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INVESTMENT AIDS AND INCENTIVES

South Africa offers a wide range of investment opportunities to foreign investors, including access to the Johannesburg Stock Exchange, the country's money and bond markets and the South African Futures Exchange. South Africa also welcomes long terms investments, particularly that go hand in hand with new technology and skills.

GENERAL INCENTIVES

There are no significant tax incentives but there is a range of incentives for locating certain kinds of operations outside Johannesburg/Cape Town/Durban regions, relief for expenses associated with export production or promotion, and depreciation/amortisation benefits for same fixed assets and intellectual property.

INCENTIVES FOR SPECIFIC INDUSTRIES

There are attractive industrial investment incentives available to potential investors wishing to establish or expand an industrial undertaking in Sout Africa.

In addition to a well developed financial sector which provides business and industrial financing, a number of specialised institutions provide finance for industrial development in various parts of the country. The Industrial Development Corporation of SA Ltd (IDC) has various incentive programmes, including low interest rate schemes for the promotion of exports, the promotion of employment, a multi shift scheme, finance for the export of capital goods, selective venture capital finance, finance for the promotion of eco-tourism and general tourism, and to improve international competitiveness.

The Small Business Development Corporation Limited (SBDC) has offered development, plus support programmes to meet the needs of small, micro and medium sized enterprises for some years, and offers a Bank Indemnity Scheme. It is currently being restructured.

Tax incentives covers depreciation on plant and machinery, building and improvements and wear and tear allowances, write-off periods for lease premiums, deductions for the cost of capital expenditure for scientific research, and double taxation avoidance agreements.

The Regional Industrial Development Programme includes an annual establishment grant, profit based incentives and relocation reimbursements in certain qualifying areas. There are also industrial investment opportunities in the various provinces. Enquiries should be directed to the relevant member of the Executive Councils for Economic Affairs or development corporations.

General Industrial Export Incentives include the General Export Incentive Scheme (GEIS), which will be phased out by the end of 1997, export marketing assistance schemes and export credit re-insurance.

South Africa also uses import tariff protection and tariff relief selectively to encourage domestic industrial development. Proposed new ventures may apply for an advance indication of the granting of protection.

There are also development programmes for specific industries such as the motor industry, and support programmes for industrial innovation.

Government is investigating a new package of supply-side measures for tax-based incentives for investment and training.

