Skip to content

Chinese companies in SA

24 January 2018
– 5 Minute Read


An estimated 10,000 Chinese companies are already doing business in Africa, and a major increase in Chinese companies operating in South Africa is inevitable. The South Africa-China economic relationship is strong and China, which is South Africa’s biggest trading partner, has a particular interest in the country. This has important employment law implications, both for the Chinese companies looking to establish themselves in South Africa, and for the South African employment landscape.

Mixed views on impact on unemployment

South Africa has a 27.7% unemployment rate, with young people in the 15-19 and 20-24 age groups most adversely affected. Considering the already significant lack of jobs, some see the idea of Chinese businesses entering the country as a threat. On the other hand, others say that the real impact of Chinese business entering Africa to date has been job creation, skills training and the introduction of new products, services and technology into the market.

Some recent studies generally support the view that Chinese businesses are a boon rather than a threat to local employment in Africa. Areas for improvement, however, are the limited levels of local procurement on the part of some Chinese firms and their relatively low levels of local management.

There have also been reports of environmental and labour law violations. In January 2017, for instance, the Congress of South African Trade Unions (COSATU) reportedly challenged government to act against Chinese companies that were allegedly employing undocumented Chinese nationals.

As with all businesses operating in South Africa, Chinese companies are obliged to adhere to our employment and immigration laws, and protect South African workers as necessary.

Of particular relevance from an employment law perspective are that employee management, dismissal and wages should be in line with South African law. As for immigration matters, any incoming workers should have the necessary work permits. Employment equity and economic empowerment are also relevant, as is data protection.

Tread carefully with dismissals

South African labour law requires employers to implement a system of progressive discipline, with dismissal being reserved for serious transgressions and repeated misconduct.

Dismissal is limited to the four grounds of misconduct, poor performance, ill health and the company’s operational requirements. In all four instances, a proper reason to dismiss must exist, and due process must be followed. If not, the employee can be reinstated or awarded compensation of up to 12 months’ remuneration. In some specific instances, the compensation that can be awarded goes up to 24 months’ remuneration.

A national minimum wage has been introduced in South Africa and will come into force on 1 May 2018. For employees working a 40-hour week, it amounts to R20 per hour or R3 464.00 a month. Related to this, collective bargaining laws and wage negotiations are important in South Africa. This means, for example, that Chinese firms are subject to the labour agreements reached between employers and trade unions at bargaining councils.

Local workers must not be disadvantaged

From an immigration law perspective, various work permits can be issued, all with different requirements.

In essence, expatriates may be brought in as necessary to provide required skills, but not to the detriment of available South African workers able to perform in those roles. Having workers in contravention of the immigration laws exposes companies to material fines or even imprisonment for its leadership.

Overseas businesses ordinarily want to bring in their own nationals at management level to set up in a new market, but transfer of skills and knowledge to local employees is key. There is much that South Africans can learn from expatriates, and taking a strategic view of skills-transfer opportunities could be highly advantageous for South Africans. A reciprocal approach to skills transfer should mean that when expatriates do leave, they leave valuable skills and knowledge behind in South Africa.

Employment equity and BEE credentials are crucial

South African employment equity legislation requires all designated employers to file an annual employment equity report setting out targets for progressing women, black people and people with disabilities. Employers who fail to file an employment equity plan expose themselves to the possibility of a turnover-related fine, an enforcement order and/or exclusion from the gazette setting out compliant companies.

Chinese companies doing business in South Africa should also be aware of the country’s draft data protection legislation, which contains provisions regulating the collection and use of data – both inside South Africa and across to other jurisdictions – as well as the period for which data can be retained. Lack of compliance exposes the company to the possibility of a hefty fine.

Mutually beneficial relationship

Various laws are in place to protect workers in South Africa, and Chinese companies looking to set up operations here need to familiarise themselves with and adhere to these laws. In this way, they will avoid adverse consequences, benefit from the many opportunities that lie within South Africa and strengthen the viewpoint that Chinese business, management know-how and investment benefit the South African economy.