Investing In... 2026 Comparisons

South Africa operates a hybrid legal system drawing on Roman-Dutch substantive law, English common law principles and a body of customary law, with the Constitution of South Africa serving as the supreme law of the land. As a general rule, South Africa follows English law in both criminal and civil procedure and Roman-Dutch common law in contract law, the law of delict (tort), and the law of persons and things. Statutory company laws originally stem from English law, but are increasingly influenced by Delaware law.

The country has a sophisticated corporate, competition and regulatory architecture. Core statutes and regulatory materials relevant to M&A include the following:

• Companies Act 2008 and its regulations (including the Takeover Regulations);
• Johannesburg Stock Exchange (JSE) Listings Requirements, relevant to companies listed on the JSE, South Africa’s primary exchange;
• Competition Act, dealing with competition/antitrust laws;
• Financial Markets Act, regulating financial markets, exchanges, central securities depositories and clearing houses;
• exchange control regulations and circulars issued under the Currency and Exchanges Act, regulating the movement of foreign currency and the flow of capital into and out of the country;
• Broad-Based Black Economic Empowerment (B-BBEE) Act and sector codes, a South African equivalent of local ownership, designed to redress the inequalities of the past by promoting the economic participation of black people;
• labour legislation, including the Labour Relations Act and Basic Conditions of Employment Act;
• Protection of Personal Information Act (POPIA), regulating data protection; and
• sectoral laws such as the Mineral and Petroleum Resources Development Act, the Electronic Communications Act, the Banks and Insurance Acts, and the Broadcasting Act.

Principal regulators include:

• Companies and Intellectual Property Commission (CIPC), overseeing the registration, regulation and compliance of companies;
• Takeover Regulation Panel (TRP), overseeing affected transactions involving regulated companies;
• JSE, overseeing listed companies;
• Competition Commission and Competition Tribunal, overseeing competition/antitrust regulation;
• South African Reserve Bank (SARB) Financial Surveillance Department (FinSurv), overseeing exchange controls; and
• sector regulators including the Prudential Authority, Financial Sector Conduct Authority (FSCA), the Independent Communications Authority of South Africa (ICASA), and the Department of Mineral Resources and Energy (DMRE).

South Africa welcomes foreign investment, having implemented numerous policies and programmes to encourage FDI, including a wide range of incentive schemes and endeavours to streamline areas that may otherwise create barriers to investment. The Protection of Investment Act ensures foreign investors must be treated no less favourably than South African investors in “like circumstances”.

Critically, South Africa does not operate a general FDI screening regime. Although the Competition Act provides for national security screening by a presidential committee for notifiable mergers involving foreign acquirers and critical infrastructure, these provisions are not yet in force and there is no anticipated effective date.

Notwithstanding the absence of a general foreign investment screening regime, investors must carefully consider sector-specific regulatory frameworks, as a number of industries are subject to tailored restrictions. By way of example:

• domestic control requirements apply in the air services sector;
• foreign ownership in commercial broadcasting is capped; and
• mining, financial services and telecommunications impose fit-and-proper and change-of-control approvals that often interact with B-BBEE ownership targets.

Sector-specific advice should therefore be obtained at an early stage of any transaction.

South Africa remains an attractive destination for foreign investment due to its sophisticated and diversified economy and strategic location on the African continent, supported by its membership in regional communities like the Southern African Development Community (SADC) and the African Continental Free Trade Area (AfCFTA). The country is widely regarded as the gateway to Africa, offering deep and liquid capital markets, an independent judiciary, predictable commercial law, a highly skilled workforce, and a well-regulated financial sector.

Recent regulatory reforms and the removal of South Africa from the Financial Action Task Force (FATF) grey list, alongside progress in energy and infrastructure sectors, have significantly bolstered market confidence.

Politically, South Africa is operating under the Government of National Unity (GNU) framework formed after the 2024 election, explicitly positioned as a co-operative governance model with stated priorities around growth/job creation and building a capable state.

Although the South African rand experienced volatility against the US dollar in mid-2025 amid global trade and policy uncertainty, it has since strengthened and outperformed many other emerging market currencies, reflecting broader economic improvements and continued strong bankable opportunities in sectors supported by reform and public-private partnerships.

Current M&A Market, Particularly for Foreign Investment

South Africa’s M&A market remains active, with foreign investment driven less by cyclical deal volume and more by strategic positioning. Cross-border deal flow remains active, particularly in the following:

• energy transition (renewables, distributed generation and grid infrastructure);
• consumer goods;
• healthcare; and
• technology-enabled services.

The government’s Just Energy Transition Investment Plan (2023–2027) continues to drive consolidation in the renewable energy sector; and the mining sector has experienced sustained M&A activity driven by global demand for transition metals such as platinum group metals, manganese and chromium.

