MARKETWATCH EMERGING MARKETS:SOUTH AFRICA

Transcription

1 The Republic of South Africa is a country located at the southern tip of the African continent. A multi-ethnic society encompassing a wide variety of cultures, languages, and religions, it is a frequent destination for international assignees. Yet it remains a challenging location for international assignments with security issues and schooling highlighted as particular challenges. KEY CHALLENGE AREAS Input from Cartus Destination Service Provider on the ground in South Africa, highlights the following key areas for assignees: Security Housing Schooling Transportation Visa & Immigration Cultural Issues SECURITY Violent crime is more prevalent in South Africa than in many western countries, with Johannesburg in particular having high levels of crime by world standards. Indeed, assignees are often alarmed at the level of security required for expatriate living, particularly in detached properties where high walls, electric fencing and guards are often used. However, it is important to convey to the assignee that these are precautionary measures, and that the majority of South African crimes are isolated to areas and suburbs away from the typical expatriate neighborhoods. There are two main risks for assignees whilst residing in South Africa: house break-ins and car hi-jacking. Property breakins have reduced amongst the expatriate population as they largely reside in gated communities where property alarm systems are linked to armed response units. To minimize risk when traveling, assignees should keep vehicle doors locked, windows closed and valuable items such as laptops and handbags, in the trunk of the vehicle. Assignees should avoid wearing very expensive jewelery and be vigilant when driving. If an assignee notices a vehicle following them, they should drive to the nearest police station or populated area such as a shopping mall. SOUTH AFRICA IN BRIEF Type of Government: Republic Currency: Rand Weights and Measures: Metric system Climate: Fairly temperate. Summer months are from November to March, with average temperatures of around 77F. Winters take place from June through to August and can be quite cold, with temperatures at night falling to 50F Time Zone: GMT +2 hours Population: 55 million Languages: 11 official languages including English and Afrikaans There are three capital cities: Cape Town (legislative capital), Pretoria (administrative capital) and Bloemfontein (judicial capital) It is important that you are realistic with assignees with regards to the potential dangers, but at the same time, non-alarmist. We recommend you ensure assignees attend a pre-move visit to allay security perceptions and concerns. To help set expectations, an in-country security briefing, during or after this visit should also be provided. Ensure you have a well-developed security policy (preassignment visit, check-list of minimum security requirements, approved complexes for housing, security briefings) and a local go to person for security related matters. We advise that you avoid lump sum policies for South African moves because there have been instances where assignees want to save on housing costs, so that they can keep the difference. This can compromise the area that they live in and the security features of their property. PAGE 1 OF 6

2 Should an assignee insist on a detached property, we recommend a full security audit before the lease is finalized. This allows security upgrade negotiations to be included in the lease agreement. Security audits should be conducted by the organization s approved in-house security firm and can cost around US$750. Our destination service provider can advise of local security firms, but we always advise that the final choice reside with the organization. You should also consider providing the assignee and their family with a driver for at least the first two weeks of the assignment, as they get used to their surroundings and become familiar with both the safe and unsafe areas of the particular city that they have moved to. Property Prices: Johannesburg and Cape Town Below is an outline of the average monthly rental prices in Johannesburg and Cape Town: PROPERTY TYPE JOHANNESBURG CAPE TOWN FURNISHED APARTMENTS One bedroom R15,000 R22,000 R18,000 R30,000 Two bedroom R18,000 R28,000 R22,000 R40,000 Three bedroom R35,000 R45,000 * R35,000 R50,000 * FURNISHED TOWN HOUSES OR CLUSTER HOMES Two bedroom R25,000 R35,000 R28,000 R35,000 ** Three bedroom R30,000 R40,000 R40,000 R50,000 ** Four bedroom R40,000 R60,000 R55,000 R65,000 ** UNFURNISHED APARTMENTS One bedroom R10,000 R14,000 R12,000 R20,000 Two bedroom R12,000 R25,000 R15,000 R30,000 Three bedroom R25,000 R35,000 * R28,000 R40,000 * UNFURNISHED TOWN HOUSES OR CLUSTER HOMES Two bedroom R15,000 R25,000 Not available Three bedroom R22,000 R35,000 R35,000 R48,000 Four bedroom R35,000 R45,000 R50,000 R60,000 UNFURNISHED PROPERTIES IN GATED COMMUNITIES Two bedroom R22,000 R30,000 * Not available Three bedroom R30,000 R40,000 R40,000 R60,000 *** Four bedroom R40,000 R50,000 R45,000 R75,000 *** HOUSING There is a good supply of furnished apartments and unfurnished houses in South Africa, suitable for temporary and long term accommodation. Furnished houses can be quite scarce, with a higher number available in Johannesburg than in Cape Town. Despite the good supply of housing stock, demand for quality expatriate properties means that assignees still need to act quickly to secure a home they like. This is especially the case for properties in gated communities. Unlike some countries, in South Africa there is no culture of aggressive negotiating, so a property s rental asking price is usually achieved by the landlord. Assignees relocating with pets may limit their choice of temporary accommodation as most landlords do not allow animals, although they may be allowed in unfurnished houses. A typical lease length for unfurnished houses is one to two years and for apartments it is usually a minimum of three months. Most landlords will accept an early termination/diplomatic break clause for long term leases, but generally the shorter the lease, the shorter the break clause period will be. Five bedroom R50,000 R75,000 R60,000 R100,000 *** * Scarce ** Very scarce *** High demand, very limited In Johannesburg, apartments are available in the north, west and eastern suburbs, although one to two-bed options are more readily available than three or four bedrooms. In some expatriate neighborhoods there is a reduced supply of four-bed houses when compared to other property-types. Apartments may be rented furnished or unfurnished, but houses tend to be rented unfurnished, with furnished options low in availability. Due to property sales prices, locals in Cape Town are choosing to rent rather than buy. As such, assignees must compete with locals (as well as other expatriates) for good quality housing and therefore need to be flexible in their property choices. In the furnished sector, two to three bed-houses and apartments are more available than larger properties. As a popular international tourist destination, in the high season, furnished accommodation in Cape Town is very challenging to source, with prices rising and most landlords charging daily rates. PAGE 2 OF 6

