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ANNEXURE A CITY OF TSHWANE DEVELOPMENT INVESTMENT INCENTIVES POLICY 2015/16

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City of Tshwane

Development Investment Incentives Policy

16 MARCH 2014

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TABLE OF CONTENTS

LEGISLATIVE FRAMEWORK AND CONTEXT OF DEVELOPMENT INVESTMENT INCENTIVES

POLICY

1. BACKGROUND

2. DEFINING A DEVELOPMENT INVESTMENT INCENTIVE

3. DEVELOPMENT INVESTMENT INCENTIVES CONSIDERATION FACTORS

4. FINANCIAL CONSIDERATIONS

5. INCENTIVES

5.1. Land purchased from the City of Tshwane after January 2015

5.2. Catalytic investment projects

6. INSTITUTIONAL ARRANGEMENTS

7. CONDITIONS FOR THE OFFERRING OF DEVELOPMENT INCENTIVES

8. DATE OF IMPLEMENTATION

9. CONCLUSION

ANNEXURES

ANNEXURE B: Council approved report (27 November 2014):

City of Tshwane Incentives Framework

ANNEXURE C: Draft City of Tshwane 2015/16 Rates Policy

ANNEXURE D: Council approved report (27 November 2014):

A situation analysis and global benchmarking of the City of Tshwane’s Investment Attraction,

Facilitation and Aftercare of catalytic and strategic investment projects and to approve a

framework

for institutionalising catalytic and strategic investment projects within the City of Tshwane

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CITY OF TSHWANE DEVELOPMENT INVESTMENT INCENTIVES POLICY 2015/16

LEGISLATIVE FRAMEWORK AND CONTEXT OF DEVELOPMENT INVESTMENT INCENTIVES

POLICY

PREFATORY REMARKS

In terms of the provisions of section 151(3) of the Constitution of the Republic of South Africa, 1996

(hereinafter referred to as the “Constitution”), a Municipality has the right to govern affairs of its

community, subject to national and provincial legislation, as provided for in the Constitution.

Section 156(1) of the Constitution confers on Municipalities the right to administer local government

matters listed in Part B of Schedules 4 and 5 and they are therefore entrusted with the powers functions

and duties to do within the confines of the objects of local government as contemplated in section 152

and section 153 of the Constitution.

In particular in terms of Section 153, a Municipality must structure and manage its administration and

budgeting and planning processes to give priority to the basic needs of the community, and to promote

the social and economic development of the community.

A Municipality based on the priori premise that it is a “creature of statute” must reach the goals as set

out in section 153 of the Constitution, within the confines of the plethora of legislation that it administers

within its jurisdiction.

The policy is aimed at establishing a recognisable and comprehensive system, which draws the

municipal legislative, administrative and executive powers together to reach the objects of local

government.

LEGISLATION

In order to give context to the said policy, it should be noted that the roles of a Municipality can be

categorised loosely as follows:

Giving political direction as the Policymaker

Public Land owner or custodian of public land

Regulator in terms of legislative provisions

Administrator in terms of setting processes and procedures and institutionalising the

facilitation of it powers

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The Development Investment Incentive (DII) Policy will set the prescripts and augment the links

between the roles of the Municipality to ensure investment which in turn will promote social and

economic development of the community as pontificated by the constitution.

Each of the roles of the Municipality is governed through specific legislation imbuing the municipality

with authority to take certain decisions and take certain actions, however, the manner in which these

powers are exercised can be interlinked and done in a manner that will achieve greater investment

within the City of Tshwane.

AS LAND OWNER

The release of land will be done in such a manner as to incentivize the purchaser to develop the land.

AS REGULATOR

The regulatory framework within which development takes place should ensure that an effective and

efficient process will be applied to the development of land within a particular area identified as part of

the DII priority.

AS POLICYMAKER

Spatial Development Frameworks (SDFs) shall support and create an implementation plan for

investment as contemplated in the Spatial Planning and Land Use Management Act, 16 of 2013 which

requires that the Metropolitan Spatial Development Framework (MSDF) has an implementation plan

linked to it. It also requires a short, medium and long terms strategy which can and should be closely

linked to investment.

AS ADMINISTRATOR

Any matter linked to investment should be administered in accordance with accepted international

standards of public service.