Inbound transactions continue to be shaped by a combination of modest economic growth, ongoing structural reforms and a well-established legal and financial framework that provides investors with a high degree of certainty relative to many peer jurisdictions. Foreign buyers are particularly focused on assets aligned to reform momentum and defensive or countercyclical themes, while remaining cautious on valuation, execution risk and time to close. Transactions involving foreign acquirers are increasingly structured with robust conditionality to address competition and public interest considerations, exchange control compliance and sector-specific regulatory approvals.

Notable Regulatory Trends

South Africa’s regulatory landscape has undergone meaningful recent reform, with further changes expected, reshaping the operating environment for domestic and international businesses.

Most notably, amendments to the Companies Act have introduced enhanced corporate governance, transparency and M&A oversight, including expanded remuneration and beneficial ownership disclosure obligations, stricter compliance enforcement via the CIPC, and revised thresholds that, once effective, will refine the category of private company transactions caught by the regulatory scrutiny of the TRP.

South Africa’s King V Code, published in October 2025 with an effective date of 1 January 2026, marks an evolution in corporate governance, streamlining principles and addressing emerging priorities such as AI, sustainability and responsible remuneration. Simultaneously, the JSE has undertaken a comprehensive overhaul of its Listings Requirements as part of a broader simplification initiative and to respond to emerging regulatory and market priorities.

Further, proposed changes to the merger notification thresholds under the Competition Act, if enacted, will substantially increase both the combined turnover/asset thresholds and the target firm thresholds used to determine whether a transaction constitutes an intermediate or large merger requiring mandatory notification to the competition authorities. This change, together with the coming into force of the recent COMESA competition rules, marks a fundamental overhaul of the regional competition regime.

Overall, the South African M&A landscape is characterised by largely pragmatic and accelerated regulatory reform aligned with international best practice, underpinned by a high degree of legal certainty, and investors are encouraged to engage early with experienced advisers to navigate the evolving framework effectively.

Private M&A Transaction Structuring

Private acquisitions in South Africa are most commonly effected through share purchases, which preserve contractual continuity and avoid the administrative burden of individual asset transfers.

Where acquirers seek to ring-fence liabilities or carve out discrete business lines, asset purchases remain viable but attract additional complexity, including tax considerations, automatic employee transfers under Section 197 of the Labour Relations Act, and the need to obtain multiple third-party consents.

Statutory amalgamations and mergers under Sections 113 to 116 of the Companies Act offer statutory succession of assets and liabilities, making them efficient tools for group reorganisations.

Subscriptions, though also a means for capital injection, are useful in structuring M&A deals, sometimes coupled with buy-backs subject to tax considerations.

Private equity sponsors and B-BBEE transactions frequently deploy trusts, en commandite partnerships and fund structures to achieve tax efficiency and tailored governance arrangements.

Where creative structuring is required, earn-outs, contingent payments, vendor loan notes, joint ventures, preferred equity, and hybrid debt instruments may be considered.

Public M&A Transaction Structuring

Acquisitions of JSE-listed companies are principally structured as schemes of arrangement under Section 114 of the Companies Act or as tender offers under the Takeover Regulations.

Schemes of arrangement, implemented through the board of the target, bind all shareholders once approved, making them suitable for negotiated, board-supported transactions. Schemes of arrangement benefit from the TRP’s oversight.

Tender offers do not require board approval and are therefore preferred in strategic or contested situations. Once acceptances reach 35%, mandatory offer provisions are triggered and the purchaser is required to make an offer to remaining shareholders. If acceptances reach 90%, the acquirer may invoke a squeeze-out, forcing the sale by dissenting shareholders.

Sale of business or assets and statutory mergers or amalgamations are used to ring-fence liabilities or carve out discrete business lines.

The JSE Listings Requirements impose a categorisation regime that dictates the level of shareholder approval and disclosure, with related-party and significant transactions attracting additional requirements.

Foreign acquirers should note that, while South Africa does not operate a general FDI screening regime, exchange control regulations, sectoral ownership restrictions in broadcasting, aviation, mining and financial services, and B-BBEE public interest conditions may influence structure selection and transaction timelines.

Beyond FDI-specific requirements, foreign investors undertaking M&A in South Africa should be aware of the following key regulatory approvals.

