It costs less than R200 to start a business in SA – cheaper than most of the world – study says
- Starting a business in South Africa costs just R175 and is one of the cheapest start-up processes in the world, according to the World Bank Group's Doing Business study.
- These costs represent 3% of the national average income per capita.
- Starting a business in Namibia costs 116% of the average wage and 501% in Zimbabwe.
- Rwanda has the lowest start-up costs while opening up shop in the Democratic Republic of the Congo is the most expensive in the world for locals.
- For more stories go to www.BusinessInsider.co.za.
It costs just R175 to start a business in South Africa, which is cheaper than 90% of the rest of the world, according to the World Bank Group's Doing Business study.
Starting a business in South Africa is inexpensive. Reserving a company name and registering with the Companies and Intellectual Property Commission (CIPC) can cost less than R200. These are the only cost-driven procedures associated with starting a business in South Africa, as determined by Doing Business' company registration study using data from 2020.
Opening a dedicated bank account, registering for income tax, withholding taxes – employees tax (PAYE), Unemployment Insurance Fund (UIF), Skills Development Levy (SDL) – VAT and with the Compensation Fund carry no initial charges.
These processes do, however, come with a mountain of paperwork and take a comparatively long time to complete, which decreases South Africa's overall Doing Business (DB) score.
This DB score is determined according to 11 areas of business, including how simple it is to deal with construction permits, register properties, acquire electricity, get credit, trade across borders, enforce contracts, and resolve insolvency.
South Africa has an overall DB rank of 84 out of 190 countries surveyed, scoring highest in the tax department – measuring the number of taxes and contributions paid – and in starting a business.
Using the DB data, BusinessFinancing.co.uk recently converted the costs associated with starting a business to US dollars and created a global comparison. In addition to the initial start-up costs, the DB study goes further by calculating the minimum capital requirement as a percentage of the national average income per capita.
South Africa is ranked tenth for its start-up affordability, with a total cost relative to the monthly average income of 3%. Most neighbouring countries have considerably higher cost-to-income percentages, with Namibia at 116%, Mozambique at 213%, and Zimbabwe at 501%.
But South Africa isn't the most affordable country to start a business in on the African continent. First place with 0% belongs to Rwanda, which doesn't charge a start-up fee for small and medium enterprises for at least two years.
While the African continent contains the countries with the most affordable start-up process, it also has the Republic of the Congo, which, conversely, is the most expensive place to start a business in the world compared to its average income per capita. Start-up fees in the Republic of the Congo total $1,232 (R18,000) against a wage of $48 (R710) resulting in a cost-to-income of 2,554%.
Reserving a company name, registering, declaring your existence in a local newspaper, and various other formalities in Venezuela adds up to just 21¢ (R3.11).
Starting a business in the United States (US) costs $725 (R10,700) which represents 16% of the average income. It's much cheaper to start a business in the United Kingdom – costing just $17 (R251) – at just 1% of the average income per capita.
While start-up costs are generally lower in developing nations, countries in Africa, South America, and Southeast Asia have a much higher cost-to-income ratio – making it more unaffordable for locals – due to high levels of poverty.
And although South Africa scores well in the affordability index, the total processing time – defined as total number of days required to successfully register a company – is more than double the average of Sub-Saharan Africa. It's estimated to take at least 40 days to complete all the procedures in South Africa.
South Africans also have more procedures to complete compared to those in high income countries identified by the Organisation for Economic Co-operation and Development (OECD). By comparison, registering a company in New Zealand can be done in less than a day.
(Compiled by Luke Daniel)
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