3 Secure Housing Owing to the security challenges in the country, many assignees choose to live in gated communities, which can be quite expensive. This is because, in addition to a property s rental payments, gated communities often include a Home Owner s Association Levy which covers security arrangements such as guards, access control, electric fencing and cameras. In addition to this cost, some gated communities also require monthly security monitoring fees (R400 to R650) to link a property s alarm system to an armed response unit. Dependent on the length of the rental lease, assignees may be able to negotiate security upgrades, but these should be requested before a contract is signed and may incur extra costs. Back-up power, although not essential, is also now included in housing allowances by some organizations. This follows the demand for electricity outstripping supply, and the government subsequently blacking out part of the grid temporarily. Known as load-shedding, this occurs during peak usage times in the winter months. The inclusion of back-up power (generators or alternators) should be negotiated before the lease is signed. Housing Quality In addition to security, housing quality can sometimes be an issue in South Africa, with our destination service provider citing that around one in 10 properties are not built to the highest standards. Damp, water leaks and poor maintenance are the most prevalent challenge to quality, particularly in Johannesburg where heavy storms are commonplace during the summer. To combat this, we avoid low quality properties and check with agents to find out whether a property has had a history of leaks. Should an assignee still want to select a home that has evidence of leaks or visible damp, we record it in the lease and ensure that the landlord fixes the problem prior to lease commencement. The additional security costs for properties are often overlooked by companies, but this added expense should always be considered when setting an assignee s housing allowance. Indeed, it could make a big difference to the quality of property that they can afford. Companies should also be aware that detached properties can sometimes be much more expensive than living in a gated community as extra security may be needed. Detached homes also do not offer the lifestyle and safety benefits of gated communities. As a minimum, we recommend that expatriate housing has an alarm system linked to a security monitoring company. Should the property be free standing then a significantly higher standard of security measures needs to be put in place, this includes electric fences, perimeter beams, CCTV cameras and burglar bars. South Africa has a high annual rental increase compared to the U.S. and Europe, with current increases reaching between 6% and 10%. This may not affect the assignee in their first year, but if their housing allowance is fixed for the duration of their assignment, it will impact their rental payments year on year. With this in mind, consider increasing housing allowances in line with annual rises. To ensure enough time for the property to be professionally cleaned and the agreed security measures put in place, we recommend that assignees do not move into a property over a weekend or the day after the previous tenant has vacated. With this in mind, assignees should be prepared to stay in a hotel or temporary accommodation for a short while and the organization should ensure an appropriate allowance is provided. SCHOOLING Private schools in South Africa are of a very high standard, following the British curriculum. However, places are limited (especially for lower grades) and long waiting lists mean that international schools are often the only option. However, most recently, pressure on private school places has eased somewhat. Although they charge considerably higher fees than a private school, the American International Schools of Johannesburg and Cape Town both have a high turnover of students and can usually accommodate children. Moreover, our destination service provider keeps in regular contact with local international schools and works with a specialist educational consultant, such as Cartus supplier, School Choice International (SCI). International schools are primarily American, British, French and German and each follow their respective curriculums. The most popular schools include: JOHANNESBURG CAPE TOWN PRETORIA American International School of Johannesburg Deutsche International Schule American International School of Cape Town British International School American International School Campus (Junior) Courtney House International School Lycée Jules Verne Deutsche Schule Deutsche Schule École Français du Cap PAGE 3 OF 6