1. BACKGROUND

This Policy must be read in conjunction with Annexures B, C and D.

The City of Tshwane (CoT) recognises that infrastructure investment is an important component and a

driver for the development of South Africa and its Cities. The CoT also holds international acclaim due

to its status as the Capital City of South Africa. As a result, the CoT is diligently working at bolstering its

standing among capital cities. The CoT is actively striving to be a vibrant place to live, work and play for

both its visitors and citizens. The CoT has thus, adopted a forty year vision for growth and

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development, in the form of Tshwane Vision 2055, to realign its current growth patterns and change the

face and fortunes of the City.

Cities do not develop overnight, but over many decades and the CoT has set itself four decades to

reach its goals. The critical part of this development is that the CoT must be able to attract investors,

who will bring with them the expertise, funds and the capacity to develop new structures and industries.

The CoT will not achieve the desired growth and development without cultivating an investor friendly

environment, efficient processes, proactive but sustainable policies and funding strategies of its own.

The CoT will have to fund part of the growth and development to lay the foundation for investors to take

up specific projects but is also looking for ways to involve these investors in growing the CoT.

This project, and other projects that may be approved from time to time by the CoT, takes place

against the backdrop of Tshwane Vision 2055, and thus supports the key desired growth and

development outcomes of the CoT in the next forty years. According to Vision 2055, the vision of the

CoT translates into six broad outcomes that represent the areas that are key for the CoT’s broad

development logic over the next four decades. The six outcomes are:

Outcome 1: a resilient and resource efficient City;

Outcome 2: a growing economy that is inclusive, diversified and competitive;

Outcome 3: quality infrastructure development that supports livable communities;

Outcome 4: an equitable City that supports happiness, social cohesion, safety and healthy

citizens;

Outcome 5: an African capital city that promotes excellence and innovative governance

solutions; and

Outcome 6: South Africa’s capital city with an activist citizenry that is engaging, aware of

their rights and presents themselves as partners in tackling societal challenges.

2. DEFINING A DEVELOPMENT INVESTMENT INCENTIVE

There is no uniform definition of what constitutes an investment incentive however, there are

proposed initiatives which fall within the mandated requirement as set out by the Constitution in

accordance with section 152 (3) namely; the objects of local government are to promote social and

economic development. The development investment incentive (hereinafter referred to as DII) aims

to achieve the aforementioned constitutional imperatives, and will take cognisance of rapid

economic and social change, which is transforming the built environment.

The United Nations Conference on Trade and Development (UNCTAD) defines an investment

incentive as any measurable advantage accorded to specific enterprises or categories of

enterprises by or at the direction of government (Barbour 2005:2). Incentives must be specific,

namely; they must be restricted to investors who meet given criteria such as locating in a specific

area, the amount of investment, or operating in a specific economic sector.

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As a sphere of government the Municipality as outlined in terms of Section 151(3) in simple terms

can define a DII as the optimal use of the powers, functions, roles and responsibilities of a

Municipality, within the confines of the legislation it administers, to promote investment.

3. DEVELOPMENT INVESTMENT INCENTIVES CONSIDERATION FACTORS

The need to catalyse investment

The United Nations, Department of Economic and Social Affairs estimates that by 2050, the urban

population will increase by 75% to 6.3 billion, from 3.6 billion in 2010 (World Urbanization

Prospects: The 2011 Revision). This rapid growth in population especially within the urban areas

creates unprecedented opportunity for the build environment.

A holistic view needs to be taken into consideration where there is a balancing of interest between

government and the private sector. The underlining principle is that if the long-term benefits of the

incentive significantly exceed the cost of foregone revenue by the government in question, then that

incentive is worthwhile.

The real estate industry follows a long development cycle which is initiated through a

conceptualisation phase, then the planning phase, a regulatory face whereby a Municipality

exercises is legislative, administrative and executive powers that capture the rights and obligations

for purposes of setting parameters for development, followed by the actual construction and finally

the occupation and management process.

The success of the real estate industry is influenced by number of factors which include (but are not

limited to) the following;

Energy prices

Infrastructure provision

Climate change

Government regulations

Technology

Effective collaboration between the various sectors (i.e. private, public, non-government

organisations, etc.)

Incentive schemes, etc.

