The urban development zone tax incentive has been very successful in Johannesburg, which is negotiating with the national Treasury to extend its zone boundaries.

Braamfontein is booming

THE City of Johannesburg has marked the success of the first five years of the national urban development zone (UDZ) tax incentive, which has brought R5-billion worth of investment to its UDZ in the inner city.

Of this amount, investments to the value of R1-billion have already been completed. "Only two projects have not started, while the rest are under implementation," confirmed Lebo Ramoreboli, the acting programme manager of spatial economic development in the City.

In addition, these projects have contributed to the creation of almost 40 000 estimated short- and long-term jobs in the construction industry.

The tax incentive encourages businesses to refurbish existing buildings or to build new assets in the inner city and to offset the cost of the development against the taxable income of the company through an accelerated depreciation allowance.

Another five years
Johannesburg officially re-launched the second five-year term of the UDZ tax incentive at Turbine Square in Newtown on 14 July. Turbine Square was one of the first developments to be undertaken by a private investor under the tax incentive. Melding the old with the new, it is one of the most visually pleasing projects in the city.

All its UDZ partners were invited to the launch, where the City congratulated them on the ongoing investment in the inner city and thanked them for the confidence they had shown in the City's incentives.

Key City partners include Afhco Holdings, which has revamped 82 buildings in the inner city to date, the majority for residential purposes; and financial services company Absa, which is developing a whole compound in Ferreirasdorp. According to Ramoreboli, this is probably the biggest UDZ development in the inner city so far.

The national Treasury originally intended for the tax incentive scheme to run for five years only; it targeted the inner cities of 13 metropolitan areas across South Africa. While most of the cities have been struggling with the complexities of the process and investors have complained that the period is too short, Johannesburg has been able to get the UDZ tax incentive successfully on the road.

Extend boundary
And now Joburg wants to extend the boundaries of its UDZ. Already, most inner cities in South Africa comprise approximately 650 hectares of built environment, while the Joburg UDZ stretches over 1 800 hectares.

"The initial UDZ areas were selected on the basis of substantial dilapidation. These areas were haemorrhaging because of capital flight [out of the inner cities]."

But since the tax incentive was introduced in 2004, Joburg's economic development department has received numerous requests from investors to increase the UDZ boundary - and it is negotiating with the Treasury to do this.

Areas that are being pushed for inclusion are Mayfair and Brixton, where residential development will be encouraged, and Booysens and Selby, which already have a strong industrial character and where office development will be encouraged.

In the meantime, Newtown, Braamfontein, and City and Suburban are booming; Marshall Town, Ferreirasdorp, Bellevue, Wolhuter and Selby have relatively smaller projects, though these are still sizeable in number; Hillbrow, Berea, Yeoville and Doornfontein are not faring as well.

The urban development zone tax incentive officially expires in March 2014.

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