South African guide to Payments

Last updated 17 August 2024

Here's a rundown of all the options you have - as a South African founder looking to build an online business - when it comes to receiving payments. There's a lot of complexity here, so I'll break down the options by use-case:

Sole Proprietor, selling within ZA only

If you're not running a registered business, and are only interested in selling to customers within the borders of SA, your easiest (and most obvious option) is to accept local EFTs (Electronic Fund Transfers). You can do this simply by opening a new bank account in your own name. Sole Proprietors can operate in South Africa without formal registration, but as a taxpayer, you'll want to register for provisional tax and make sure your affairs are in order.

Depending on who you bank with, the total fees involved can differ widely. Listing all the various options here wouldn't really help you make this decision: It's generally the least frustrating to just open a new account at whichever provider you already bank with. Entry-level accounts in South Africa range from free, to around R10/month.

Personally, I'm a big BankZero fan, but would only recommend them to people who want to do everything through a mobile app, and don't need anything else from their bank other than a place to keep and spend money.

The general rules I'd suggest here:

  • If you're operating as a sole prop, open a separate bank account for all business-related transactions, and keep a diligent record of income and expenses - you'll need that at tax time. Blending personal and business expenses in one account - no matter how much you think you're saving in terms of admin overhead and cost - will come back to bite you.
  • Ensure that any expense you're counting as a "business expense" is actually an expense incurred in the production of income. Your personal living costs don't count.

Sole Proprietor, selling within ZA only, accepting credit cards in person

Here's where it starts getting more interesting. In order to accept credit card payments in South Africa, you essentially have two options:

  1. Apply at your bank for a merchant account (hugely expensive, takes tons of time), or
  2. Use a "middleman" provider (payment gateway) that charges their own layer of fees

In terms of time, cost, stress and customer experience, the latter option is almost always the better one. Within SA, you've got several options here, the two most startup-friendly being:

  [Yoco Core](https://www.yoco.com/za/pricing/) [iKhokha](https://www.ikhokha.com/pricing)
Once-off Fees R999 - R1999 R499 - R1499
Monthly Fees R49/month R75/month (optional)
Transactional Fees 2.5 - 2.7% 2.5 - 2.75%

You can also talk to your bank about getting set up as a merchant and renting a card machine, but those prices tend to be unfavorable compared to these providers.

Sole Proprietor, selling within ZA only, accepting credit cards online

Accepting card payments in person is one thing, online is another. If you're planning on building a website or ecommerce platform and want to charge customers primarily over the internet, your local options are effectively the following.

Paystack

If you're only looking to accept the major credit card brands, Paystack is likely to be your best option - they're the newest entrant in the market, offer disruptive pricing for basic transactions, and their overall support is great.

Payouts (withdrawing from the platform) are free - Paystack will automatically EFT your settled payments within 1-3 days.

As of 15 May 2024, the fees are as follows:

Payment Method Per-Transaction Fees Minimum Purchase
Local Credit Cards 2.9% + R1.00 N/A
International Credit Cards 3.1% + R1.00 N/A
EFT Transactions 2.0% N/A

Payfast

Payfast is the older and more established provider. They offer a larger range of payment options with a varying fee structure, under their "Payfast Aggregation" product. If you're running a consumer-facing online store and opening up the widest range of payment options is important to you, chances are Payfast will be your best choice.

Note that Paystack charges R8.70 per EFT payout (every time you withdraw your money from the platform).

As of 15 May 2024, the fees are as follows:

Payment Method Per-Transaction Fees Minimum Purchase
Credit and Cheque Card 3.2% + R2.00 N/A
Instant EFT, Capitec Pay 2.0% R2.00
Mobicred 3.2%
Apple Pay, Samsung Pay 3.2% R2.00
RCS Store Cards 3.2% + R2.00 N/A
Masterpass, Snapscan, Zapper, Debit Card 3.5% + R2.00 N/A
MukuruPay 3.9% + R6.00 N/A
Scode 4.5% + R5.00 N/A
MoreTyme 5.5% + R2.00 N/A

Sole Proprietor, selling globally from South Africa

As of May 2024, the most widely-accepted and frictionless way to receive payments from abroad, whether as a sole proprietor or a registered business, is Paypal via FNB. You don't necessarily need an FNB bank account, but you do need an online banking profile in order to effect withdrawals from your Paypal account. The process is roughly as follows:

  1. Register a personal account at paypal.com
  2. Create an online banking profile at FNB (guide here)
  3. Receive payments from customers to your PayPal account and run the withdrawal to ZAR via FNB's online portal or mobile app.