The success of realising real estate within the local government sphere (land ownership) is

influenced by number of factors over and above which is indicated above by:

Legislative strictures for a decision to dispose of land

The burden of proof on a Municipality before disposal of land

The manner in which land can and must be disposed of

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The accountability to National Treasury on its custodianship

Public land, public money, public interest

The CoT acknowledges the value chain offered by the development of land and one of the critical

success factors for the disposal of land and development is to identify appropriate incentives that

can be utilised to attract potential developers and/or investors to develop within the CoT beyond the

Innovative Land Finance Mechanisms (ILFM) project.

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4. FINANCIAL CONSIDERATIONS

The CoT has recently finalised its Long-Term Financial Strategy (LTFS) aimed at developing

a funding plan for its operations (“running the City”) and most importantly to fund its new

strategic trajectory (“building the City”). In the LTFS, the CoT has identified the following

objectives that must be achieved:

i. Create a prudent and sound medium to long-term financial framework, which is resilient

and able to absorb future shocks;

ii. Design a plan that ensures sustainability of services through:

investment in infrastructure; and

adequate maintenance of infrastructure;

iii. Identify strategies that will ensure long-term financial sustainability:

operational efficiency initiatives; and

sustainable and alternative revenue streams;

iv. Respond to the long-term strategy of the CoT; and

v. Improve the CoT’s credit rating.

The incentives articulated herein are aimed at catalyzing economic growth and development

within the Tshwane region, including the advancement of SMMEs for the purpose of promoting job

creation.

The fundamental objective of the DII is to create an investor-friendly environment which will

encourage developers and investors to consider CoT as their first point of call when exploring

investment opportunities.

The proposed incentives should relate to spatial planning initiatives in the City and these

should make reference to Tshwane Vision 2055 as well as the MSDF and R e g i o n a l

S p a t i a l D e v e l o p m e n t F r a m e w o r k s ( RSDFs). However there should also be

alignment to other plans and programmes e.g. the Cities Support Programme and Built

Environment Performance Plan (BEPP) as well as the Capital Investment Planning System (CaPs),

where spatial priorities to achieve spatial transformation, is established.

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Initially the CoT will forego revenue due to the discounting of fees, contributions and rates.

However the CoT will have facilitated a future benefit in that the developments that will have

been granted discounts or exemptions, will have to pay rates after the dispensation period. The

properties will have a higher value due to the improvements and thus future rates income to the

CoT will be significant.

The CoT has also developed a capital productivity model that is able to assess the socioeconomic

impact of proposed initiatives within the Tshwane region. The model will be utilised to assess the

socioeconomic impact of all proposed investment into the Tshwane region. Simply stated, the

model is able to determine the short and long-run developmental effects of a proposed initiative,

including:

GDP effect;

Sectorial effects;

Job creation;

Wage effects within the economy.

5. INCENTIVES

LAND OWNERSHIP AND CUSTODIANSHIP

The CoT as land owner may dispose of land in terms of the legislation as outlined above. This means

that through the disposal of land, the municipality may use its executive, administrative and legislative

powers to promote investment. In terms of section 152 of the Constitution, it is the responsibility of the

Municipality to provide basic services to all areas within its jurisdiction. As a result thereof bulk services

contributions forms and essential part of reaching the objectives of Local Government.

5.1 LAND ALIENATED BY THE MUNICIPALITY AFTER JANUARY 2015

The Draft 2015/16 Rates Policy, as per Annexure C, has been amended to add an additional category of

rebate based on a specific category of ownership in terms of section 15(2) of the Local Government

Property Rates Act, 2004 outlined as follows:

5.1.1. Land alienated by Council to a Transferee, a property rates rebate of 90 percent for 24 months

after date of registration of transfer or such further period as the Municipality may allow and

subject to such conditions as they deem expedient;

5.1.2. Criteria for rebate under this category of ownership in terms of section 15, may include

circumstances where beneficial occupation is not possible. In this case, the property may receive

a 100% rebate from the payment of rates until beneficial occupation is possible, the

determination of which lies with the City of Tshwane.

5.1.3. Beneficial occupation refers to instances in which a purchaser of property is unable to take

occupation of the said property for reasons beyond his control, for example, the existence of

illegal occupation on the said property.