• Competition/antitrust clearance – Transactions meeting merger thresholds require clearance from the Competition Commission and Competition Tribunal under the Competition Act. Notably, authorities assess not only competition effects but also public interest considerations, including impacts on employment, historically disadvantaged persons (HDPs) and worker ownership, SME participation, and local industry competitiveness. Employment and ownership outcomes attract particular scrutiny, with moratoria on merger-related retrenchments.
• Takeover regulation – Transactions involving “regulated companies” require compliance or exemption certificates from the TRP if the transaction in question is an “affected transaction” (ie, a disposal of all or greater part of the assets or liabilities of a company, a scheme or a merger/amalgamation, among others). A company is regulated if it is public or state owned. Certain private companies are also deemed regulated, notably if they have transferred more than 10% of their shares in the last two years. This trigger is currently in the process of being changed. Once effective, private companies with ten or more shareholders meeting specified financial thresholds will also be subject to the scrutiny of the TRP.
• Exchange control – Cross-border transactions require SARB FinSurv approval (via authorised dealers) for capital movements, including share issuances, loans, guarantees, IP transfers and repatriation of proceeds. Inbound investments may proceed via authorised dealers without prior SARB approval, provided arm’s-length pricing and reporting requirements are met.
• B-BBEE – While not “hard law”, B-BBEE compliance is an operational necessity for businesses interacting with government or requiring sector licences (mining, telecoms, etc). Public interest competition merger conditions also increasingly incorporate HDP ownership and worker equity elements, requiring planning at term-sheet stage. Certain transactions will also need to be notified to the B-BBEE Commission.
• Companies Act approvals – Typical Companies Act approvals include board solvency confirmations, special resolutions for fundamental transactions (Sections 112–115), and financial assistance approvals under Sections 44 and 45 for intra-group funding or acquisition financing.
• JSE – Certain transactions by listed companies require additional shareholder approvals and regulatory approval by the JSE.
• Sector-specific approvals – Depending on the target’s activities, approvals may be required from sector regulators (some of which were highlighted above).

The corporate governance architecture in South Africa is underpinned by the Companies Act, the JSE Listings Requirements, and the King Code on corporate governance. Recent reforms continue to prioritise transparency through remuneration and beneficial-ownership disclosure, stricter remuneration reporting and enhanced whistle-blowing requirements. The King V Code, effective January 2026, streamlines governance principles whilst sharpening focus on accountability, director independence and expanded guidance on AI, sustainability and responsible remuneration.

Entity Forms

Private companies (Proprietary Limited) remain the preferred acquisition and holding vehicle due to flexibility, fewer disclosure requirements and the ability to tailor shareholder arrangements through the memorandum of incorporation and shareholders’ agreements.

Public companies are used for listed platforms and broader capital raisings but attract TRP oversight for affected transactions and extensive disclosure obligations under the Companies Act and JSE requirements. The JSE has segmented the main board into Prime and General segments, alongside AltX, to accommodate different corporate needs.

External companies enable foreign issuers to operate locally without forming a subsidiary, though these are less common as acquisition vehicles.

Trusts, en commandite partnerships and fund structures are deployed in private equity and B-BBEE transactions for tax and governance reasons.

Minority shareholders in South Africa benefit from a robust framework of statutory protections primarily derived from the Companies Act, supplemented by the JSE Listings Requirements for listed entities and the King V Code on corporate governance.

In terms of the Companies Act, beyond the usual protections afforded to shareholders holding in excess of 25% being able to block special resolutions, other key safeguards include:

• pre-emptive rights on share issuances (protecting against dilution);
• appraisal rights entitling dissenting shareholders to receive fair value for their shares in the context of fundamental transactions; and
• the right to apply to court for relief from oppressive or unfairly prejudicial conduct, bring derivative actions on behalf of the company, and require the company to seek court approval before implementing a fundamental transaction where at least 15% of votes were cast against the relevant resolution.

For regulated companies (see 3.2 Regulation of Domestic M&A Transactions for definition), the TRP oversees transactions to ensure fair treatment and adequate disclosure to all securities holders, including mandatory offer requirements when an acquirer crosses the 35% voting threshold and restrictions on dealing.

For listed companies, the JSE Listings Requirements mandate extensive disclosure, with the categorisation regime driving shareholder approvals, independent board oversight, and fairness opinions for certain transactions.

Also notable, the King V Code establishes accountability, transparency and independence requirements.

The Competition Commission also actively considers minority protections when evaluating mergers, alongside the promotion of greater ownership spread, particularly to increase HDP and worker ownership levels.

In practice, shareholders frequently negotiate additional contractual protections through shareholders’ agreements and the company’s memorandum of incorporation, including board representation rights, reserved matter vetoes, tag-along and drag-along rights, and anti-dilution mechanisms, ensuring that minority interests are appropriately safeguarded alongside the statutory regime.

Although not as commonplace as in the USA, shareholder activism in South Africa has in recent years gained momentum, particularly among JSE-listed companies. Institutional investors and non-institutional players are driving event-focused campaigns:

• on value extraction and governance;
• requisitioning meetings;
• opposing resolutions;
• exercising appraisal rights; and
• challenging remuneration and ESG decisions.

