HOW TO SET UP A BUSINESS IN CAPE TOWN
Why Invest in Startups Locally? Setting Up a Business in Cape Town
Cape Town is known as a hub of innovation and creativity; the city has been ranked as the #1 South African metropolitan municipality for ease of doing business. It’s also recognised as South Africa’s second-largest municipal economy and the second-largest contributor to employment in South Africa.
These statistics make a compelling case for those looking to invest in Cape Town businesses or to open their own enterprise in the Mother City.
Cape Town’s world-class central business district (CBD) and established infrastructure make it easy to establish and operate a business. What’s more, Cape Town is known for being an inclusive, sustainable and vibrant business environment with a dynamic economy.
Cape Town SMME Startup Information
While Johannesburg is known as the location of many long-established corporations, Cape Town is
famed as the startup capital of South Africa.
The City of Cape Town recognises the power of entrepreneurship to grow the local economy. Because of this, the City prioritises the support of SMMEs (Small, Medium and Micro-sized Enterprises) in Cape Town.
This means there are many useful entities and resources available for small businesses and startups looking to establish themselves in Cape Town or the greater Western Cape area.
Funding a Startup
The majority of South African businesses launch without financial assistance, and use their sales to finance their operations. However, there are several options for startups that need funding in order to launch.
Government grant funding:
If your business aligns with a specific government project or initiative, you can apply for a government grant. Unlike a bank loan, a government grant doesn’t require repayment.
You can get a business loan from a lender like a bank, and pay it back with interest.
In this case, an investor would provide funding in exchange for owning a percentage of your business. The investor would earn dividends when the business makes money, meaning the funding would not need to be repaid.
Venture capital funding:
A venture capitalist (VC) is a type of investor who will provide funding for your business on the condition that you can offer good returns.
Angel investment funding:
Unlike venture capitalists, angel investors are not financially motivated. They provide funding to help young entrepreneurs get started. An angel investor could be a mentor or a personal friend.
Personal debt finance:
You may also choose to fund your business through personal means, like a home loan or a credit card.
Investing in a Startup
While investing in a startup business can be risky, there is also a great potential for rewards and returns. As an investor, you get the opportunity to support job creation and economic growth, while also diversifying your portfolio.
The Basics of Starting a Cape Town Business
Visa & Immigration:
For international entrepreneurs looking to work and live in Cape Town, there are several types of South African Visas available. These Visas vary depending on your industry and your job situation.
The options available include business Visas, working Visas/ work permits, critical skills working Visas, Intra-company transfer Visas and corporate visas.
Find out more about the key differences between these permits here.
The tax rate in South Africa is determined by the National Treasury and collected by SARS, the South African Revenue Services. The country has a well-developed and well-regulated tax regime, designed to promote economic growth across its business sectors.
Business tax and deductions in South Africa are fairly calculated based on the size and type of your enterprise. Tax law is regularly revised in order to keep in line with international best practices.
Read more about South African company and corporate taxation here.
The type of South African bank account you open will depend on the type of Visa you’ve been granted.
The South African currency (Rand) offers a favourable exchange rate for many international currencies, making it a cost-efficient destination for overseas business operations. Cape Town is one of Africa’s leading banking destinations, home to world-class financial institutions.
Learn more about banking for businesses in South Africa here.
Business Parks and Industrial Areas:
Cape Town is home to a wide variety of industrial areas, office parks and economic hubs. These areas attract local and multinational companies. Throughout the city, you’ll find many notable textile, automotive, warehousing, printing, logistics, construction, and food processing businesses, as well as prominent blue-chip headquarters.
Discover Cape Town’s more economical business locations here.
Cape Town is among the leading employment destinations in the whole of Africa. The governing
principles that have been put in place also make the city one of South Africa’s most attractive locations for local and international enterprises.
South Africa’s labour market places a strong emphasis on strategies that promote equality and fair treatment. There are several key legislative acts and employment policies in place to promote good working conditions for local, inter-regional and inter-continental workers. These include:
- The Labour Relations Act (LRA)
- The Basic Conditions of Employment Act (BCEA)
- The Employment Equity Act (EEA)
- The Skills Development Act (SDA)
These acts are managed by the Cape Town Department of Labour, which governs the business landscape in the Western Cape. Occupational health and workplace safety are also closely managed and regulated.
Learn more about South Africa’s employment policies here.
Cape Town offers so much in terms of lifestyle, infrastructure and ease of doing business, making it an accessible and desirable destination for business investment.
Contact The Business Hub for SMME business support or connect with our Investment Facilitation team for more information on investment opportunities.