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Review of tax incentives - Ramata Textiles

Posted On Thursday, 21 June 2001 03:01 Published by
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EAST LONDON -- Buffalo City mayor Sindisile Maclean says he is to ask Premier Makhenkesi Stofile and Finance MEC Enoch Godongwana to lead a delegation to get the government to review its tax incentives

EAST LONDON -- Buffalo City mayor Sindisile Maclean says he is to ask Premier Makhenkesi Stofile and Finance MEC Enoch Godongwana to lead a delegation to get the government to review its tax incentives which were largely to blame for the loss of the R1billion Ramatex textile group
investment here.
"Our incentives package is akin to tying a boxer's hands behind his back, blindfolding him and
throwing him into the ring with a world champion," said Maclean.
South Africa's incentives are seemingly no match for what international players like Ramatex want.
"It is killing all our investment hopes. We won't be able to attract direct foreign investment if
our package is not reviewed."
Both Stofile and Godongwana are overseas at the moment and were not available for comment.
Maclean said the mega city had all the bulk service package fundamentals in place.
"We worked hard at the prospect of creating 18000 jobs over 10 years. We leaned over backwards
offering Ramatex 100 hectares of flat land for a mere R250000."
He said he also planned to pursue foreign investment possibilities with international investors
who could exploit Washington's African Growth and Opportunity Agreement which allowed goods from
Africa into the American markets duty free.
Maclean said the tax holiday and the elimination of wharfage charges which Namibia had promised
Ramatex were out of the local and provincial government's hands.
"They are national competencies," he said.
Maclean also revealed for the first time that the council had received a letter last week in which
Ramatex stated that its proposed investment had been "deferred indefinitely".
The letter criticised South Africa for its inability to respond to international investors'
"Your government's incentives are not strategically fit for Ramatex's investment criteria and
vision," wrote Ramatex executive director Albert Lim.
"Long processes of negotiations with your government on the terms of investment incentives have
eroded our management's confidence. Time is of the essence."
Last year Lim told the Daily Dispatch that the investment climate for direct foreign investors in
South Africa was not friendly and has slowed down Ramatex's plans for its R1bn textile investment.
Later, in response to the Dispatch article, Edwin Smith, a spokesman for Trade and Industry
Minister Alec Erwin, said government was attending to concerns raised by Ramatex and department
officials had already met with Ramatex executives in Singapore.
Smith said Ramatex has been granted a tax holiday for six years. Smith said it had been agreed
during a meeting with the Department of Public Enterprises that Eskom would carry 70 percent of
the costs to construct the required substation.
"The balance of 30 percent will be covered by the Critical Infrastructure Fund," said Smith.
Referring to Lim's statement that the group had met hurdles, especially from areas related to
the basic economic infrastructure and high wharfage charges, Smith said a commitment to reduce the
wharfage charges had also been received from the Public Enterprises Department.
"We have secured an in-principle agreement from the Competitiveness Fund regarding the travel
costs for 50 local Ramatex employees to receive training abroad," said Smith.
But in his letter to Maclean, Lim said Ramatex had been given promises "but not in writing and
which still had to be fulfiled".
Government's inability to provide attractive tax concessions was also criticised by Border-Kei
Chamber of Business president Philip Kahts.
"The national government should have weighed the importance of tax concessions for Ramatex up
against what could be lost for the Eastern Cape before denying the group its requested tax holiday,"
he said.
Maclean said the loss of Ramatex is however not the end of the road for Buffalo City's development.

Publisher: Dispatch
Source: Eddie Botha
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