The relatively unknown continent of Africa is the continent for business opportunities. For example, it is expected that 50% of the global population growth will take place in Africa between now and 2050. The average age of the inhabitants of this continent will be 25.
In other words: Africa has a young and dynamic workforce. If the job market is well-developed, there will be higher rates of employment and the economy will grower more rapidly. What’s more, the African continent has the fastest growing middle class in the world. Boasting a wealth of natural resources, it is not surprising that countries such as China and India are taking a keen interest in this continent.
Opportunities for small and medium-sized businesses in Africa
Whereas in the past, mainly multinationals such as Heineken and Unilever would expand into Africa, there are certainly opportunities for small and medium-sized businesses in Africa now, particularly in terms of exporting to Africa.
Research shows that the risks of expanding into Africa are smaller than in other growth markets which we as Europeans are more familiar with such as Brazil, Russia, India and China (the BRIC countries). This study looked at administrative (bureaucratic), cultural (language) and economic (level of development) barriers between the Netherlands and Africa.
The study reveals that investing in countries such as Niger and Angola is not as risky as investing in India. Countries such as the Capeverdian Islands, Botswana and Tanzania even have a lower risk profile than our ‘familiar’ China!
The Netherlands has now entered into agreements to prevent double taxation with a number of countries on the African continent including Ethiopia, Ghana, Uganda and South Africa. And it has entered into negotiations to come to such an agreement with Zambia and Kenya for example. Some existing trade agreements are also currently being renegotiated.
Taxation rates in South Africa
The Netherlands has included special provisions in its legislation with respect to doing business with developing countries. These provisions are included in the Double Taxation Avoidance Decree (Besluit Voorkoming Dubbele Belasting). In case there is no separate tax treaty with a certain country for Dutch citizens, then this decree will make sure that double taxation is avoided.
This Decree also includes a list of the relevant developing countries. It can be concluded that doing business on the African continent can certainly lead to opportunities, which are perhaps less risky than you may initially think. However, you do need some solid advice prior to your business adventure.
Our consultants would like to map out the opportunities with you. We will mainly look at the tax rates in South Africa.