Selling a manufacturing business: plant, premises, permits and people

Sell the business, or sell the plant?

A going concern sale suits a business with a profit a buyer can rely on. Where profit is thin, or production has stopped, the value is usually in the plant, and an auction realises it on a fixed date.

Decide before you wind down. For VAT, SARS does not treat a dormant business as an income-earning activity, so a dormant factory cannot be zero-rated as a going concern unless the agreement obliges you to restart it and have it earning income before transfer (SARS Interpretation Note 57, para 4.8.5). For labour law, stopping production does not by itself settle whether the staff transfer.

Valuing the plant and equipment

• Installed or removed. A machine running in a line is worth more to a buyer who will use it where it stands than to one who will remove it; removal value allows for the cost and risk of dismantling, rigging, transport and recommissioning. A valuation should state its basis.
• What a buyer can verify. An asset register that matches the floor, with manuals, service records and the statutory test records for lifting machines and pressure vessels (see the plant and machinery auctions guide).
• What is not yours to sell. Leased plant belongs to the lessor, and plant on an instalment sale usually stays the finance house’s until paid off: settle it, or get the finance house to agree to the buyer taking over the agreement. A machine under a special notarial bond is treated as pledged to the bondholder (Security by Means of Movable Property Act, section 1), so it needs the bondholder’s release. Tooling paid for by a customer may belong to that customer.

Tax shapes the price allocation. Manufacturing plant usually qualifies for the section 12C allowance of 20% a year, or 40% and then 20% a year for new or unused plant acquired on or after 1 March 2002; a small business corporation may instead deduct 100% in the year the plant is first used (section 12E(1)) (SARS, Taxation in South Africa 2026, 2.6.14 and 2.6.15). If plant sells for more than its tax value, the allowances recovered are included in the seller’s income as a recoupment under section 8(4)(a) (same guide, 2.6), so how the price is split between plant, stock and goodwill changes the tax: settle it with your tax practitioner before you sign.

Our valuations service gives written plant and equipment valuations; for the whole business, see how to value a business in South Africa.

The factory: owned or leased

Whether the buyer needs your building depends on the process. In SARS’s example of a manufacturer on leased premises, a building integral to the business is dealt with by the buyer signing its own lease with the landlord at the same time, and one the business could do without need not pass at all (Interpretation Note 57, para 4.9, Example 2).

A leased factory usually needs the landlord’s written consent before the lease can be ceded and assigned to the buyer, or the buyer signs a new lease. A factory you own can go one of three ways:

• Sold with the business. If the seller is a VAT vendor and the property is part of its enterprise, the sale carries VAT: at zero per cent if every going concern requirement is met, at the standard rate if not. Only where the seller is not a vendor, or the property is not part of its enterprise, is the purchaser liable for transfer duty instead. Never both (SARS FAQ).
• Kept and let to the buyer. The business can still be zero-rated if every other requirement is met, because SARS accepts that the assets needed to run it can pass by lease; the rental is standard-rated (para 4.9). A sale and leaseback, where you sell the building and rent it back, is not a going concern (para 4.8.4).
• Sold separately, through our property auctions or by private treaty.

Agree which items, such as overhead cranes and transformers, go with the building, and check the zoning: land may be used only for the purposes its land use scheme permits (Spatial Planning and Land Use Management Act, section 26(2)), so a buyer staying on the site will want the zoning certificate and approved building plans.

Environmental licences: what transfers, and how

Environmental licences are issued to a named holder, and most do not follow a new owner automatically:

The emission licence needs the most planning

No one may conduct a listed activity without a provisional atmospheric emission licence or an atmospheric emission licence (Air Quality Act, section 22). A transfer needs the permission of the licensing authority for the area, usually the metropolitan or district municipality (section 36), after public notice (see the first question below). Until then the licence stays in the seller’s name, so settle the timing and conditions of sale with an environmental attorney before you sign. In a share sale the holder does not change, but read each licence’s conditions.

Pollution liability does not end with the sale

The duty to take reasonable measures against significant pollution applies to anyone who causes or has caused it (National Environmental Management Act, section 28(1)), so selling does not end your own liability; it also falls on the owner of the land, whoever controls it and anyone with a right to use it, where a polluting activity is or was carried on there (section 28(2)). A transferred waste management licence leaves the previous holder liable for anything incurred while it held the licence (Waste Act, section 52(8)). No one may transfer contaminated land without telling the person it goes to that it is contaminated and, for a declared remediation site, notifying the Minister or MEC and complying with their conditions (Waste Act, section 40(1)). Expect a buyer to ask for the environmental file, including directives and site assessments, and disclose known contamination in writing.

