In light of the new Immigration regulations, Mr. Joop Demes, Chartered Accountant and CEO of Pam Golding Hospitality and Mr. Dirk Meissner, Managing Director of IBN Stellenbosch recently had a discussion, specifically relating to the obtaining of South African residency based on the purchase of a Bed and Breakfast/Guesthouse establishment.
Joop Demes: What is the government’s reason for allowing residency on such grounds?
Dirk Meissner: Tourism remains a high contributor to the GNP and is seen as essential for the economy and image of South Africa. The positive effects of foreign owned B&B’s, guesthouses, etc. is fully understood on all levels of government: national, provincial and municipal across the country and our understanding is that the government wishes to boost tourism in South Africa by supporting foreigners eager to set up such establishments.
Joop Demes: What are the advantages of foreign ownership in establishments such as B&B’s, guesthouses, etc.?
Dirk Meissner: The most notable advantage of foreign owned B&B’s, guesthouses, etc. is the foreign ‘touch’ which creates a comforting atmosphere for tourists of similar nationalities, as well as a refreshing change for all others. The influence of foreign cultures brings even more diversification to our already diverse, aptly named ‘Rainbow Nation’.
Joop Demes: Why is residency obtained on such grounds so popular?
Dirk Meissner: Previously, immigration based on relative, work and business permits has been an easy way to obtain residency (even permanently!) in SA. The requirements and fulfillment of conditions were, by international comparison, rather low (€180.000 as investment). The previous requirement of employing at least 5 South Africans full-time has often been ignored and the Department of Trade and Industry has, at times, requested names of businesses that had received permission to have a reduced investment and are still in the same business after 5 years with 5 employees – but those are difficult to find!
Joop Demes: What are the basic requirements of obtaining such residency after the changes to the Immigration regulations?
Dirk Meissner: The government requires foreign direct investment (FDI), job creation/local employment (including training of locals) and, especially in the case of permanent residence, wants the investors to be serious about their business, understand the challenges and to continue their business for at least 5 years after receiving permanent residence. The Department of Trade and Industry will also have to give the applicant a recommendation allowing them to move forward with their application.
Joop Demes: What does the job creation/local employment requirement now entail?
Dirk Meissner: The requirement of job creation/local employment has now been changed to the effect that 60% of all employees must be South African citizens or Permanent Residents. One local employment opportunity can be enough, provided the foreign investor is not drawing a salary until he has permanent residence. Again, this is actually quite an easy requirement in case of a B&B/guesthouse.
Joop Demes: What is the currently required foreign direct investment (FDI) amount?
Dirk Meissner: Formally the foreign investment requirement now sits at R5 million. However, this requirement can be waived or reduced for a wide range of industries and business mentioned in a government gazette. Tourism infrastructure is mentioned the gazette, closest category thereof being a “Boutique Hotel”. This word originates from the DTI and we have been unable to find a clear definition therefore by any academic or business tourism body, and neither in any municipal spatial development legislation. As of now, applications for guesthouses with investments above R5 million have been approved by the DHA.
Joop Demes: You mentioned a requirement from the DTI (Department of Trade and Industry), what does this requirement entail?
Dirk Meissner: Any Business Visa will require a recommendation by the Department of Trade and Industry. Their turnaround time at present is around 30 working days and the result of their evaluation will be sent directly to Home Affairs, the applicant will not see the recommendation, even if it is negative. Only then may a permit/visa application can be lodged.
Joop Demes: Are there any specific locational requirements for a B&B/guesthouse?
Dirk Meissner: The DTI is skeptical regarding investments into ‘ordinary’ B&B’s in well-established areas, such as Cape Town; especially Somerset West, Stellenbosch and Hermanus. They regard the market as saturated and therefore do not foresee further growth in these areas, rather competition based on price. The DTI would prefer investments into underdeveloped areas, such as the Northern or Eastern Cape, etc., where, for example, investments into fruit export and the solar industry take place, thus the need for accommodation. Special interest tourism such as cycling tours, wine festivals, conferences, adventures, arts and culture, etc. also brings large amounts of visitors and, it is in areas like these that accommodation is still needed. In short, the DTI would prefer original ideas for tourism establishments, or investments in underdeveloped areas.
Joop Demes: How have the changes to the Immigration regulations affected the waiting period/costs for visas/permits?
Dirk Meissner: Generally, the government wants to be more involved and in control of visas/permits and unfortunately, due to their inefficiencies, delays must be expected. Professionals should guide this process for individuals, but of course they cost money. Basically, it has become more expensive and more time consuming but on the other hand, more consistent to obtain residency in South Africa.
Joop Demes: Where would one submit an application for a Business visa/permit?
Dirk Meissner: All first applications need to be submitted abroad. As SA is represented in approximately 110 countries, we are often confronted with different sets of requirements.