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Benefits of Making Business in South Africa | Buy & Sell Business

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Benefits of Making Business in South Africa | Buy & Sell Business

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  1. BENEFITS OF MAKING BUSINESS IN SOUTH AFRICA WWW.MERGERSCORP.COM

  2. At MergersCorp M&A International we help our clients confidentially buy and sell privately held businesses, aligning the interests of all parties for mutual success and satisfaction. It is our goal to make the process of either buying a new business or selling your current business as smooth and efficient as possible. We know how important confidentiality is to our sellers and we treat it with the utmost importance. WWW.MERGERSCORP.COM

  3. BENEFITS OF MAKING BUSINESS IN SOUTH AFRICA WWW.MERGERSCORP.COM

  4. Country Overview South Africa is a country on the southernmost tip of the African continent, marked by several distinct ecosystems. Inland safari destination Kruger National Park is populated by big game. The Western Cape offers beaches, lush wine lands around Stellenbosch and Paarl, craggy cliffs at the Cape of Good Hope, forest and lagoons along the Garden Route, and the city of Cape Town, beneath flat-topped Table Mountain. South Africa, the southernmost African country is bordered by Botswana, Mozambique, Namibia, Swaziland, and Zimbabwe and it surrounds the small Kingdom of Lesotho. The country covers an area of 1,221,000 km², compared it is larger than four times the size of Italy, or slightly less than twice the size of the U.S. state of Texas South Africa has a population of 55.9 million people (official estimate 2016), the country's administrative capital is Pretoria; legislative capital is Cape Town and the judicial capital is Bloemfontein (Mangaung), largest city is Johannesburg. SA has 11 official languages: Afrikaans, English, Ndebele, Northern Sotho, Sotho, Swazi, Tswana, Tsonga, Venda, Xhosa, and Zulu. Most spoken first languages are Zulu (isiZulu - 23%), Xhosa (isiXhosa - 16.0%), and Afrikaans (13.4%).

  5. Executive Summary South Africa has one of the continent's biggest and most developed economies. Up until 1994 it was ruled by a white minority government, which enforced a separation of races with its policy called apartheid. The apartheid government eventually negotiated itself out of power after decades of international isolation, armed opposition and mass protests. The democratically-elected leadership encouraged reconciliation and set about redressing social imbalances, but the economy has struggled. South Africa has an estimated population of 43 million. With the annual growth rate of 0,77% the population has been projected to be 45 millions by the year 2015. The government aims for 2.1% of fertility by 2010 and stabilization of the population at 80 million by 2100. The population density in South Africa is 49 per Km2 (127 people per mi2). The median age in South Africa is 27.6 years.

  6. Introduction – Doing business in South Africa South Africa is ranked 84 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of South Africa deteriorated to 84 in 2019 from 82 in 2018. South Africa is one of the most sophisticated emerging markets in the world. The unique combination of well-developed first- world financial markets, and a rapidly emerging market economy, has risen to an entrepreneurial and dynamic investment environment with many global competitive advantages and opportunities. The vision of South Africa is set out in the National Development Plan (NDP), which outlines proposed interventions aim to eliminate poverty by 2030 by expanding economic opportunities by: diversifying exports; strengthening links to faster-growing economies; enacting reforms to lower the cost of doing business; moving to more efficient and climate-friendly production systems; and encouraging entrepreneurship and innovation.

  7. Conducting business in South Africa Investors can employ a variety of legal business structures in South Africa, depending on the nature of the operation and the related tax and legal considerations. The most commonly adopted forms of doing business by foreign investors are private companies and branches. The principal methods of doing business in South Africa are by using a: • Public (name ends in “Ltd”) or private (“Pty Ltd”) company. • Personal Liability Company (“Inc”) • Partnership. • Business trust. • Sole proprietorship. • External company (branch of a foreign company)

  8. Taxation in South Africa Local businesses are taxed at 28%, individuals are taxed at a rate between 18% and 40%, while Trusts (excluding special trusts) are taxed at 40% on profit. VAT (Value Added Tax) applies to all goods and serviced at a standard VAT tax rate of 14%. However, certain items are zero- rated, e.g. exports, petrol, diesel and basic food items (such as brown bread, milk and fruit). Certain services are exempted from VAT, for example educational services, public transport and residential rental accommodation. Transfer duty is payable by individuals when they acquire property at progressive marginal rates between 0% and 8%. This is a tax that is higher for taxpayers with more money. In a progressive tax system like the U.S. federal income tax, wealthy individuals pay tax at a higher rate than less wealthy individuals. This is why wealthy Americans are taxed more than middle-class Americans and middle-class Americans are taxed at a higher rate than working-class Americans.

