Tax breaks to spur inner-city investment

Posted On Monday, 29 March 2004 02:00 Published by eProp Commercial Property News
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Local and national government are devising plans to reverse urban decay.

Trevor ManuelTax breaks, due to become law later this year, will aim to rejuvenate derelict CBDs.

Financial incentives will be offered under a plan for municipalities to demarcate Urban Development Zones (UDZs).

National government has given municipalities until June to confirm their UDZs.

It is expected that tax breaks for development in these areas will be provided through a change to the Income Tax Act, which is expected to go before Parliament in October.

So far 16 councils have provisionally flagged areas for development. These are: Buffalo City (incorporating East London), Cape Town, Ekurhuleni (incorporating Alberton, Benoni, Germiston, Springs, Kempton Park, Edenvale, Brakpan and Boksburg), Ema lahleni (Dordrecht, Indwe and Lady Frere), Emfuleni (Vereeniging), eThekwini (Durban), Johannesburg, Mafikeng, Mangaung (Bloemfontein), Matj habeng (Welkom), Mbombela (Nelspruit), Msunduzi (Pietermaritzburg), Nelson Mandela (Port Elizabeth), Polokwane (Pietersburg), Sol Plaatjie (Kimberley) and Tshwane (Pretoria).

Launched by Finance Minister Trevor Manuel in his 2003 Budget, the proposed tax breaks essentially boil down to a 20% depreciation allowance over five years to developers refurbishing buildings in the identified areas.

But will this be enough to revive inner cities?

"Most incentives worldwide have been shown to be a failure," says Yael Horowitz, inner city project manager for the Johannesburg Development Agency (JDA). Horowitz says the incentives "are a very small part of what is needed. There are many other programmes which lead to revitalisation and reinvestment."

The government has recognised this, and has mandated the municipalities demarcating areas to commit "significant fiscal measures to support the regeneration of that area" on a sustained basis.

The exact nature of such commitments has been left open-ended, allowing tailored initiatives to be applied to individual UDZs.

Says Li Pernegger, programme manager in the city's Economic Development Unit: "Johannesburg is poised for this development, having handed its inner-city development business plan to the National Treasury."

As part of its commitment to this initiative, the city has been working on programmes aimed at addressing social problems in the city.

Paul Arnott-Job, the JDA's project manager on infrastructure projects, says: "The whole of the CBD and Newtown is covered by CCTV, which has effectively reduced crime.

"The private sector in the city is co-operating because firms are funding what we call the City Improvement Districts (CIDs), which is essentially a guy on each street corner, making the city a very safe place in which to be."

The CID teams also perform a cleaning function in areas which the council finds difficult to access, says Arnott-Job.

Cape Town says it is also ready for the legislation.

Clifford Sitonga of the Cape Town City Council, who is leading economic development in the city, comments: " There has been a lot of consultation with the private sector, the business chambers, Cape Town Partnership and the various stakeholders, and we are ready for the deadline."

The city has committed itself to increasing the capacity of critical infrastructure, such as electricity and water, says Wahid Patel of Cape Town's Economic Division of Infrastructure Trading Services.

"We have to do this, to ensure that we don't cap investment in these areas because there isn't enough power, and we're stuck in the same infrastructural position as cities like Paris and New York," says Patel.

Last modified on Thursday, 22 May 2014 15:28

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