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15 Apr 2016 00:00
Extensive redevelopment projects, driven by a tax incentive, have transformed the Johannesburg CBD. (Photo: Oupa Nkosi)
Johannesburg is the beating heart of South Africa and is of enormous economic importance to the country and the continent. Johannesburg’s inner city, in particular, is of significant economic value.
It plays a crucial role in the economic prosperity of Joburg in that it frees up resources required for addressing social and economic disadvantages; enhances return on public investment in transportation, residential and other urban infrastructure; eases constraints on regional economic growth through the inner city’s labour force and strategic parcels of land; and allows for spatial economic organisation that leads to substantial growth and profit opportunities.
Like the central business districts (CBDs) of major cities internationally, it has experienced its own fair share of urban decay, especially since the 1980s when capital flew to the northern parts of the city and its economic haemorrhaging saw crime rise and infrastructure decline. However, the implementation of the Urban Development Zone (UDZ) tax initiative and the commitment from the City of Johannesburg (CoJ) to the revitalisation of this investment core has seen remarkable change flow through the inner city streets. Today, the CBD of Johannesburg has undergone significant change and impressively themed districts and precincts have transformed the urban landscape into a vibrant hub of growing economic activity.
“This initiative is an important economic tool that has assisted the city to further create an enabling environment for business in the property sector, hence the visible economic revitalisation that is taking place in the inner city,” says Ruby Mathang, member of the mayoral committee responsible for economic development. “Through this initiative we hope to encourage a transformation of property ownership patterns that involve large and small investors, black investors as well as women and the youth. We are looking forward to a city that is fundamentally different from the past, a city that embraces non-racialism, a city that embraces all cultures and religions, a cosmopolitan city that will attract not only South Africans, but people from around the world.”
CoJ has engaged with inner city stakeholders and role-players to gain a deeper understanding of the challenges they faced and those elements of the CBD that impact on their ability to do business or work effectively. Their perceptions included concerns around infrastructure deterioration, lack of facilities and public amenities, bureaucratic delays in processing important applications, billing inaccuracies, toxic assets and crime. It was a bleak picture at the time.
However, a look around the inner city of Johannesburg today reveals a thriving metropolis with vibrant new precincts and a reconditioned economy. Areas such as Newtown, Brickfields, Marshalltown and the Maboneng precinct in Doornfontein bustle with people, business and development. There remain areas requiring further investment and rejuvenation, but the process so far has been a remarkable success.
“Joburg is South Africa’s largest and wealthiest city and accounts for 16% of the country’s gross domestic product (GDP),” says Lebo Ramoreboli, deputy director, integrated regional economic development, City of Johannesburg. “It is the headquarters of, and host to, many of the nation’s largest corporates, financial institutions, media houses, law firms, the JSE and more. Many of our biggest companies remain headquartered in central Johannesburg — Standard Bank, FNB, Absa, Anglo American, Anglo Gold Ashanti, BHP Billiton, Transnet and Credit Suisse, just to name a few. Our commitment to transforming the area and engaging with its stakeholders was essential to bring our CBD back to life.”
Together with its partners, CoJ has made significant strides in revitalising the inner city, attracting new investment, reducing crime and taking action against urban grime and decay. This has been achieved through synchronised and co-ordinated innovative interventions, strategically anchored on the UDZ tax incentive that has led to the creation of wall-to-wall thematic precincts.
The UDZ tax incentive forms part of the Inner City Economic Development Implementation Plan. This smart, innovative initiative was passed by Parliament in 2003 as an amendment to the income tax law and then approved for implementation by the National Treasury in 2004. It has been made available to 15 South African municipalities and metros including Johannesburg, Cape Town, Ekurhuleni and Polokwane.
According to the South African Revenue Service, the core objectives of the incentive “are to address dereliction and dilapidation in South Africa’s largest cities and promote urban renewal and development by promoting investment by the private sector in the construction or improvement of commercial and residential buildings”. Investors accrue notable financial benefits, regardless of property size, thanks to tax deductions within UDZ boundaries. To qualify, investors must restore, refurbish or extend an income-generating property, demolish old buildings to create new or purchase new or refurbished buildings or units. They then qualify for a 100% tax deduction over a set period of time, dependent on level of investment.
“Initially the tax incentive was to terminate in 2009, but it was extended to 2014 and then, again, to 2020,” says Ramoreboli. “This is largely due to the successes Johannesburg, Cape Town and eThekwini have attained and also to give other municipalities still struggling to roll it out a chance to do so, and thus reap the incentive’s benefits.”
So far, Joburg has attracted about R14-billion in cumulative investments to the inner city, half of which represents completed private sector construction projects, while half represents work-in-progress. CoJ continues to aggressively promote the UDZ tax incentive to traditional property investors in the country and internationally, and also intends to introduce new property investors in order to introduce diversity in ownership patterns and thus contribute to economic transformation in the property sector. The new investors being targeted include African investors, women and the youth in order to achieve a target of R25-billion in cumulative investments by 2020.
Since its redevelopment, the Johannesburg inner city has consistently contributed more than 24% to the city’s gross geographic product (according to 2014 figures), has the largest concentration of infrastructure in South Africa and the integrated urban economic system provides more employment than Sandton, Woodmead, Rivonia and Randburg combined. Add to this the fact that nearly 470 000 people live in the inner city — 13.4% of the total Johannesburg population — and it is easy to understand why economic and structural transformation has been, and continues to be, a vital step for both Johannesburg and South Africa.
According to Ramoreboli, the transformation of the inner city has attracted investment in the form of new precincts that would not have arisen otherwise. She asserts that without it some investors would not have come up with creative ways of renovating buildings and even creating new spaces and economic activity areas around different parts of the city. On top of implementing the tax initiative, Joburg City Council has invested in a comprehensive marketing strategy to ensure investors receive maximum benefit throughout. This is why Joburg has attracted investment in areas such as Maboneng, Jeppestown, Marshalltown, Ferreirasdorp, Fordsburg, Braamfontein, and Newtown.
“In the near future, we will organise a consultative workshop that will involve relevant role-players including residents to plan and design the nodes for best fit of the people and environment that currently exist,” concludes Ravi Naidoo, executive director for economic development, City of Johannesburg. “We will solicit young people’s input on the designs and strategies regarding how we can attract investment into these nodes and radically transform them into contemporary pan-African districts. This will additionally create construction-related jobs and employment in the businesses that locate in these precincts.”
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