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5.1.4. Upon a property as per clause 5.1 being developed and being lawfully occupied in terms of the

National Building Regulations and Standards Act, 1977 the following rebates may apply on the

payment of rates by the owner:

5.1.4.1. The cost of the investment in the opinion of the Council amounts to R5,000,000 to

R50,000,0001: 50% rebate for 5 years

5.1.4.2. The cost of the investment in the opinion of the Council amounts to R50 000 001 to

R400,000,000: 35% rebate for 8 years

5.1.4.3. The cost of the investment in the opinion of the Council amounts to R400,000,001 to R

1,000,000,000: 50% rebate for 10 years

5.1.4.4. The cost of the investment in the opinion of the Council amounts to R1,000,000,001 and

above: 70% rebate for 15 years

The difference between 5.1.4.1. and 5.1.4.2. – 5.1.4.5. is based on the fact that 5.1.4.1. is only

applicable to previously disenfranchised applicants.

The determination of the categories pertaining to individual incentive applications will be subject to the

Strategic Investment Committee, as per Annexure D.

5.2. CATEGORY OF RATING FOR CATALYTIC INVESTMENT PROPERTIES

Category of rating for purposes of accommodating investment from the private sector in terms of Council

policies will be dealt with as follows:

Development of land within the jurisdiction of the Municipality, which the Municipality may determine as

developments, contributing to catalytic investment within the City of Tshwane in its sole discretion.

The Draft 2015/16 Rates Policy has been amended to add an additional category of rebate based on a

specific category of ownership in terms of section 15(2) of the Local Government Property Rates Act,

2004 outlined as follows:

5.2.1. Criteria for changing the category of ownership to 5.2 shall include areas targeted within the:

Metropolitan Spatial Development Framework (MSDF);

Regional Spatial Development Framework (RSDF): or

Spatial Development Zones (SDZ’s)

as may be determined by the Municipality, in relation to the development.

5.2.2. Upon a property as per clause 5.2.1. being developed and being lawfully occupied in terms of

the National Building Regulations and Standards Act, 1977 the following rebate may apply on

the payment of rates by the owner:

1 Only applicable to disenfranchised individuals as may be determined by Council from time to time and subject to

such criteria and information as may be required by the Council.

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5.2.2.1. A 50 percent rebate from date of proclamation for a max period of 5 years as determined by

Council with a minimum investment of R400 million.

5.2.3. Following the conclusion of the aforementioned periods, the investor/developer will be liable for

100% of all rates payable.

5.3. Infrastructure contribution waivers shall be subject to negotiation with the City of Tshwane,

where applicable as no commitments can be made within this Policy.

6. INSTITUTIONAL ARRANGEMENTS

The Municipality shall prescribe processes and procedures in terms of which applications shall be made

to Council for accessing the above incentive policy, which applications shall be dealt with in terms of the

policy and its associated delegations.

6.1. The Development Investment Incentives Policy must be read in conjunction with the Council

approved report of 27 November 2014, entitled: A situation analysis and global benchmarking of

the City of Tshwane’s Investment Attraction, Facilitation and Aftercare of catalytic and strategic

investment projects and to approve a framework for institutionalising catalytic and strategic

investment projects within the City of Tshwane.

6.1.1. All DII applications will be subjected to the Strategic Investment Committee as outlined in the

Council approved document in 6.1. (chaired by the MMC: Economic Development and

Planning) that has been established consisting of the Heads of Departments of key areas,

including but not limited to: Transport, Services Infrastructure, City Planning, Group Finance and

Group Legal.

6.1.1.1. Where appropriate, independent specialist consultants will be invited to attend the

committee meetings.

6.1.2. The policy is intended to provide the parameters for decision making however, this will not

preclude the municipality from setting guidelines in terms of which applications shall be dealt

with.

6.1.3. The authority to accept and process applications shall be with the City Manager or person

designated by him in terms of a further guideline, which guideline may include:

A brief overview of the investment or proposed development;

The scale of the investment or proposed development in monetary terms

The size of the investment or proposed development from a land mass

perspective;

The location of the investment or proposed development and whether it is a core

development node as articulated in the MSDF;

The social and economic impact, for example through the number of jobs to

be created during and after construction;

The extent of the infrastructure and type that is installed (i.e. roads, bulk water

pipes, electrical infrastructure etc.), and

Regulatory authority of the Council

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6.1.4. In so far as practicably possible any application in terms of development legislation as may be

determined in terms of this Policy as DII shall be dealt with in terms of the CoT’s Standard

Operating Procedures for investment with respect to CoT development processes, e.g.

turnaround times for development applications, building plan approvals, occupational certificates

and so on.

