1. Incentives issued by the central government
DTI mainly issued the following four types of incentives:
● Concept and R&D (CRD) Incentives: these are incentives available to private sector enterprises that invest in the creation, design and improvement of new products and processes. Such businesses conduct investigative activities with the intention of making a discovery that can either lead to the development of such new products and processes or to the improvement of existing products.
●Competitiveness Enhancement Incentives (CEI): these are for investments which facilitate competitiveness enhancement, sustainable economic growth and development in a specific sector.
●Industry-Specific Incentives
●Other incentives, including Black Business Supplier Development Program, Co-operative Incentive Scheme, Incubation Support Program
2. Regional investment incentives
①Industrial Development Zones (IDZs)
Before 2014, DTI launched the industrial development zone (IDZ) program according to the Manufacturing Development Act of 2000. The IDZ program focuses on attracting FDIs, expanding imports of high value-added products and establishing ties between domestic industry and IDZs. Bulk ore transportation, petrochemical, auto making and relevant industries benefit greatly from this program.
② The Special Economic Zones Bill
In 2014 the Special Economic Zones Bill (SEZ Bill) was promulgated, which decided to implement the SEZ program. This program is designed to create a favorable environment for FDIs, domestic investments and development of strategic industrial functions and provide guarantee to establishment of new industrial zones and enhancement of existing ones. The SEZ Bill provides conditions for development, promotion, implementation and management of a large number of SEZs, which can help the government to effectively manage all SEZs (including IDZs).
As a supplement to the SEZ strategy launched by DTI, South Africa also have established a series of tax incentives for enterprises that have settled in SEZs. Tax incentives to eligible enterprises include: VAT and tariff reduction and exemption (for enterprises within customs controlled areas), exemption of employment tax, building allowance and preferential corporate tax.
VAT and tariff reduction and exemption
In accordance with current laws and customs rules on VAT, enterprises within customs controlled areas (CCA) will obtain VAT reduction and exemption. Features of a customs controlled area are as follows: (1) export rebates and VAT exemption on processing raw materials (including machinery and other properties) that will be used for the export of manufactured goods; (2) under special conditions, no VAT will be levied on goods and materials that are purchased in South Africa; (3) fast and effective customs process.
Employment Tax Incentives (ETI)
All employers who hire low-salaried employees (less than ZAR 60000 each year) within SCZs will enjoy preferential employment tax. ETI aims to encourage employers to hire inexperienced young work seekers. It reduces employers’ cost of hiring young people through a cost-sharing mechanism with government while leaving the wage received by employees unaffected. Employers can apply for the ETI and reduce the amount of Pay-As-You-Earn (PAYE).
Building allowance
Qualified businesses operating within approved SEZs are eligible to accelerate depreciation of capital structure (buildings). Special capital (depreciation) allowance can be used instead of normal allowance to build or improve buildings and other fixed structures.
Preferential corporate tax
Companies that meet certain conditions will be eligible for a 15% corporate tax from 2014 to 2024 (currently flat rate is 28%).