Other permits, contracts and key people

• Other permits. Municipal permits (for example, for storing flammable substances), product approvals and import and export registrations each have their own rules. List each one, its holder and whether it transfers or must be applied for afresh, and make the agreement conditional on any the buyer needs to trade.
• B-BBEE. Organs of state and public entities must apply the B-BBEE codes in licensing and procurement (B-BBEE Act section 10(1)), and private customers may ask for your level too. The level partly reflects ownership, so a sale can change it. See our due diligence checklist.
• Customer and supplier contracts. In a going concern sale a contract passes to the buyer only if it allows that or the other party agrees. In a share sale the contracts stay with the company, but look for change of control clauses. Customers who approve their suppliers may need to approve the new owner, so allow time.
• Key people and know-how. A buyer discounts for a factory that depends on a few people. Write down the processes and machine settings, train a second person on each critical line, introduce a second contact to the main customers and offer a handover. Expect to be asked for a restraint of trade.

Your staff and section 197

In a going concern sale, section 197 of the Labour Relations Act makes the buyer the employer automatically, unless a different arrangement is agreed in writing between the employer or employers and the employees’ representatives (the consulting parties listed in section 189(1)), as section 197(6) requires. The staff move on their existing terms (or terms that are, on the whole, not less favourable) with service unbroken, and a dismissal because of the transfer is automatically unfair (section 187(1)(g)).

You and the buyer must agree a valuation, at the transfer date, of accrued leave pay, the severance pay that would be due on a retrenchment and other accrued unpaid amounts; agree in writing which of you is liable and how it is provided for; and disclose those terms to each transferred employee (section 197(7)). For 12 months you stay jointly and severally liable for those amounts if a transferred employee is retrenched or the buyer is liquidated or sequestrated, unless you show you complied, and you and the buyer are jointly and severally liable for any employment claim that arose before the transfer (sections 197(8) and (9), as substituted by the Labour Relations Amendment Act 12 of 2002). If the seller is insolvent, section 197A applies instead: see insolvent estate and liquidation auctions.

If you close and sell only the plant, no business is transferred and section 197 should not apply. Retrenching staff because of the closure is a dismissal for operational requirements: you must first consult the parties section 189(1) lists, such as a registered trade union whose members are likely to be affected or, failing one, the affected employees. If you employ more than 50 people and the dismissals reach the numbers in section 189A(1), as closing a whole factory often will, section 189A provides for a facilitator and longer periods before notice of dismissal. Each retrenched employee must be paid severance of at least one week’s remuneration for each completed year of continuous service, unless they unreasonably refuse an offer of alternative employment (Basic Conditions of Employment Act, section 41, in force since 1 December 1998).

But whether a business was transferred as a going concern turns on substance, not form (NEHAWU v University of Cape Town): a complete line sold in place to a buyer who runs the same business there may carry the staff with it. Speak to a labour attorney before you tell your staff.

VAT, consents and deadlines

A going concern sale is zero-rated for VAT only if every requirement of section 11(1)(e) is met, including that both parties are VAT vendors and agree the going concern terms in writing when they sign (Interpretation Note 57). Otherwise a seller that is a VAT vendor charges VAT at the standard rate, currently 15%, in force since 1 April 2018 (SARS: VAT).

Once a section 34 notice is published, a creditor of the business can demand immediate payment of a fixed debt that would otherwise fall due later (section 34(2)), so have the cash, or an arrangement with those creditors, in place first. Your attorney confirms which requirements apply; see also selling a business as a going concern.

Keeping it confidential, and how we sell it

A factory is easy to damage while it is for sale: skilled staff look elsewhere, customers line up a second supplier. The buyer may be a competitor, customer or supplier, so information is released in stages: in a private sale, anonymous marketing first (a public auction catalogue may name the business); a signed non-disclosure agreement before the information pack; proof of funds before the books; customer lists, pricing, margins and process know-how last. If the bidder is a competitor, prices, customer lists, costs and capacities are competitively sensitive under the Competition Commission’s guidelines of 24 February 2023, and sharing them can raise concerns under section 4 of the Competition Act: share them late, through advisers, and take competition advice. Under the Protection of Personal Information Act, personal information processed must be adequate, relevant and not excessive (section 10), so share payroll by role first. See the confidential business sale process.

Dynamic Business Sales sells trading businesses as going concerns, by private treaty or on auction with a reserve; in September 2026 we auctioned the CMVAS Group, a connectivity, ICT distribution, technical services and critical power business, both as separate businesses and as a whole through a sale of all the shares. Where production has stopped, we sell the plant as movable assets, as one lot or broken up. In September 2026, for example, we auctioned a commercial egg farm’s equipment on site and online (past results). What selling costs is set out in writing before you sign. Start with a confidential call.