For South African accounting purposes, the only rules that really matter are:

  • Repatriate any received forex within 30 days. This is a South African Reserve Bank regulation, nothing to do with Paypal or FNB.
  • When marking invoices paid locally, the final ZAR amount (after PayPal and FNB's fees and commissions) is what'll count as your revenue.

Sole Proprietor, selling globally using a Merchant of Record

A Merchant of Record is essentially a reseller. As a business, they offer you a platform to list and sell your products, and as far as all the paperwork and tax obligations are concerned, they become the seller. You then invoice them on a recurring basis to "withdraw" your revenue, which is counted as sales income towards your business.

MoRs have a few benefits - the main one being simplified tax and accounting. Via an MoR, whether you make one sale or a thousand, you deal with the same amount of paperwork and bookkeeping overhead on your end.

MoRs also generally advertise tax compliance as a benefit: They collect local sales tax in the various countries on your behalf and remit that, but the reality of the global tax system (as of 2024) is that you're very unlikely to be approached by a foreign tax authority to pay their local sales taxes.

Some MoRs to consider, each of which offers different pricing and payout options:

  • Gumroad - Ideal for once-off sales of digital downloads
  • LemonSqueezy - Ideal for once-off and recurring digital products
  • Paddle - Ideal for recurring SaaS billing
  • Mollie - Ideal for eCommerce

Sole Proprietor, selling globally with foreign incorporation

If you want to go "all the way", and use top-tier global payment platforms like Stripe, Adyen and Braintree, you'll need to incorporate in a jurisdiction that supports those. This can become quite expensive and time-consuming on the admin side, so you should generally only consider this route as an "expansion". Unless your entire business hinges on selling "locally" within the US/EUR markets, consider this an add-on to deal with once your SA-based business is up and running.

Generally speaking, with this option, you're creating a distribution entity for your product. If you're primarily based in SA, work in SA and live in SA, then for tax and intellectual property reasons, your product (and all proceeds/profits) are deemed to originate from SA.

This business will, in effect, either be "hiring" yourself in SA to do the work (for a services-oriented operation), or act as a reseller for your product (for a products/licensing-oriented operation). You'll operate the business remotely from South Africa as a foreign incorporator, and be liable for taxes in the country where you incorporate.

To start, your best option is either:

These services cost anything from USD 500 - USD 1500 all-in to create a registered entity and do the necessary filings and appointments. Note that you'll now be obligated to comply with tax and reporting requirements in those countries, so having a good law firm bookmarked is a good idea - I've personally been quite happy with LawBite

Once your entity is set up, you can sign up for Stripe's payment gateway product, and Stripe will then allow you to charge customers all over the world, in most currencies, and gather the revenue for you. You then need to get it paid out to South Africa.

This is where the complexity ticks up a notch: Stripe does EFT payments to bank accounts, so you're very likely to end up operating a Mercury Bank account (it's the default they recommend for Stripe Atlas), or an account in the UK.

The account is owned by your foreign entity, so the money that routes there can be used for business purchases, etc. To repatriate that money, you'll generally invoice your foreign company from South Africa, then wire that money to your South African bank account to settle those invoices.

The major banks (ABSA, Standard Bank, FNB, Nedbank) all allow for international incoming wire transactions, and will offer various conversion rates and fees for settling that money. If you're using a bank that doesn't support cross-border payments, the most cost-effective option would be to register your business on Wise, wire the money to Wise, and then send it from there to your South African bank account. Wise has the lowest FX and transaction costs in the industry (as of 2024), and will use Bidvest or Exchange4Free for the local leg of the transaction, which is a fully-domestic ZAR EFT hitting your local bank account.