South African companies must disclose their ultimate beneficial owners, including foreign investors holding 5% or more, to the CIPC on an ongoing basis. Acquisitions and sales by non-residents must be reported through authorised dealers for exchange control purposes to ensure the ability to repatriate dividends and sale proceeds. Where an acquisition confers control, mandatory merger notification to the competition authorities may be required, with enhanced disclosure of ownership structures and public interest considerations. Additional disclosures apply for JSE listed and regulated companies (at 5% shareholding thresholds and changes thereafter) and in certain regulated sectors. While South Africa is open to foreign investment, transparency and regulatory reporting are central features of the investment landscape.

The JSE, Africa’s largest exchange by market capitalisation, provides a transparent, regulated deal-making environment with deep liquidity and robust investor protections. The JSE now operates Main Board Prime, Main Board General and AltX segments, to accommodate issuers of varying size and complexity, reducing regulatory burdens for smaller issuers while maintaining investor safeguards. Recent regulatory reform has modernised, streamlined and simplified the JSE’s Listing Requirements, aligned with global trends, while preserving investor protections and regulatory certainty.

The current IPO pipeline is the strongest since 2017.

Other Sources of Funding

In addition to capital raises through the JSE, businesses in South Africa access capital through multiple channels. Bank financing remains significant, though private credit is playing an increasingly prominent role in M&A financing, offering flexible and competitive loan structures. Private equity continues to deploy substantial dry powder through continuation vehicles and structured solutions. Creative financing structures, including vendor loan notes, earn-outs, preferred equity, hybrid debt instruments and mezzanine funding are also increasingly common, particularly in mid-market transactions.

South Africa’s capital markets and securities framework is anchored by the Financial Markets Act, JSE Listings Requirements and JSE, FSCA and TRP oversight, discussed in more detail above.

Foreign investment funds are afforded the same protections (discussed at 7. Foreign Investment/National Security), ensuring protection of investments and fair treatment. They are also equally governed by the other requirements mentioned in this chapter of the guide, whether operating as a company, private equity fund, sovereign wealth fund or other investment vehicle (ie, competition merger approvals, sector-specific licensing approvals and exchange control approvals).

South Africa has a comprehensive competition/antitrust regime under the Competition Act, regulating restrictive practices, abuse of dominance and mergers. The South African merger regime is well established, overseen by its principal regulators, the Competition Commission (which investigates mergers), the Competition Tribunal (which adjudicates) and the Competition Appeal Court (which hears appeals).

Transactions trigger mandatory merger notification to the Competition Commission where they:

• have an effect in South Africa (ie, where the target has derived revenue from the sale of goods or the provision of services in, into or from South Africa, or owned assets in South Africa during the preceding financial year);
• satisfy the definition of a merger in terms of the Competition Act (ie, linked to the change in control for competition purposes); and
• meet prescribed financial thresholds.

The Competition Act makes no exclusion for foreign-to-foreign transactions, where the “effect in South Africa” test is satisfied. The financial thresholds for notification are in the process of being revised, and new thresholds are likely to come into effect during the first half of 2026.

Merger notification comprises the submission of statutory merger notification forms, and payment of prescribed merger filing fees. The merger filing fees are also in the process of being revised. The merger review process takes between two and four months, but for large and complex mergers can extend beyond this period. Notification must be made prior to implementation, with sanctions being applicable for implementing a merger without notification and approval.

It is increasingly important to understand the network of regional competition regulators, particularly where a deal has elements of cross-border deal-making. Note, however, that South Africa itself is not a member state of any regional economic bloc where competition law is regulated by a regional competition regulator.

The substantive test that must be employed by the competition authorities is whether or not the proposed merger is likely to substantially prevent or lessen competition and whether the merger can or cannot be justified on public interest grounds. In applying the test, the competition authorities must assess the strength of competition in the relevant market and the probability that the firms in the market, after the merger, will behave competitively or co-operatively, taking into account any factor that is relevant to competition in that market. If it appears that the proposed transaction is likely to substantially prevent or lessen competition, then the competition authorities must determine whether or not the proposed transaction is likely to result in any technological, efficiency or other pro-competitive gain which will be greater than, and offset, the effects of any prevention or lessening of competition that may result or is likely to result from the proposed transaction, and would not likely be obtained if the proposed transaction is prevented.

The competition authorities must also assess whether the proposed transaction can or cannot be justified on substantial public interest grounds by assessing the effect of the proposed transaction on:

• a particular industrial sector or region;
• employment;
• the ability of small and medium-businesses, or firms controlled or owned by HDPs, to become competitive;
• the ability of national industries to compete in international markets; and
• the promotion of a greater spread of ownership, in particular to increase the levels of ownership by HDPs and workers in firms in the market.

Employment and ownership outcomes attract the most scrutiny. The Commission’s approach to ownership and public interest continues to evolve, with the regulator issuing guidance and refining its position over time. As a result, early and strategic engagement with public interest issues has become a key determinant of deal success, with the framework increasingly allowing for greater flexibility in how positive public interest outcomes may be achieved.

