South Africa - International Franchise Association

Direct marketing is expected to grow over the next ten years. Direct marketing channels
in South Africa include:
• Direct e-mail selling - such as Internet viral campaigns (where one email user
nominates “friends” to participate in a promotional campaign and to his/her own
benefit hands over the email addresses of friends and colleagues);
• Direct selling channels - such as the independent agent or distributor system;
and
• Internet marketing – which has also grown rapidly as South African consumers
become more comfortable about handing over banking details and ordering from
non-brick and-mortar companies.
Joint Ventures/Licensing Return to top
Joint ventures and licensing arrangements involving foreign entities attract the attention
of the South African regulatory authorities when repatriation of funds (royalties, fees and
profits) from South Africa to a foreign recipient is agreed to or possibly required in the
future.
When a company is interested in entering into a foreign licensing agreement to
manufacture a product in South Africa, the South African licensee must submit an
application to the Department of Trade and Industry (DTI). DTI, in turn, will make a
recommendation to the South African Reserve Bank (SARB) which must approve the
payment of royalties. When a licensing agreement involves no manufacturing, the
request for exchange control approval is sent directly to SARB by the South African
licensee.
The calculation of discretionary funds (royalty, fees etc.) that can be set by the parties to
a Joint Venture or Licensing arrangements are subject to a complex foreign exchange
controls set by the SARB that have been made less onerous over recent years.
Contract conditions involving obligatory purchasing and pricing agreements or requiring
the licensee to sole source articles from the licensor are prohibited.
More detailed and up to date information on the foreign exchange aspects of joint
ventures and licensing can be obtained from the SARB or an approved foreign exchange
dealer and can be found in the SARB’s Exchange Control Manual, accessible via the
following website.
http://www.resbank.co.za/RegulationAndSupervision/FinancialSurveillanceAndExchange
Control/EXCMan/Pages/default.aspx
Selling to the Government Return to top
Government purchasing is a significant and growing factor in the South African economy
as it addresses infrastructure deficits that include energy, transportation,
communications, health and education.
Business Report reported in October 2011, that the SA Finance Minister, Mr Pravin
Gordhan, announced that spending on public-sector driven infrastructure projects would
rise from R185bn in the 2010/11 financial year to R275bn in 2014. In his medium-term
budget policy statement, Mr. Gordhan said that expenditure by the State — including