  9. Trade South Africa is the 34th largest export economy in the world and the 47th most complex economy according to the Economic Complexity Index (ECI). In 2017, South Africa exported $108B and imported $81.9B, resulting in a positive trade balance of $26.4B. In 2017 the GDP of South Africa was $348B and its GDP per capita was $13.5k. The top exports of South Africa are Gold ($16.9B), Diamonds ($9.8B), Platinum ($9B), Cars ($6.9B) and Coal Briquettes ($6.23B), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Crude Petroleum ($6.42B), Refined Petroleum ($4.96B), Cars ($4.11B), Gold ($2.79B) and Broadcasting Equipment ($2.78B). The top export destinations of South Africa are China ($17.1B), the United States ($8.21B), India ($8B), the United Kingdom ($7.97B) and Germany ($7.05B). The top import origins are China ($15.6B), Germany($7.23B), the United States ($5.49B), India ($4.28B) and Saudi Arabia ($3.89B).

  10. Banking in South Africa Standard Bank Group Limited was incorporated in 1969. The bank headquarters is situated in Johannesburg. This bank provides services such as transactional banking, borrowing, saving, investment, insurance, lending, wealth management, risk management, and advisory services. It has handled around ZAR2.13 trillion of the total assets. Standard Bank Group Limited had generated revenue of around ZAR59.62 billion in the year 2018. In the same year, the net income of Standard Bank Group Limited was around ZAR28.19bn. It employs around 48,000+ employees. First Rand Ltd was established in 1966 which is also a subsidiary of FirstRand Limited. The bank’s headquarters is situated in Sandton. The bank provides banking, investment services, and insurance to commercial, retail, public-sector and corporate customers in South Africa and across the world. It has handled around more than R1.53 trillion of the total assets for the year ended 2018. It employs around 45,490+ employees.

  11. Our M&A Process NEGOTIATION & CLOSE POST MERGER INTEGRATION (PMI) INTEGRATION (PMI) POST MERGER TARGET APPRAISAL APPROACH DUE DILIGENCE Key Areas  Target & market analysis;  Initial assessment of synergies & value drivers;  Indicative valuation;  Go or No-Go decision;  Preparation of transaction documents (NDA – Non- disclosure Agreement/LOI- Letter of Intent);  Select Transaction team;  Appoint advisors;  Consider funding ability.  Initial approach letter;  Signing of NDA;  Prepare & share initial information requests;  Formulation of LOI (Letter of Intent) & possible negotiations;  Initial meeting and Q&A;  Circulate information on the Target to the Transaction team.  Set scope of due diligence;  Set up VDR (virtual data room);  Coordinating of due diligence, further meetings and Q&A sessions;  Consider points relevant to the Post-Merger (PMI) phase;  Revisit indicative valuation & prepare detailed valuation based on due diligence findings;  SPA negotiations with the seller;  Development of final structure (share/asset deal) and final valuation;  Approvals;  Signing of SPA & Close.  Consider the extent of integration;  Development of 100 Day PMI Plan;  Consider short & long term objectives;  Estimate requirements to capture synergies;  Determine resource needs & optimal allocation. Parties Involved  CFO;  Head of M&A;  Accountants;  Corporate finance advisors;  Consultants.  Senior management;  CEO, CFO, CTO;  Strategy director;  Head of M&A;  Head of Business Development;  Consultants.  Company general counsel;  Lawyers;  Senior management.  Company general counsel;  Lawyers;  Senior management/HR. 11 © Midaxo 2018 www.midaxo.com

  12. Looking to Buy or Sell a Business? CONTACT US NOW FOR A FREE BUSINESS VALUATION WWW.MERGERSCORP.COM

  13. MergersCorp.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Member firms of the MergersCorp network of independent firms are affiliated with MergersCorp International. MergersCorp International provides no client services. No member firm has any authority to obligate or bind MergersCorp International or any other member firm vis-à-vis third parties, nor does MergersCorp International have any such authority to obligate or bind any member firm. Copyright © 2020 MergersCorp International. All rights reserved. 13 © Midaxo 2018 www.midaxo.com

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