Where competition or public interest concerns arise, merger remedies may be imposed. The remedy imposed will depend on the nature of the harm identified. Remedies may be structural (typically divestiture) or behavioural. Behavioural remedies may include a host of innovative remedies, such as:

• the conclusion of long-term supply arrangements;
• pricing commitments;
• licensing of intellectual property or other rights;
• obligations to source from existing or past suppliers (in most cases, these are local suppliers);
• requirements to invest in the domestic supply chain; or
• requirements to maintain or expand local production facilities.

Public interest cases with a negative impact on employment have resulted in a moratorium being placed on merger-related retrenchments for a period. Increasingly, more novel public interest conditions are being agreed to, such as commitments tailored to sectoral context. These include:

• educational funding and skills development;
• establishment of bursary funds;
• preferential employment;
• local manufacturing and procurement commitments;
• enterprise development supporting SMEs and HDP companies;
• community-based enterprise development initiatives;
• local expansion programmes; and
• capital expenditure commitments.

The Competition Commission has the power to prohibit transactions that substantially lessen competition or fail to address public interest concerns. Implementation without prior clearance constitutes gun-jumping, which is subject to regulatory sanction. Parties must obtain clearance before closing, with transaction documents typically including merger control clearance as a condition precedent.

As aforementioned, South Africa does not operate a general FDI screening regime. Foreign investment is generally open and welcomed, with numerous policies and incentive schemes designed to encourage FDI and streamline processes. The Protection of Investment Act provides high levels of protection for foreign investors, ensuring fair treatment.

Although the Competition Act contains provisions requiring national security screening by a presidential committee for notifiable mergers involving foreign acquirers and critical infrastructure, these provisions are not yet in force and there is no anticipated effective date. Moreover, the executive committee responsible for applying the FDI Screening Rules has yet to be constituted and the security assets deserving of protection have yet to be designated. Greenfield investments and other non-merger FDI fall outside these dormant provisions and, although a formal national security screening regime has been periodically mooted, there is currently no indication that such a framework will be introduced in the near term.

Despite the FDI Screening Rules not being in effect, foreign-to-foreign transactions are still reviewable by South African competition authorities, where those transactions have an effect in South Africa, meet the definition of a merger and satisfy the prescribed financial thresholds (as explained at 6.1 Applicable Regulator and Process Review).

Certain sectors impose tailored local ownership, B-BBEE or change of control restrictions, typically enforced by the relevant regulator (ie, the FSCA, ICASA and the DMRE). These include:

• aviation;
• broadcasting;
• mining;
• financial services;
• security; and
• telecommunications.

Also notable is South Africa’s exchange control regime under the Currency and Exchanges Act. South African residents may not enter into any transaction exporting capital (including funds, intellectual property or rights to capital) from South Africa without approval from FinSurv or, in certain cases, an authorised dealer. Exchange control is therefore relevant to:

• cross-border share issuances;
• loans;
• guarantees;
• IP transfers; and
• the repatriation of dividends, interest and sale proceeds.

However, this should not be viewed as a restriction: all that is required is obtaining the relevant approval upfront by demonstrating the transaction is for fair value and on arm’s-length terms.

There is no applicable information in this jurisdiction.

There is no applicable information in this jurisdiction.

There is no applicable information in this jurisdiction.

For foreign investors effecting FDI into South Africa, a number of additional legal and regulatory regimes may be relevant beyond the core corporate, competition law, tax and employment law framework. The most notable are highlighted below.

• Exchange control – As mentioned at 7.1 Applicable Regulator and Process Overview, South African residents are subject to exchange controls under the Currency and Exchanges Act. No resident may export capital (including IP) without FinSurv or authorised dealer approval. Exchange control applies to cross-border share issuances, loans, guarantees, IP transfers and repatriation of dividends, interest and proceeds. Approvals are obtained by demonstrating fair value and arm’s-length terms. Inbound investments proceed via authorised dealers without prior SARB approval if arm’s-length. FinSurv applications take three to six weeks; authorised dealer approvals take days.
• B-BBEE compliance – B-BBEE is a defining feature of South Africa’s corporate landscape aimed at addressing the inequalities of the past. The B-BBEE Act and sector Codes stipulate targets for black ownership, management control, skills development, enterprise development and socio-economic contribution. The more points a business achieves, the higher its B-BBEE status level will be, which translates into a procurement recognition level. Although not hard law, government and SOEs consider B-BBEE when procuring and, in certain sectors such as mining and telecommunications, when licensing. It is therefore in the interests of all corporates investing in South Africa to increase their levels of B-BBEE, whether dealing directly with SOEs or government; other organisations in that value chain; or society at large.
• Sector-specific regulation – Certain sectors are subject to specific licensing, ownership or regulatory requirements, including:
1. banking and financial services;
2. insurance;
3. telecommunications;
4. mining;
5. energy; and
6. defence-related industries.
• Doing business laws – Once in South Africa, foreign investors should be aware of the body of laws pertaining to data protection (POPIA), anti-money laundering and terrorist financing and consumer protection, among others.

