no capital gains tax in South A f r i c a . - P a rtnerships and joint ve n t u res are not treated as separate taxable entities. Each partner is taxed on his or her share of the p a rt n e r s h i p ’s taxable income. - Specific taxation legislation applies to mining, a g r i c u l t u re and long-term insurance companies. - In addition to normal income tax, t h e re is a secondary tax on c o m p a n i e s .The tax is calculated on the net amount of dividends d e c l a re d ,and is curre n t ly levied at 12.5 perc e n t . - Double taxation agreements exist between South Africa and the fo l l owing countries: B o t sw a n a ,D e n m a r k , F i n l a n d , F r a n c e, G e r m a ny, H u n g a ry, I s r a e l , Ko re a , L e s o t h o, M a l aw i , N a m i b i a , N e t h e r l a n d s ,N o r w ay, Po l a n d ,the Republic of China, R o m a n i a , S w a z i l a n d ,S we d e n , S w i t z e r l a n d ,Ta n z a n i a ,T h a i l a n d , the United K i n g d o m ,Zambia and Zimbabwe. The treaty with the United Kingdom also extends to Gre n a d a ,M a u r i t i u s ,the Seychelles and S i e rra Leone.T h e re are other countries who are in the pro c e s s of negotiating double taxation agreements with South A f r i c a . I nvestment Promotion A ge n c y I nvestment South Africa was established by the Department of Trade and Industry and was launched in Fe b r u a ry 1997. Its core functions are to promote South Africa as a destination that will attract fo reign direct investment and to provide inve s t o r facilitation serv i c e s .Each of South A f r i c a ’s nine provinces has its own investment promotion agency, and one of the roles of I nvestment South Africa is to coordinate these activities at a national leve l ,as well as to assist the provinces in developing the c apacity to effe c t i ve ly attract and facilitate fo reign inve s t m e n t . Systems to deal with incoming inquiries have been put in place, as well as systems to put interested investors in touch with the re l evant private and public sector playe r s . I nvestment South A f r i c a ,in consultation and coordination with the Department of Trade and Industry and re l evant agencies such as Khula, implements a backward linkage programme focusing on d eveloping supplier linkages between local SMEs and fo re i g n i nve s t o r s .F u rt h e r m o re, I nvestment South Africa is also playing a role in the streamlining of investment re g u l a t i o n s . E x c h a n ge Contro l s The South African Reserve Bank is in charge of the administration of exchange contro l , with some re s p o n s i b i l i t i e s being delegated to authorised fo reign exchange dealers, such as c o m m e rcial banks. Some exchange control regulations that might affect investors are as fo l l ow s : If a South African resident borrows from a non-re s i d e n t ,p r i o r ap p roval is re q u i red from the central bank. Companies that are more than 75 percent owned or contro l l e d by non-re s i d e n t s ,a re restricted in their local borrow i n g .T h e restriction is related to the net wo rth of the company and the amount of fo reign participation in the company. Fo reign exchange may be provided for the payment of import s , if there is documentary evidence as to the receipt of goods in South A f r i c a .I m p o rt permits may be re q u i red in some cases. E x p o rters must ensure that the proceeds of the export are re c e i ved in South Africa within six months of shipment,a l t h o u g h authorised dealers may ap p rove credit up to 12 months if this is n e c e s s a ry to retain the fo reign marke t . T h e re is no restriction on the repatriation of pro f i t s ,or on the t r a n s fer of dividends or branch pro f i t s . I n t e rest payments are also fre e ly transfe r a b l e. The transfer of directors’ fees of ove r ZAR4,000 (about USD794) per ye a r, management fees and royalties are also subject to ap p roval by the central bank, h oweve r. Dividends and interest payments are exempt fro m normal and withholding tax. N o n - residents are permitted to retain fo reign curre n c y a c c o u n t s . Companies are allowed to remit an amount of capital abro a d , with extended limits for the acquisition of fixed pro p e rty in SADC countries.The Minister of Finance announced an incre a s e in these amounts during his <strong>1998</strong>/99 budget - the amount fo r SADC countries was increased