R5bn investment for Joburg CBD

18 July 2008

Johannesburg is reaping the rewards of South Africa’s Urban Development Zone tax initiative, first proclaimed five years ago, with some R5-billion being invested in designated areas in the country’s largest inner city.

Of this amount, investments to the value of R1-billion had already been completed, with various projects contributing to the creation of an estimated 40 000 short- and long-term jobs in the construction industry.

“Only two projects have not started, while the rest are under implementation,” said the Johannesburg Metropolitan Municipality’s acting programme manager for spatial economic development, Lebo Ramoreboli.

The tax incentive encourages businesses to refurbish existing buildings or to build new assets in the inner city and to offset the cost of the development against the taxable income of the company through an accelerated depreciation allowance.

Another five years

While most of the cities struggled with the complexities of the process and investors complained that the period was too short – leading to the extension – Johannesburg had been able to get the UDZ tax incentive successfully on the road.

The municipality officially re-launched the second five-year term of the UDZ tax incentive at Turbine Square in Newtown on 14 July. Turbine Square was one of the first developments to be undertaken by a private investor under the tax incentive. Melding the old with the new, it is one of the most visually pleasing projects in the city.

All the municipality’s UDZ partners were invited to the launch, where they were congratulated and thanked for their on their ongoing investment in the inner city and the confidence they had shown in the incentive.

Key partners included Afhco Holdings, which has revamped 82 buildings in the inner city to date – the majority for residential purposes – and financial services group Absa, which is developing a whole compound in Ferreirasdorp.

The Absa development, according to Ramoreboli, was probably the biggest UDZ development in the inner city so far.

The national Treasury originally intended for the tax incentive scheme, which targeted the inner cities of 13 metropolitan areas across South Africa, to run for five years only.

Extended boundary

While already stretching over 1 800 hectares of high density inner city property – most inner cities in South Africa comprise about 650 hectares of built environment – the metropolitan municipality wants the boundaries of the zone to be further extended.

“The initial UDZ areas were selected on the basis of substantial dilapidation. These areas were haemorrhaging because of capital flight [out of the inner cities],” said Ramoreboli.

But since the tax incentive was introduced in 2004, the municipality’s economic development department received numerous requests from investors to increase the UDZ boundary – and it is currently negotiating with the National Treasury to do this.

Areas that are being pushed for inclusion are Mayfair and Brixton, where residential development will be encouraged, and Booysens and Selby, which already have a strong industrial character and where office development will be encouraged.

In the meantime, Newtown, Braamfontein, and City and Suburban are booming; Marshall Town, Ferreirasdorp, Bellevue, Wolhuter and Selby have relatively smaller projects, though these are still sizeable in number; but Hillbrow, Berea, Yeoville and Doornfontein are not faring as well.

The urban development zone tax incentive now officially expires in March 2014.

Source: City of Johannesburg