7. CONDITIONS ON THE OFFERING OF INCENTIVES

7.1. Any failure, by the developer, to comply will result in the imposition of the failure to comply, as

per Clause 7.5. of this Policy.

7.2. A developer must during this period of the property rates rebate pay for all other services

rendered by the municipality such as electricity, water and sewer, refuse collection and so on.

7.3. A service level agreement must be in place and signed by the developer or investor and the City

of Tshwane.

7.4. An occupation certificate is required in instances where “lawful occupation” is referred to within

this Policy.

7.5. A change of category based on the content of this policy shall be captured in an agreement

between the owner of the property and the municipality.

7.6. Should the owner fail to comply, as per a) or b) below, with the said agreement, the following

shall be applied and form part of the agreement:

a) if illegal occupation occurs (i.e. occupation without a valid occupation certificate),

b) commencing of construction without approved building plans

7.6.1. The applicable failure to comply for the above mentioned will be the payment to the City of

double the rates rebates and/or exemptions received plus interest.


This policy is to be implemented by the CoT with effect from 1 July 2015 and will be reviewed on

annual basis or as deemed necessary by Council.

9. CONCLUSION

This policy aims to facilitate increased investment and development within the City of Tshwane and

requires a concerted effort and collaboration between the private and public sector. The policy will

guide development in line with the City’s vision and will endeavour to foster a transparent,

accountable and trustworthy working relationships amongst all stakeholders involved. The Policy will

be reviewed on an annual basis.

The City of Tshwane reserves the right to alter the provisions contained herein at its discretion as

determined by its financial capacity.

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Reference No 06404/1 Ernest Shozi (0875) COUNCIL: 27 November 2014 4. OFFICE OF THE EXECUTIVE MAYOR

APPROVAL FOR THE CITY OF TSHWANE’S INCENTIVE FRAMEWORK (From the Mayoral Committee Cluster: Governance: 22 October 2014 and the Mayoral Committee: 12 November 2014)

1. PURPOSE

This document encapsulates the Incentives Framework for the City of Tshwane (CoT); the conceptualisation and implementation of which will be championed by the Economic Intelligence Units located within the Office of the Executive Mayor.

2. STRATEGIC OBJECTIVES

This report directly addresses the following strategic objectives:

2.1 PROMOTE SHARED ECONOMIC GROWTH AND JOB CREATION

The Incentives Framework will be used as tools to attract investments and development to areas where the CoT is actively seeking to increase economic activity and as a result assist with employment creation within specific regions.

2.2 IMPROVED FINANCIAL SUSTAINABILITY

The Incentives Framework creates sustainable and innovative methods of attracting private sector investments to the city and because the value of incentives will be expressed in monetary terms, this will in turn act as a form of revenue stream for the CoT.

3. BACKGROUND

The City of Tshwane has embarked on process of investigating appropriate means of disposing some parcels of land within the City for a variety of development options. The CoT has to this point initiated a project referred to as Innovative Land Finance Mechanisms (ILFM).

One of the critical success factors for attracting developers and investors is to offer a compelling value proposition with respect to leasing of land, disposal of land and the ability to process any land related application within acceptable timeframes. The City of Tshwane must in this respect identify appropriate incentives that can be utilised to attract potential developers and/or investors to develop within the CoT. Further development within the CoT will not only enhance short-term revenue streams to the CoT, but will also stimulate long-term local economic development within the metropolitan region.