4 It is important to be absolutely realistic with the assignee regarding school availability. Companies typically sponsor the schooling costs of dependent children as part of the family support and in South Africa we would recommend you set a high budget for tuition fees. Like most aspects of relocation, advance planning is key. Once an assignment date has been decided, get in touch with Cartus straight away so that school choices can be determined and searches can begin. Many Cartus clients get actively involved in local schools in order to form good relationships with them. Some even choose to advocate a member of the organization on the school board. It is important to understand that actions such as these are not to gain preferential treatment, but to form good, working bonds between organization and school. For group moves, consider investing in a school s expansion so that they can accommodate the influx of expatriate children moving into the area. TRANSPORTATION Apart from rail links between cities and airports, there is no reliable public transport system, making it essential that the assignee can drive. They will not be able to take a driving test in South Africa, so must have a valid home country license accompanied by an International Driver s Permit, prior to arrival. Once they have a vehicle, the assignee will need to register it with their local licensing department in South Africa and obtain a traffic register number. Many drivers in cities like Johannesburg adopt quite an aggressive and sometimes dangerous style of driving, which contributes to the reason why South Africa has one of the highest road accident fatality rates in the world. Motorway infrastructure and toll roads are generally in excellent condition, but assignees should be wary of the secondary roads, which can be poorly maintained, not well signed or lit and heavily congested during peak traffic. South Africa can sometimes experience stormy weather and assignees should be mindful of this when driving, as roads can often become flooded by heavy rainfall. As South Africa is not a location for those who cannot drive, we encourage our clients not to select an assignee for a move unless they have already obtained a driver s license. Given the high road traffic accident rate in South African cities and the risk of car-hijacking, we recommend that assignees and spouses consider taking an advanced driving course. Obtaining the finance to either lease or purchase a car can be challenging as monthly payments are extremely high. With this in mind, consider providing a lump sum allowance for the purpose of purchasing a vehicle. In addition to their expense, car leases are typically issued over a three year term, which is problematic for assignments of a shorter duration. As a solution to this, consider setting up a corporate lease with a local car rental firm. This way, assignees on short term assignments will not have to lease a car in their own name and when the assignment has ended, the car can be given to another employee. Alternatively, you may want to consider providing the assignee with a company car. VISA & IMMIGRATION Assignees need to apply at a consulate, in person, in their home location. This cannot be managed by a third party on their behalf, e.g., an immigration service provider. The time it takes to apply for a visa can vary, with some assignees waiting up to four months. Foreign nationals in South Africa cannot open a bank account, sign a lease or clear goods through customs until they have a work visa. This requires a good deal of documentation that may vary depending on the home country. The Intra-company Transfer Work Visa has been extended to four years and does not usually take more than 30 days to acquire, however, gaining extensions for existing permits can be challenging, with some taking four months or more to process. In some cases, these delays have meant that applicants have had to leave South Africa and re-enter once the visa is renewed, which can be disruptive to organisations, the assignee and their family. Children require a school place and a study permit. This can be applied for at the same time as the assignee work permit or, if a school place has not been secured yet, once the family has arrived in South Africa. Study permit applications also require proof of medical insurance. Re-Entry Bans for Visa Overstays Foreign nationals who stay in South Africa after their visas have run out are now subject to bans on re-entering the country (previously overstays were subject to fines). The length of the ban will depend on the length of the overstay e.g., an assignee who overstays for 30 days or less will be banned from South Africa for 12 months. Given that an assignee cannot open a bank account or sign a lease without a work permit (now called Work Visa) we advise that the application process begins as soon as an assignment is scheduled. PAGE 4 OF 6

