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UDZ Tax Allowance

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Budget Speech by Minister, 2003. Meeting between EDU & NT to determine location & size of UDZs. Mayoral Comm recommendation in ... Economic supra-national city ... – PowerPoint PPT presentation

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Title: UDZ Tax Allowance


1
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
2
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, 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

3
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

4
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
5
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)

6
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

7
Rationale 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

8
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

9
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

10
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)

11
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

12
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 recd from Treasury

13
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

14
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

15
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 lpernegger_at_joburg.org.za
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