July 12, 2004
By Thomas Thale
THE whole of the Johannesburg inner city - including the surrounding residential and industrial areas, not just the central business district - should benefit from tax incentives designed to stimulate urban regeneration.
This is the thrust of a proposal for an urban development zone, which the City has submitted to the National Treasury.
The submission was in response to the announcement - made by Trevor Manuel, the finance minister, in 2003 - that developers who revamped buildings in designated inner-city areas would get tax relief.
The deadline for municipalities to submit proposals for areas to be demarcated as urban development zones was the end of June
The tax incentive is expected to become a major catalyst for massive development in the city centre.
The tax incentive was given legal expression in the Revenue Laws Amendment Act of 2003, which allows developers who refurbish existing buildings in designated urban areas to receive a 20 percent depreciation allowance over five years.
Developers who construct new buildings in these areas are to receive a two percent tax write-off in the first year, followed by a five percent annual write-off over 16 years.
But the legislation also requires cities to put forward an area of 690 hectares for a single zone - "an area which largely corresponds to the Joburg CBD", says Li Penneger, the programme manager for area regeneration in the city's Economic Development Unit.
This would exclude areas such as Fordsburg in the west, the high-density neighbourhoods of Yeoville, Hillbrow and Berea, and the manufacturing belt on the northern side of the M2, which stretches from Selby to Marshalltown.
In its proposal, the City argues that all these areas, which are in desperate need of renewal, be incorporated into the zone. This proposal puts the size of Johannesburg's zone at a massive 1 786 hectares, almost thrice the legal limit.
Subsection 7d of the act provides for the demarcated area to exceed the prescribed limit, provided "the municipality proves to the minister that the excess area is integrally related to the area within the limitation contemplated" and that "the municipality can prove to the minister that sound economic reasons exist for demarcating a larger area".
The minister would also have to be satisfied that the government could afford to extend the benefits to a larger area.
According to Penneger, the inner city is "the largest source of the city's economic productivity: it provides more than 23 percent of gross geographic product".
It has more than 37 000 dwelling units and provides more than 200 000 formal and informal jobs, says Penneger.
"The inner city makes the largest single contribution to Johannesburg's economic output, which is the most important urban economy on the continent."
Aarti Shah, the deputy director of inter-governmental policy and planning in the Treasury, says the department is evaluating the municipalities' submissions and will respond soon.
If Johannesburg's submission is approved, it will be gazetted in the next two months.
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