5 We recommend that assignees be prepared with all the necessary documentation as early as possible. For further information or queries regarding immigration, you should always consult your immigration provider. The re-entry ban for visa overstays has the potential to impact a company s relocation program and therefore visa expiration dates should be closely monitored, with extension applications planned well in advanced. CULTURAL ISSUES The African culture has a unique warmth, charm and vibrancy, but it is different to that of the West. Compared to housing and security, cultural differences are much more subtle, but can lead to frustrations amongst assignees if they are not made aware of them. Meetings. When meeting with business associates for the first time, it is important that participants get to know one another. Assignees should not expect to conduct business negotiations at an initial meeting. Decisions. Although final decisions are usually made by one person, the decision making process often incorporates everyone and will typically take as long as it needs to. It is important to be patient during this process as pushing for an answer can be counter-productive. Teamwork. Generally South Africans work well together in teams. Group harmony is important, with strong social bonds formed between co-workers. However, there can be a number of ethnic and racial divisions in the South African workplace, which may sometimes make it challenging to build teams. There are not just white South Africans, but English or Afrikaans and there are not just Black South Africans, but Zulu or Xhosa for example. Do not assume people will automatically work well together, sensitivity and local knowledge is imperative to achieving success in a South African business environment. Relationships and Hospitality. A lot of emphasis is placed on developing good, working relationships amongst business contacts and colleagues in South Africa, so make sure assignees dedicate time to doing so. Hospitality is important and it is not uncommon to be invited to dinner at a colleague s home. Should an assignee receive an invitation, they should always accept and reciprocate where they can. Timescales. Like many African societies, some South Africans have a relaxed attitude to timescales and deadlines, both in business and their personal life. Deadlines are seen more as guidelines than actual deadlines, which can be frustrating to assignees used to a faster paced work environment. If an assignee has a deadline critical to work commitments, they should clearly specify this. Given the racial divisions in some areas of South Africa,we recommend assignees get to know about the country s economic and political history prior to arrival. We also recommend cross-cultural training for assignees moving to the country. The policy-type you choose should take the length of the assignment into account as well as the scope of relocation experience that the assignee has. CITY DIFFERENCES Johannesburg North East Largest population in South Africa One of the country s most westernized cities with upscale shopping malls, sophisticated banking and large homes Popular expatriate areas of the city are suburbs and gated communities: Northern suburbs - Sandton Central, Atholl, Dunkeld, Hyde Park, Sandhurst, The Parks and Melrose Gated communities - Dainfern, Dainfern Ridge, Cedar Lakes, Fourways Gardens and Waterfall Estates can all be found in the far north of the city and are in close proximity to the American International School Heavy rainstorms in summer months, cool dry winters Security issues more prevalent in Johannesburg than other South African cities Pretoria North East - 80km from Johannesburg. Residential developments around both cities means that the two are more or less connected Close proximity means that Pretoria shares the same climate and culture as Johannesburg Popular expatriate areas: The Centurion Golf Estate, located just 15km from the city center Silver Lakes in the East Not as many international schools in Pretoria as Cape Town or Johannesburg, but the American International School of Johannesburg is reachable from suburbs such as the Centurion Golf Estate Historically an Afrikaans speaking city, although this is less prevalent today Cape Town South West Known as the Mother City, much smaller than Johannesburg Very westernized Outdoor activities are more popular here than in other cities, with beaches and mountains popular amongst residents PAGE 5 OF 6

6 Popular expatriate areas: Southern suburbs - Constantia, Bishops Court and Newlands, Claremont and Tokai. (Close to American and British international schools and South African private schools) Gated communities - Steenberg Golf Estate, Silverhurst and Uitsig Atlantic Seaboard Bantry Bay, Camps Bay, Clifton and Hout Bay Northern Suburbs - Century City and Durbanville Rental prices can be relatively more expensive when compared to other South African cities, depending on which part you choose to live in Windy in the summer and can be cold and wet in the winter months Durban East coast The busiest port in South Africa One of the fastest growing cities on the continent and popular holiday destination for locals. This means that furnished accommodation in beach resorts is challenging to source in December and January Large Indian population, which is reflected in the local cuisine and culture Not many international schools, but excellent private schools Rental prices normally lower than Johannesburg or Cape Town Sub-tropical. City can get very humid in the summer months. Port Elizabeth South East coast Self-labeled the friendly city, its main industry is based on motor and railway manufacturing City only has a small selection of quality private schools. Top schools can be found in Grahamstown, more than an hour s drive away. Should an assignee choose a school in Grahamstown, weekly boarding arrangements may be appropriate The lifestyle in Port Elizabeth is outdoors-based entertainment, with the city s several golf courses being popular Maritime climate and a winter rainfall area When relocating employees to emerging markets, it is important to establish from the outset whether your organization wants to achieve cost effectiveness or successful relocation. In most global locations we relocate employees to, there are going to be areas where we can recommend cost -saving initiatives, but when it comes to some emerging market countries, you should ensure cost savings do not prevent the correct level of support from being provided. This is particularly important in places like South Africa, where extra funding is needed to ensure an assignee; lives in a home that meets minimum security requirements; has effective transportation provision; good schooling for their family; and the necessary cultural training to be effective in their international assignment. Cartus thanks our Destination Service Provider, Intouch Relocations for the information provided for this issue of MarketWatch. Source: Country Navigator powered by TMA World (Cultural Issues sections). trustedguidance@cartus.com 2017 Cartus Corporation. All Rights Reserved. Cartus and the Cartus logo are registered trademarks of Cartus Corporation. The information provided in this MarketWatch publication is provided in good faith but is not intended to provide specific advice or to take theplace of either written law or regulations. Conditions in many emerging markets can change quickly, so Cartus does not guarantee the accuracy or endorse any of the views or opinions given by any third parties and accepts no liability for the data and information included within. PAGE 6 OF 6