However: Don't forget about taxes! Depending on where you incorporate, you'll be liable for:

  • Annual returns tax, which differs by jurisdiction
  • Income tax, which differs by jurisdiction

In the example of using Stripe Atlas to incorporate in Delaware, that means your annual expenses there will be:

  • Delaware Franchise Tax, a flat $300/year for an LLC delawareinc.com
  • Corporate Income Tax, which assuming you incorporate in Delaware:
    • State taxes of 8.7% to the State of Delaware delaware.gov
    • Federal taxes of up to 21% on profits irs.gov

On top of those, you'll likely want to have a US-based firm do your annual taxes and compliance, for which fees vary.

And don't forget: As a foreign business, you're subject to that country's laws and reporting requirements (which change from time to time), and especially in the case of software businesses based in the US, you'll want to be very wary of Section 174 - the recent amendment of which requires amortization for R&D spend in software companies (meaning, developer salaries) and has had a huge impact on the way SaaS businesses operate.

On top of that: If 80% or more of your personal income in a given tax year originates from this foreign entity (which it very likely would if this becomes your main hustle), SARS will deem that entity to be your employer and it'll be required to register for tax in South Africa. This is known as the "Personal Service Provider" rule, and while you might skate under the radar for a long time as a small operation, the moment you're audited, it could become a problem.

Other options

There are lots of other payment gateway options in South Africa, but I have no personal experience with any of these and cannot comment on their suitability - either for a sole proprietor operation, or a registered business.

Supplier Payment Methods
[WigWag](https://www.wigwag.me/) Credit and Debit Cards
[Peach Payments](https://www.peachpayments.com/) Credit and Debit Cards, EFT, Apple Pay, Capitec Pay, Nedbank Direct EFT, Mobicred, Ukeshe Scan to Pay, Paypal, Payflex, 1 Voucher, Zero Pay
[OZOW](https://ozow.com/) Bank EFT, Absa Pay, Capitec Pay, Nedbank Direct EFT, WhatsApp
[Zapper](https://www.zapper.com/) Mastercard, VISA
[Snapscan](https://www.snapscan.co.za/) Mastercard, Visa and SASSA
[PayGenius](https://info.paygenius.co.za/) Visa, Diners Club International, American Express, Mastercard, Instant EFT, Airtel Money, Halopesa, Mopesa, Paypal, Tigopesa, MTN Money

Selling as a Pty Ltd within ZA

In short, all the same options above apply, except:

  • You'll be registering as a Pty Ltd instead of in your own name as a sole proprietor (see this quick-start guide!)
  • Generally, you'll have higher transaction limits and better support
  • Your bank account (regardless of provider) is likely to have a monthly fee (R80/month and up)
  • You'll want to integrate all these transactions into your accounting solution if possible

Selling as a Pty Ltd globally, from South Africa

Global trade (or in our case, "exporting") is where it gets a lot more interesting. As a South African registered business, you're allowed to export goods and services to pretty much any country in the world. The tax, customs and excise rules around exports are dizzying (and outside the scope of this article), so we'll just focus on the payment options instead.

Firstly, these platforms will all work just as well for a business, as for a sole proprietor:

They all offer the ability to accept credit cards online and ultimately receive the money locally in ZAR. These will work well if your customers understand that they're paying in foreign currency (usually OK for services work), but if you have a strong requirement around being able to offer products in their local currency, you'll want to look at either using a Merchant of Record, or incorporating internationally.

Selling as a Pty Ltd globally, using a Merchant of Record

This is effectively the same as (using a MoR as a sole prop)[#sole-mor], with the main difference being that you'd invoice the MoR from your Pty Ltd and count that incoming revenue as company revenue, not personal income. Depending on what you're selling and the rules that the MoR enforces, you might only be able to sell certain products or beyond certain revenue thresholds as a private company.

Selling as a Pty Ltd globally, with foreign incorporation

This is effectively the same as (the sole proprietor route)[#sole-foreign], with the big differences being:

  • You'd invoice your US-based company from your SA one
  • Since you own both companies, the US-based company is deemed a branch of your SA-based one (and some complications apply)
  • If you're paying your salary from your SA-based company which is tax registered, there's less complications with the Personal Service Provider rule

Update history

  • 17 Aug 2024: Added WigWag as a payment option, expanded on tax and compliance complications of incorporating a foreign entity, included Section 174 and Personal Service Provider rule links
  • 15 May 2024: First edition

If you have any questions, suggestions, comments or feedback here feel free to email me directly at [email protected] - I try keeping this page up to date as things move!

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