South Africa taxes resident companies on worldwide income and non-resident companies on South African-sourced income. The standard corporate income tax rate is 27%.

Dividends declared by resident companies are subject to dividends tax at a rate of 20%, although the rate could be reduced in terms of an applicable double tax agreement (DTA), and dividends to resident companies are exempt from dividends tax. Dividends tax does not apply to branches of foreign companies, nor does South Africa impose a branch profits remittance tax.

Partnerships do not have separate legal personality nor are they treated as separate taxpayers. En commandite or limited liability partnerships are often used where tax transparency is required.

South Africa imposes withholding taxes on certain payments to non-residents, subject to double taxation treaties. Examples of payment types include dividends (where the domestic rate is 20%), interest (at 15%) and royalties (at 15%).

South Africa has an extensive DTA network, which may, depending on the terms of the relevant DTA, reduce the withholding rate to 5–15% for dividends, 0–10% for interest and 0–10% for royalties. Dividends articles in DTAs generally provide for a lower withholding rate for beneficial shareholders holding 10–25% of the shares in the South African company, and a higher rate (although still less than 20%) for other shareholders. A reduced rate of withholding in respect of interest applies to certain types of debt and/or types of lenders – eg, financial institutions, insurance companies or the government.

Attempts to limit treaty shopping include mutual agreement procedures in DTAs as well as local anti-tax-avoidance mechanisms such as the General Anti-Avoidance Rule (GAAR) or other specific anti-avoidance rules in local tax legislation. (Also refer to 9.5 Anti-Evasion Regimes.)

Early-stage tax structuring is critical, particularly in complex M&A transactions and group consolidations, to obtain tax efficiency and prevent unintended negative tax consequences. South Africa offers tax deferral for qualifying corporate reorganisations, and careful structuring is critical to ensure optimal application of the deferral rules to anticipated transactions.

Tax planning strategies to mitigate taxes will depend on the specific circumstances. The use of debt and deductible interest could help to reduce taxable income, subject to specific anti-avoidance rules such as thin capitalisation, transfer pricing constraints, and limitation of interest deductions where the lender is not subject to income tax in South Africa.

In those instances where no interest deduction is available and where the lender is South African, it may be more tax effective for funding to be advanced in the form of preference shares than a loan.

Where shares are held by a non-resident shareholder or a loan is advanced by a non-resident lender, careful consideration should be given to the provisions of applicable DTAs.

Cross-licensing and intellectual property (IP) holding structures may offer some benefits, subject to transfer pricing scrutiny, limitation of deductions for “tainted IP” and exchange control approvals for the transfer of licensing of IP to a non-resident.

The principal taxes relevant to M&A transactions in South Africa depend on deal structure but typically include capital gains tax (CGT), securities transfer tax (STT), value added tax (VAT) and dividends tax.

CGT generally arises for resident sellers on the disposal of shares or assets and is taxed as part of income or corporate tax. For non-residents, CGT applies mainly to disposals of South African immovable property and to shares in “property rich” companies (being companies deriving more than 80% of their value from South African immovable property or mining rights, where the non-resident holds at least 20% of the shares in the South African company). The effective CGT rate for companies is approximately 21.6%, although treaty relief may be available and foreign investors disposing of shares in non-property rich companies will typically fall outside the CGT net. Accordingly, in respect of non-property rich investments, investment via a partnership may be more beneficial than investing via a South African holding company.

In share deals, STT is payable at 0.25% on the transfer of shares in South African companies, while asset deals may attract VAT at 15%, unless the transaction qualifies for VAT zero-rating such as in respect of the sale of a going concern. Dividends tax may also be relevant where value is extracted through dividends or share buybacks (subject to anti-avoidance rules – see 9.5 Anti-Evasion Regimes), and transfer duty can apply on the transfer of immovable property.

From a transactional perspective, robust tax warranties and indemnities – often supported by warranty and indemnity insurance – remain a key feature of deal negotiations.

South Africa maintains a robust anti-avoidance framework.

• Transfer pricing – Transactions between connected persons must be at arm’s length. Exchange control approval requires demonstration of fair value and arm’s-length terms. SARS actively enforces transfer pricing compliance.
• General anti-avoidance rule – Applies to arrangements lacking commercial substance entered into primarily for tax avoidance.
• Controlled foreign company rules – Attribute income of foreign subsidiaries to South African shareholders in certain circumstances.
• Anti-hybrid rules – South Africa has implemented measures addressing hybrid mismatches in cross-border arrangements.
• Specific anti-tax-avoidance rules – Other rules that are also notable include:
1. potential recharacterisation of dividends on hybrid equity instruments or third-party backed shares;
2. rules regarding “dividend-stripping” or share buybacks;
3. utilisation of assessed losses;
4. donor attribution rules; and
5. preventing the flow-through of capital gains to non-resident beneficiaries of South African trusts.
• Reportable arrangements – Certain tax planning structures must be disclosed to SARS.