from ZAR50m (USD9.9m) to ZAR250m (USD49.6m), while the amount for other countries was increased from ZAR30m (USD6m) to ZAR50m. I nvestment Code South A f r i c a ’s export insurance scheme provides export e r s with insurance facilities to cover normal commercial insolve n c y and political or transfer risks that may prevent them fro m receiving payment for their go o d s . The signing of bilateral a g reements for the promotion and protection of inve s t m e n t with nine countries are in the process of being nego t i a t e d . South Africa is signatory to international investment pro t e c t i o n a g reements and is a member of MIGA. I nvestment Opport u n i t i e s Because South Africa has been cut off from world markets fo r some time, the country ’s re - e n t ry into the global arena has opened up many opportunities for fo reign and South A f r i c a n i nvestors alike. The IDC has identified industries and sectors with a c o m p a r a t i ve advantage, in terms of export performance and c o m p e t i t i ve n e s s . The best export-oriented industries as per revealed comparative a d v a n t a g e, we re found to be: * Food and related pro d u c t s :S u g a r s ,s t a rc h e s ,insulin and wheat g l u t e n ,vegetables and fruit. * Textiles and clothing:Textile we a r, woven fabrics of synthetic f i b re s . * Wo o d - related pro d u c t s :Wood and cork,chemical wood pulp, p aper and articles there o f . * C h e m i c a l s : Inorganic chemicals, fe rt i l i s e r s , p e t roleum jelly, mineral waxe s . * Non-metallic mineral pro d u c t s :Building and monumental stone. * Basic metals: Basic iron and steel, fe rro - a l l oy s ,n o n - fe ro u s basic metal pro d u c t s . E x p o rt industries with the highest degree of penetration in world markets are : * Food and related pro d u c t s :C e reals and preparation there o f , b eve r a g e s . * Textiles and clothing: M e n ’s suits and tro u s e r s ,fo o t we a r, t r ave l go o d s ,h a n d b a g s . * Wo o d - related pro d u c t s : Wood and cork manu f a c t u re s , f u r n i t u re and part s ,chemical wood pulp. * C h e m i c a l s : Organic chemicals, fe rt i l i s e r s , p e t ro l e u m - re l a t e d p ro d u c t s ,t y re s . 00 80
S O U T H A F R I C A * M a c h i n e ry : Agricultural machinery and part s , trailers and other non-motorised ve h i c l e s ,r a i lw ay equipment. * Basic metals: Basic iron and steel pro d u c t s . * Metal pro d u c t s :W i re s ,cables and cordages of iron and steel. The best performing manufacturing sub-sectors have been identified as: * C l o t h i n g . * Fo o t we a r. * Tanneries and leather finishings. * Leather pro d u c t s . * F u r n i t u re. * P aper containers. * Industrial chemical pro d u c t s . * Industrial and other machinery. * Electrical ap p l i a n c e s . * N o n - fe rrous metal pro d u c t s . * Basic iron and steel. * Fabricated metal pro d u c t s . The process of ‘unbundling’ also offers some inve s t m e n t o p p o rt u n i t i e s .Because of isolation during the ap a rtheid ye a r s , companies could not expand outside the country ’s borders and so acquired a large number of non-core businesses - South African Brewe r i e s ,for example,owns Edgars,a retail chain. M a ny South African conglomerates are now in selling off their nonc o re businesses - ZAR32bn (USD6.35bn) wo rth of unbundling deals occurred during 1997. F u rt h e r m o re, p o rt folio investment opportunities will be cre a t e d by the demutualisation of two of South A f r i c a ’s biggest c o m p a n i e s ,Old Mutual and Sanlam, both of which are in the life assurance industry.The companies have, over the ye a r s ,built up huge free re s e rve s ;these re s e rves will now be offe red to policy holders in the form of share s .As a re s u l t , n ew shares to the value of ap p rox i m a t e ly ZAR80bn (USD15.9bn) will be av a i l a b l e on the market within the next two ye a r s ,and the planned listing of these two companies on the JSE is estimated to boost the e x c h a n g e ’s market capitalisation by around six perc e n t . P RO J E C T S S e c t o r P ro j e ct/D e s c r i p t i o n A m o u n t Ship re p a i r s , R i c h a rds Bay Dry Dock Project – invo l ves the building of two dry docks U S D 146 m M e d i u m / h e av y and five float bert h s .Fo reign cooperation in the form of equity and/or e n g i n e e r i n g loan financing is sought. I n f r a s t r u c t u r a l Passenger terminal at Durban – expansion/modernisation to handle 1000 U S D 19 . 