UDZ Tax Incentive – Application by Joburg
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UDZ Tax Incentive – Application by Joburg Presentation to Finance, Strategy & Economic Development Committee 7 June 2004. Annex AA10: Presentation to Committees. City of Johannesburg. Finance & Economic Development. Background. Budget Speech by Minister, 2003

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City of johannesburg

UDZ Tax Incentive – Application by Joburg

Presentation to Finance, Strategy & Economic Development Committee

7 June 2004

Annex AA10: Presentation

to Committees

City of Johannesburg

Finance & Economic Development


Background

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

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 city

Structure of Inner City

Total 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 4 – Residential +: 42% of Inner City (749 ha) & 8,856 erven

Zone 3 – Fordsburg +: 7% of Inner City (118 ha) & 1,858 erven

Zone 2 – Manufacturing & industrial: 23% of Inner City (417 ha) & 2,489 erven


Residential profile of the inner city

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

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

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

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

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 cont1

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 cont2

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

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

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 allowance1

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

Contact Details

Li Pernegger

Programme Manager

(Economic Area Regeneration)

Finance and Economic Development

City of Johannesburg

Cell: +27 (0)82 464 4287

Tel: +27 (0)11 407 7031/7141

Fax: +27 (0)11 403 4125

E-mail: [email protected]


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