South Africa’s employment and labour regime is primarily regulated by the law of contract. However, there is a network of legislation providing minimum protection for employees out of which employees and employers cannot contract. This legislation is found in a number of Acts, including the following:

• Labour Relations Act, regulating (among other things) collective bargaining, unfair dismissal and unfair labour practices, and business transfers;
• Basic Conditions of Employment Act, setting minimum standards for working conditions, leave, and working hours, among others; and
• Employment Equity Act, prohibiting unfair discrimination in employment policies and practices, and promoting workplace diversity and transformation through affirmative action measures.

A number of sectoral determinations and industry bargaining council agreements may apply to specific categories of employees. Similarly, these regulate (among others) wages, maximum hours of work, overtime rates, minimum periods of leave, notice and other benefits. Collective bargaining and labour union arrangements are quite common in industries such as mining, manufacturing, aviation, construction, banking and retail.

South African law affords employees significant protection against unfair dismissal. In terms of the Labour Relations Act, a dismissal must be substantively and procedurally fair. This means that the employer must have a fair reason to dismiss an employee and follow a fair procedure in giving effect to the dismissal. Broadly speaking, four reasons are recognised as fair reasons for dismissal, namely:

• misconduct on the part of the employee;
• incapacity due to poor work performance;
• incapacity due to ill-health or injury; and
• the operational requirements of the employer.

The procedural fairness requirements differ depending on the reason for the dismissal. Employees’ contracts of employment can, accordingly, not be terminated simply by the giving of notice, and South African law does not recognise “employment-at-will”.

The Labour Relations Act also provides additional protection for employees in a-typical employment relationships (such as employees provided to a client through a temporary employment service and employees employed for a limited duration). This protection only extends to employees who earn below the threshold amount determined in terms of the Basic Conditions of Employment Act from time to time, currently ZAR261,748.45 per annum from 1 April 2025.

Foreign investors considering FDI should include labour and employment considerations as part of any due diligence exercise. Labour diligence typically covers:

• employment agreements (including any atypical arrangements);
• statutory compliance in relation to tax, unemployment insurance, and health and safety;
• union recognition arrangements;
• disputes; and
• employment equity compliance.

Key-person retention warrants consideration, particularly the presence and enforceability of restraint of trade undertakings, which must be reasonable when it comes to duration and geographical scope.

Common elements of remuneration/compensation frameworks in South Africa include:

• cash;
• allowances (such as car, cellphone or subsistence allowances);
• cash bonus or equity incentive schemes;
• retirement fund contributions; and
• medical aid and risk benefits.

Although there is no statutory obligation on an employer to subscribe to any benefit funds or contribute towards an employee’s retirement or medical aid, depending on the number of employees employed, most employers subscribe to a medical aid or retirement scheme. For example, in the event of an employer subscribing to a retirement fund scheme, a large pension or insurance company would administer this scheme. Deductions towards membership of these benefit funds are normally made from the employees’ remuneration. From a remuneration structure perspective, it is quite common to structure the employees’ remuneration on a “Total Cost to Company” basis. Any contribution towards benefit funds is then ultimately borne by the employee, although this can be structured as an employer- and employee-contribution in a tax-efficient manner.

In the context of acquisitions, acquirers typically consider retirement fund and other benefit fund participation and incentive arrangements as part of an employment due diligence. These matters must be addressed contractually, and any undertakings regarding employee compensation as part of public interest merger conditions should be aligned with post-closing operating plans. Although not common, some employment contracts (particularly with executive level employees) may contain “golden parachute” provisions, which entitle employees to significant payments in the event of a change of control of the employing entity.

Remuneration disclosure is a developing area of law in South Africa, with public companies soon to be caught by remuneration policy and report disclosure requirements and shareholder approval, with material consequences for failed votes.

Employment Protection in Deal-Making

From a deal-making perspective, where a business is sold as a going concern, Section 197 of the Labour Relations Act automatically transfers the employment contracts of employees who are predominantly assigned to the transferring business to the purchaser by operation of law. The new employer is required to recognise the employees’ past service with the old employer and to employ the employees on terms and conditions of employment that are, on the whole, no less favourable than those previously enjoyed (except where the employees’ terms are regulated by a collective agreement, in which event the new employer must comply with the terms of the collective agreement as they are). This includes pension rights and other accrued benefits. It is possible to contract out of the automatic transfer provisions, but such an agreement cannot be concluded only between the two employer entities – the written agreement of the employee concerned, or the relevant trade union, is required. A dismissal linked to the transfer of a business is deemed automatically unfair.