9 m d eve l o p m e n t harbour passengers at a time. C o n fe rence facilities to accommodate 500 d e l e g a t e s .Shipping Services Centre with ap p rox i m a t e ly 500 offices. To u r i s m M a n z e n g we nya on the Kwazulu-Natal North Coast. 40 bed lodge/chalet U S D 5 m c o m p l e x .I nvestment in the development of the site and potential p a rticipation in management of the tourism operation is sought H o u s i n g Village development at Pilgrims Rest, Mpumalanga Prov i n c e. 200 new houses, U S D 19 . 9 m including reticulation infrastructure such as water, electricity and sanitation. A u t o m o b i l e P roduction of aluminium alloy cast engine blocks in the Western Cap e. U S D 39 . 7 m i n d u s t ry 100 percent equity financing is re q u i re d . Printing and pap e r P roduction of linerboard imported pulp, m a i n ly for the export marke t . U S D 1 0 9 . 1 m E c o - t o u r i s m St Lucia We t l a n d s .Tourist accommodation, c o m munity re s o u rce centre, U S D 7 . 3 m cultural village, re f reshment kiosk and curio stalls. Fo reign inve s t m e n t p a rtnerships are sought. To u r i s m Ye l l ow woods Resort and Golf Estate in Po rt Elizabeth. Joint ve n t u re U S D 148 . 9 m p a rtner re q u i re d . To u r i s m D evelopment of a nature conservation and tourist infrastructure in the Graaf- U S D 15 . 9 m Reinet are a .Includes turning existing dwellings into tourist accommodation and establishment of a lodge.W i l d l i fe tourism pro j e c t . 81
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1998 SOUTHERN AFRICA ECONOMIC SUMMI
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CONTENTS I N D E X Abbreviations 2
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THE SADC FINANCE AND INVESTMENT SEC
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c u rre n t ly exists in SADC gover
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REGIONAL MAC RO-ECONOMIC HIGHLIGHTS
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Southern Africa and Competitive n e
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had agreed to accept the general fr
Page 15 and 16: A NG OL A of GDP in 1996. E x p o r
Page 17 and 18: A NG OL A Projects for Possible Inv
Page 19 and 20: A recent event in the political sce
Page 21 and 22: B O T S WA N A B OT S WANA STOCK MA
Page 23 and 24: B O T S WA N A P rotection of Inve
Page 25 and 26: scheduled for 23 May 1998. Eight po
Page 27 and 28: L E S O T H O The money market is d
Page 29 and 30: L E S O T H O L E S OT H O :P ROJEC
Page 31 and 32: p a r l i a m e n t a ry elections,
Page 33 and 34: M a l awi Stock Exchange The stock
Page 35 and 36: M A L AW I I nvestment Code The Inv
Page 37 and 38: M A L AW I S TAT I S T I C S(USDm u
Page 39 and 40: M au r i t i u s c o u n t ry is se
Page 41 and 42: M au r i t i u s Mauritian Investme
Page 43 and 44: M au r i t i u s Ta x a t i o n Tax
Page 45 and 46: c u rre n t ly holds 129 seats in P
Page 47 and 48: M O Z A M B IQ U E combined with a
Page 49 and 50: The current status of the project i
Page 51 and 52: M O Z A M B IQ U E dermersal fish f
Page 53 and 54: After talks between the South Afric
Page 55 and 56: N A M I B I A Namibia does not impo
Page 57 and 58: N A M I B I A I nvestment Code A c
Page 59 and 60: Johannesburg Stock Exchange. G E N
Page 61 and 62: S O U T H A F RI C A that some East
Page 63 and 64: S O U TH A F R I C A cities of Joha
Page 65: S O U TH A F R I C A INDUSTRIAL FIN
Page 69 and 70: p rocessing industries,t e x t i l
Page 71 and 72: S WA Z I L A N D Swaziland Stock Ma
Page 73 and 74: S WA Z I L A N D The Ministry of En
Page 75 and 76: Snow capped peaks of Kilimanjaro. G
Page 77 and 78: TA N Z A N I A exchange rate, the s
Page 79 and 80: TA N Z A N I A S TATISTICS (USDm, u
Page 81 and 82: Z A M B I A the supply of water for
Page 83 and 84: Z A M B I A Fo reign Tr a d e Zambi
Page 85 and 86: Z A M B I A Other institutions incl
Page 87 and 88: Victoria Falls. G E N E R A L I N F
Page 89 and 90: Z I M BA BW E Z i m b a b we Stock
Page 91 and 92: Z I M BA BW E - No restrictions on
Page 93 and 94: LIST OF SOURCES S o u rces containi
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1998 SOUTHERN AFRICA ECONOMIC ... - National Treasury

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