Title: UDZ Tax Allowance
1UDZ 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
2Background
- 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, Rburg CBD, Rpoort
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
3What 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
4Structure 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
5Residential 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)
6Rationale 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
7Rationale for Extent of Application, cont
- Economic supra-national city
- Joburg contributes 16, R163bn, of SAs GDP (over
R30bn more than next largest earner, Cape Town) - Joburgs 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
8Inner 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
9Employment 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
10Rationale 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)
11Rationale 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
12Progress 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 recd from Treasury
13Possible 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
14Possible 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
15Contact 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 lpernegger_at_joburg.org.za