As Section 197 provides for the automatic transfer of employment contracts, no consultation is required with the transferring employees or their representative trade union, but it is good industrial relations practice to keep employees informed of potential changes and employees do have a right to be informed of certain information relating to accrued employee liabilities. In addition, where collective agreements or registered workplace forums exist, the target company or seller must comply with any consultation or information-sharing obligations that may be contained in those agreements prior to or in connection with the transaction. Acquirers should expect unions to be key stakeholders in sizeable transactions.

In share sales, employees remain employed by the target company and their contracts are unaffected by the change in shareholding. However, employees may still be dismissed only on fair and lawful grounds and through proper procedures under South African employment law.

Consultation duties apply to any contemplated redundancies (commonly referred to as “retrenchments”). The Labour Relations Act provides that an employer may dismiss an employee where an operational requirement is present. Operational requirements are requirements based on economic, technological, structural or similar needs of an employer. In the event of potential retrenchments, the employer is required to consult with the potentially affected employees in a meaningful, joint consensus-seeking manner on its proposals before making any decisions to retrench employees. Where employees are members of a trade union, the employer must consult with the trade union on the proposed retrenchments, irrespective of whether the trade union is formally recognised by the employer as a collective bargaining agent or not. Upon dismissal for operational requirements, employees are entitled to statutory severance pay equal to one week’s remuneration for every year of completed service with the employer (together with their accrued leave pay, notice pay if the employee is not required to work the notice period, and any other amounts to which the employee is contractually entitled).

As mentioned above, competition authorities closely scrutinise the employment and ownership implications of transactions. Where workforce reductions are unavoidable, retrenchments are typically capped or subject to time-bound moratoria of two or three years, and remedy packages commonly include employment preservation and worker ownership commitments, alongside an assessment of whether the transaction promotes a broader spread of ownership, particularly among HDIs and employees.

IP is not, in itself, a standalone criterion for foreign investment screening in South Africa. It is, however, relevant to FDI in a number of respects, most notably from an exchange control perspective, as IP is treated as capital for these purposes. Accordingly, transfers of IP out of South Africa require the requisite exchange control approval.

South Africa provides a reasonably robust IP framework. The CIPC oversees the registration and regulation of IP rights, including trade marks, designs and patents. The legal framework provides clear mechanisms for the protection and transfer of IP, aligned with the Berne Convention, TRIPS and other international instruments. Copyright assignments must be reduced to writing and signed by or on behalf of the assignor in order to be valid. Transfers of registered IP rights, including trade marks, designs and patents, require formal filing with the CIPC, while unregistered IP and other intangible assets are typically transferred by way of assignment agreements.

However, foreign investors should be aware of the following practical considerations. Notably, existing IP legislation has not yet been updated to expressly address the protection of AI generated works, creating a degree of legal uncertainty in this emerging area. In addition, as detailed above, any cross-border transfer of IP is subject to exchange control approval, which may result in timing delays of approximately three to six weeks from application submission. From a transactional perspective, IP is therefore a key focus area in M&A due diligence, typically assessed alongside data protection, cybersecurity and broader regulatory compliance considerations.

South Africa’s independent judiciary and predictable commercial law framework supports IP enforcement.

The primary data protection legislation in South Africa is the POPIA, which regulates the processing of personal information of both natural persons and juristic persons. POPIA must be read together with its regulations (which were recently updated in April 2025), as well as the guidance notes issued from time to time by the Information Regulator, the data protection authority.

POPIA only applies to the processing of personal information entered into a record by or for a responsible party (also referred to as a “data controller” in some other jurisdictions) where the responsible party is domiciled (ie, registered) in South Africa, or is not domiciled in South Africa but makes use of automated or non-automated means to process personal information in South Africa (unless those means are used only to forward personal information through South Africa).

Enforcement of POPIA has strengthened in recent years. Under POPIA, an enforcement notice will generally be issued by the Information Regulator in the event of non-compliance with POPIA, which affords the responsible party a period of time in which to remedy such non-compliance. This enforcement notice would be preceded by an investigation or an assessment. Failure to comply with an assessment or enforcement notice is an offence, which may result in a fine, or imprisonment of between 12 months and ten years, or both, or an administrative fine of up to ZAR10 million.

The Information Regulator has over the last few years conducted several assessments into the manner in which responsible parties are processing personal information, both in response to complaints received and on its own initiative. This has resulted in several enforcement notices being issued. In the past year, administrative fines for failing to comply with an enforcement notice have ranged between ZAR100,000 and ZAR500,000, with the highest administrative fine imposed to date being ZAR5 million. Civil action for damages may also be brought by an aggrieved data subject or by the Information Regulator at the request of a data subject.