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Transcript of City of Johannesburg Finance & Economic Development UDZ Tax Incentive – Application by Joburg...
City of Johannesburg
Finance & Economic Development
UDZ Tax Incentive – Application by JoburgPresentation to Finance, Strategy & Economic Development Committee7 June 2004
Annex A
A10: Presentation
to Com
mittees
Background
• Budget Speech by Minister, 2003• Meeting between EDU & NT to determine
location & size of UDZs• Mayoral Comm recommendation in July
2003– That, in order of priority, following be
recommended to National Treasury for inclusion in UDZ Incentive: Inner City, R’burg CBD, R’poort CBD & Lenasia CBD
– That, if National Treasury limits selection of designated areas to one area only, Inner City be recommended for UDZ incentive
• Legislation approved by President in December 2003
What does the Legislation cover?
• Income Tax Act 58 of 1962, Revenue Laws Amendment Act: Insertion of Clause 33, Section 13quat
• Accelerated depreciation deductions for construction & refurbishment (erection, extension, addition, improvement) whereas previous depreciation was zero, 2% or 5%
• UDZ Incentive/Tax Allowance– Aims to support urban renewal efforts– Targets inner cities in 16 LA areas, in UDZs
• Preparation of case for larger area being finalised for 23 May
Structure of Inner CityTotal Inner City is 1.1% of total Joburg area (1,786 ha excluding Zone 5); allowable UDZ is 690 ha
Zone 1- office & business: 28% of Inner City (502 ha) & 4,212 erven
Zone 2 – Manufacturing & industrial: 23% of Inner City (417 ha) & 2,489 erven
Zone 3 – Fordsburg +: 7% of Inner City (118 ha) & 1,858 erven
Zone 4 – Residential +: 42% of Inner City (749 ha) & 8,856 erven
Residential Profile of the Inner City
• Nearly 208,000 people live in Inner City (+6.5% of all population in Joburg)
• Highest number of households and people live in Zone 4 (69%) & in Zone 1 (27%)
Rationale for Extent of Application
• Complex area in transition – Suffers from inner city decline like
others in world– Impact of apartheid legacy being
dealt with– Crucible for new approaches
• Operational rationale– Application deals with possible
“shadow” effect whereas smaller area will not
Rationale for Extent of Application, cont…
• Economic supra-national city– Joburg contributes 16%, R163bn, of
SA’s GDP (over R30bn more than next largest earner, Cape Town)
– Joburg’s 5-year economic growth rate from 1997-8 to 2000-1 was double the national average (i.e. 5%)
– The Inner City contributes over 23% to city GGP (Region 8 proxy)
– Largest concentration of infrastructure in SA: infrastructure replacement costs are +R30bn
Inner City Economic Structure
• Highest concentration of retail space is in Zone 1
• Industrial space is located throughout Inner City reflective of its historic mining & manufacturing economy
• Integrated urban economic system– Provides more jobs
than Sandton, Woodmead/Rivonia & Randburg combined
– Important anchor for E-W corridor & N-S Corridor (location of Gautrain route)
– Location of corporate HQs plus SMEs
Employment Profile of the Inner City
• Over 201,000 jobs located here (+15% of all jobs in Joburg) (2001)
• Office based workers are the majority (57%)
• Most employment (75%) located in Zone 1, followed by Zone 4 (16%)
• Unemployment at 32%
Rationale for Extent of Application, cont…
• Focus of transformation– E.g. Better Buildings Programme– Inner City Task Force– Declining land values from 2000 to
2004 (e.g. Berea 41%, Braamfontein 18%, Fordsburg 12%, CBD & Hillbrow 38%)
– 26% decline in assessment rates from +R24m (July 2000) to R18m (Feb 2004) (32% alone in Zone1)
Rationale for Extent of Application, cont…
• Institutional integration– Inner City Office, 1998– Adoption of Inner City by CoJ as priority
intervention area in 1999– Inclusion as one of 6 Mayoral Priorities in 2000– Creation of dedicated Inner City committees– Role players, e.g. JDA, EDU, CJP, JICBC, Region
8, POMA, working towards same goals– Planning for Inner City as a single, integrated
entity– Committed interventions, e.g. precinct
projects, BIDs, Better Buildings, ICDS, housing, rates rebates, CCTV, etc, underway
Progress to Date
• Presented to Inner City Portfolio Committee (19 May), Economic Development Subcommittee (21 May), Finance, Strategy & Economic Development Committee (7 June), then Mayoral Committee (10 June), Council thereafter
• Decision to be forwarded with application (ready to go!) to National Treasury for approval –No guarantees of success for entire Inner City
• Latest notification rec’d from Treasury
Possible Impact of UDZ allowance
• Only Zone 1 showcased here today
• ‘Bad’ building: Massyn Court, corner Kerk & Mooi Streets– In Fashion District– Worst building in Inner City
• Overcrowded• Shacks on balconies• No services, fire risk from candles
(during day)• Sanitation buckets emptied into
stairwells
– Valued at R600k in 1991, now 480k– Next to high-value area – good
prospects for regeneration
Possible Impact of UDZ allowance
• ‘Good’ building: Carlton Centre, Commissioner Street– Biggest single development in
SA when built in 1973• Includes hotel, • Biggest parking garage in Inner
City• Tower is 50 stories high• Replacement value of R1.3bn• Empty for +10 years
– Sold for R33m & now 98% occupied
– Part of BID, CCTV– Now shopping centre is also
over 80% let, possible hotel reopening
Contact Details
Li PerneggerProgramme Manager
(Economic Area Regeneration)Finance and Economic Development
City of JohannesburgCell: +27 (0)82 464 4287
Tel: +27 (0)11 407 7031/7141 Fax: +27 (0)11 403 4125
E-mail: [email protected]