“South Africa cannot afford to make adversaries of any global economic power. Our economy has stagnated over the past 10 years, with the government essentially having run out of money.

Over the last financial year, our debt-service costs amounted to R389 billion ($21.1 billion), with our debt-to-GDP projected to reach 76.2 per cent in this financial year,” says Stefan Kritzinger, head of Compliance and Support at Govchain.

“AGOA, our largest trade agreement with the US, remains at risk. Several US political leaders have already called for South Africa to be removed from the programme, which would result in devastating consequences for our economy,” continues Kritzinger.

Since AGOA’s enactment in 2000, South Africa’s exports to the US grew at an average annual rate of 12.98% between 2002-22, while 70% of South Africa’s agricultural products to the US have been possible through the programme.

South Africa is rich in natural resources and quality agricultural products. However, for businesses to enjoy the financial benefits of the imports and exports business, there are several regulatory boxes they must tick.

A business needs to be registered with the CIPC to legally trade. The basic requirements for registering include a company name, a business registration number, as well as tax number from SARS.

“This should be followed by applying for an import and export license, bearing in mind that the license is only officially required when the total imported or exported cargo is R150 000 or more within a year, that there are more than three imports and exports in one calendar year, and that the business is import for resale or business purposes and not for personal use,” explains Kritzinger.

Without this license, a business cannot clear goods at customs, legally cannot trade across borders, especially because SARS tracks imported and exported goods for tax and compliance.

To apply for a license, a business would need to complete a DA 185 application form and submit its CIPC company registration certificate, tax clearance certificate, bank confirmation letter, as well as a certified copy of the applicant’s ID or passport with the completed form to SARS.

Upon approval, SARS will provide the company with an import and export code that will be used every time a business moves goods across the border.

Kritzinger added that. “understanding import duties, VAT and customs fees is also equally important. While VAT is charged on all imports, customs duties vary depending on the type of product. On the other side, most exports are zero-rated for VAT, meaning there is no charge, but businesses are encouraged to keep clear records of exports to qualify for tax exemptions.”

Lastly, businesses must remain cognisant of any product restrictions and trade agreements. For example, alcohol and tobacco require additional import permits, while fresh food and agricultural products require health and safety certificates. Trade agreements may also qualify certain products for lower custom duties.

“Despite the current rocky diplomatic dispute with the US, South Africa still enjoys trade relations with the country, as well as many other lucrative markets around the world. It is important for businesses to get the compliance correct so they avoid missing out on the benefits,” Kritzinger concluded.

“For the first time, South Africa is no longer bound by the economic policies of a single party, forcing political leaders to negotiate better solutions,” says Stefan Kritzinger, head of Compliance and Support at Govchain. With Parliament yet to deliberate on the budget, Kritzinger urges bold decisions to steer economic growth, as government plans to extend the Covid-19 SRD grant, raise public sector wages by 5.5%, and manage rising debt, which hit 75.1% of GDP in September 2024. He advocates cutting unnecessary spending, implementing pro-business reforms like rail and port concessions, and conducting a comprehensive government spending review.

Nonetheless, businesses will need to start preparing for a likely VAT increase of 0.5%.

“VAT applies to multiple transactions for businesses, but absorbing the VAT increase through their purchases is only one side of the coin. Many companies still offer their own VAT rated goods or services. The increase in VAT creates a financial conundrum for business owners over whether to pass on that increase to the consumers by raising the price of their goods and services or alternatively absorbing the increase without raising the price and operate at a profit loss, with the hopes that this would increase sales over time,” Kritzinger described.

For many businesses teetering on the edge of financial distress, absorbing such a profit loss is just not a viable and sustainable option.

VAT must be paid over to SARS every two months by businesses, where many already struggle to set aside that amount when trying to cover their daily expenses.

Therefore, increasing prices of goods or services is an unfortunate reality to maintain VAT payments and avoid the consequences, which could also include SARS audits and investigations – something that can create reputational damage as well.

“Nonetheless, pricing strategies exist for scenarios such as VAT increases. Businesses can adopt a gradual pricing approach with some products or services being increased immediately while others are raised further on in the financial year. Alternatively, all products or services have their prices simultaneously increased gradually throughout the year. The result is nonetheless the same with reduced customer resistance and less price shock,” Kritzinger suggested.

Other methods can include offering customers more value with the price increase. These can come in the shape of loyalty programmes, bundle deals, or special discounts.

Whether businesses absorb the increase in VAT or pass it onto the consumer through price increases, there is still an opportunity for businesses to conduct an expenditure review with the objective of cutting redundant and wasteful operational costs. This would also empower businesses to relook at their suppliers and either renegotiate contracts or find new cost-effective ones.

“Tough times require tougher decisions, but with the right strategies in place, businesses have a chance to get through the rough fiscal waves that lie ahead,” Kritzinger concluded.