TAX INCENTIVES

TYPE OF INCENTIVE	APPLICABILITY	BENEFIT	OBJECTIVE
Research & Development	-Scientific research operating expenditure	-Operating expenses expenses fullys deductible	Stimulate scientific research
	-Approved scientific scientific research capital expenditure	-Capital expenditure in equal amounts over 4 years.
Double tax agreements	Various Countries	No double tax payment	Prevent double taxation.
Employee housing	-Erecting a house for an employee	50% of expenditure limited to Rs.6000	Promote employee housing
	-Amount donated or loaned to employee to erect a house.	50% of loan or donation limited to Rs. 6,000.
	-Erection of at least five residential units to full- time employees or let to a tenant.	Allowances : Initial 10 % Annual 2%
Export of capital goods	Debts not insured.	Allowance for medium and long term credit to foreign purchasers of capital goods 100% of outstanding debts not covered by insurance but the allowance is included in the income for the following year when a new allowance may be claimed.	Promote exports
Tax free Interest	Loans made by company managed and controlled outside South Africa	Interest is exempt	Encourage foreign Investment
Depreciation	Plant and machinery : - Manufacturing - Agriculture.	Various : -In equal amounts over 5 years. -50%,30%,20% over 3 years	Reduce Tax liability
	Building and improvements.	Manufacturing process/hotel
	Wear & tear allowance on non-manufacturing fixed assets	-annual allowance of 5 % Various-normally 10-20%
Multi-shift Scheme	Independent industria-lists who must maintain an equity level equal to at least 33% of the value of total assets. At least one shift of 8 hours should be added resulting in greater employment. Total Assets >R100000 No application> R150000.	Loans at 9% for the first 3 years to fund additional working capital and plant and equipment (to de-bottleneck capacity constraints for increased production)	To incrase the utilisation of existing manufacturing capacity
Finance for export of capital goods	To exporters qualifying for credit Guarantee Insurance Corporation facilities and acceptable SA Content.	Competitive financing for foreign buyers of South African mfd. capital goods. Period 2-10 years. Attractive interest rates fixed for the entire period.	Promote export of capital goods.
Venture capital finance	Entrepreneurs starting a business or high technology industry or requiring further permanent capital to finance growth or the commercialisation of new technology.	Advantageous financing.	Promote entre preneurship small business.
Low interest rate scheme for export promotion	Industrialists expanding capacity to serve export markets, also resulting in employment opportunities.	Loans at 9% for the first 3 years if 60% of expected sales for export and if 30%-60%,only half of loan at 9%, therafter Industrial Development	Creation of new export mfg. capacity
	Total assets>=R 1 million	Corporation (IDC) rates
Small business development loans	Individuals who want to start a business who qualify for loans up to R1 million Total assets R1 million	Competitive interest rates	Promote entrepreneurship small business.
Bank indemnity Scheme	Banks provide indemnity scheme for loss on facilities to small or medium enterprises. Clients contribution and collateral must total at least 50% of facility granted.	Indemnit against 60% of loss. Maximum of R 400,000 per client	Small and medium enterprise
Eco-tourism scheme	Industrialists who provide additional accommodation in national game reserves that are larger than 10000 ha. Equity level of at least 30% of the value of total assets.	Loans at IDC Rates or by risk participation	Expansion of tourism infrastructure.
General tourism scheme	Industrialists who providing additional accommodation to bona fide tourists or upgrading or improving existing facilities; also selected new developments. Turnover for accommodation should be at least 70% of total turnover and equity of atleast 40% of total assets.	Loans at IDC rates. Maximum funding of R 10 million per project. Full range of support services	Expansion and upgrading of tourist infrastructure.
Low interest rate scheme for employment promotion	Manufacturers expanding capacity to create new employment opportunities.	Loans at 5% for first 3 years, then ID Crates.	Creation of new production technology that will result in creating employment opportunities
	Total assets R 100 million Cost of Job R 100000.
RESEARCH AND DEVELOPMENT INCENTIVES
Support Programme for Industrial Innovation (SPII)	All private sector companies in the manufacturing Industry.	A grant of 50% of actual direct cost incurred in precompetitive development activity up to maximum of R 1 million	Promote local, technologically advanced and internationally competitive manufacturing industries.
EXPORT INCENTIVES
Export Marketing Assistance (EMA)	Undertakings registered with the Department of Trade and Industry.	A portion of specified costs relating to exhibition, market research and travel refunded.	Promote exports
Steel rebates and steel concessions	Exporters of fabricated steel products where 25% value has been added.	Rebates based on the value of exports.	Promote exports

REGIONAL INCENTIVES

REGIONAL INDUSTRIAL DEVELOPMENT INCENTIVES

Two different Programmes:

Regional Industrial Development Program(RIDP)	Incorporated entities, branches and divisions, sole proprietors and divisions,sole proprietors and partnerships. For expansions application for grant must be made before any investment is undertaken. For new establishments application must be made within 6 months of commencement of production.		Create new or expand existing Industrial undertakings. Create new or expand existing secondary operations engaged in manufacturinng as well as processing and assembling.
Simplified Regional Industrial Development Programme (SRIDP).	Total investment must not exceed R 25 million per enterprise(excludes branches and divisions).
Establishment grant (First 2 years)	All areas outside PWV/Durban core areas. 60% of grant in Cape peninsula, Pinetown/ Pietermaritzburg and larger Durban functional areas. Equity level of at least 35% of the value of total assets.	Tax free establishment grant of 10.5% (6.3% in some metro politian areas) of the cost of operational assets and 50% of inventory and accounts receivable for RIDP. Only applies to first R15 million of costs per province, i.e., maximum grant is R1,575 million per province.	Promote the creation of new or the existing factory capacity in the mfg. processing industires.
Profit based incentive (following 3 years)	All areas outside PWV/Durban core ares. 100% profit based.	Tax free based on profitablility of new business/expansion. -RIDP (20% of profit before tax)X(1+200% of return on assets) The profitability grant cannot exceed the establishment grant. -S RIDP= 25% of profit before tax-this incentive cannot exceed 2 times the annual establishment grant.	Promote the creation of new or the expansion of existing factory capacity in the mfg. processing assembling industries
Relocation incentive (not available for S RIDP)	Foreign industrialists all areas.	If manufacturing are relocated from outside the Rand Monetary Area up to R1 million per project may be subsided.	Promote the creation of new or the expansion of existing factory capacity.
Productivity monitoring scheme	All Regional Industrial Development Point concessionaries.	Based on profitability of new expansion.	Promote the creation of existing factory capacity.
Relocation allowance	Foreign industrialists all areas.	If plant relocated from outside South Africa up to R1 million of transport costs may be subsidised.	Promote the creation of new or the expansion of existing factory capacity.