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MarieB1

Typewritten Text

ANNEXURE B

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4. DISCUSSION

The City of Tshwane recognises that infrastructure investment is an important component and a driver for the development of South Africa and its Cities. The CoT also holds international acclaim due to its status as the capital city of South Africa. As a result, the CoT is diligently working at bolstering its standing among capital cities. The CoT is actively striving to be a vibrant place to live, work and play for both its visitors and citizens. The CoT has thus, adopted a forty year vision[1] for growth and development, in the form of Tshwane Vision 2055, to realign its current growth patterns and change the face and fortunes of the City. Cities do not develop overnight, but over many decades and the CoT has set itself four decades to reach its goals. The critical part of this development is that the CoT must be able to attract investors, who will bring with them the expertise, funds and the capacity to develop new structures and industries. The CoT will not achieve the desired growth and development without cultivating an investor friendly environment, efficient processes, proactive but sustainable policies and funding strategies of its own. The CoT will have to fund part of the growth and development to lay the foundation for investors to take up specific projects but is also looking for ways to involve these investors in growing the CoT. The CoT has recently finalised its Long-Term Financial Strategy (LTFS) aimed at developing a funding plan for its operations (“running the City”) and most importantly to fund its new strategic trajectory (“building the City”). In the LTFS, the CoT has identified the following objectives that must be achieved:

• Create a prudent and sound medium to long-term financial framework, which is resilient and able to absorb future shocks;

• Design a plan that ensures sustainability of services through: o investment in infrastructure; and o adequate maintenance of infrastructure;

• Identify strategies that will ensure long-term financial sustainability: o operational efficiency initiatives; and o sustainable and alternative revenue streams;

• Respond to the long-term strategy of the CoT; and

• Improve the CoT’s credit rating. Investment incentives are used as a tool by governments to attract and promote investment, stimulate economic growth and assist with employment creation within a particular region. These investment incentives can be used by different spheres of government to achieve pre-determined strategic objectives contained in the applicable strategies and/or policy documents. Investment incentives therefore aim to induce investors to shift an investment decision towards a particular strategically identified region, sector and/or project. As such, an incentive is broadly understood to be a specific intervention designed to change the behaviour of investors or to influence their decisions in order to achieve specific outcomes Defining an ‘investment incentive’ as compared to a general incentive is more complex and there is no standard definition. The United Nations Conference on Trade and Development (UNCTAD), however, defines an investment incentive as “any measurable advantage accorded to specific enterprises or categories of

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97 enterprises by or at the direction of government”. According to this definition, a broad reduction in taxes or an improvement in other investment related conditions for all investors is not considered an incentive This is because incentives must be ‘specific’, hence it must be restricted to investors who meet particular criteria such as locating in a specific area or operating in a specific economic sector. An incentive can be in the form of a grant but not all grants can be considered incentives. The following categories of investment incentives are generally recognised:

• Direct financial incentives, which include: o Grants; and o Low interest loans

• Indirect fiscal incentives, which include: o Tax rebates; o Tax holidays; and o Subsidised and/or reduced service costs.

• Other non-fiscal incentives, which include: o Technical and/or business support on the part of government.

A brief desktop investigation on a number of similar cities in other parts of the world has been conducted as a benchmark so that the CoT can measure or assess itself on the provision and utilization of incentives to entice private sector development around the CoT. Globally, there are trends and solutions that are being explored by cities to unlock sustainable development within their jurisdiction, by using land as one of the instruments to achieve the objective of financing urban infrastructure and the provision of basic services to its inhabitants. The following Cities are the subject of case studies for successful implementation of incentives:

• Cairo (Egypt),

• Sao Paulo (Brazil),

• City of Johannesburg (South Africa), and

• Austin (Texas, USA). The City of Tshwane is currently utilising most of the grants from National government departments for Opex and Capex purposes. There are new incentives and grants that the City must take advantage of, such as the Critical Infrastructure Programme (CIP) to augment its capital budget and expedite the installation of bulk services infrastructure. The CIP will be part of the package of incentives that will be recommended to attract potential investors to the City of Tshwane.

The incentives that will be packaged for the purpose of implementing the Innovative Land Financing Mechanisms project will be made up of incentives and grants from National and local government spheres as well as new incentives that have been identified by the City.

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Category

Local Incentives

National Incentives

1.

Fast tracking of applications

A dedicated process manager as a single point of contact to facilitate the flow of information and decision making

Expedited processing through a Joint Operation Committee (JOC) of City experts through a defined meeting or a series of such meetings

Utilisation of experts to augment the internal CoT team in finalising outstanding but crucial information

Relaxation of some conditions of development (not to infringe on any legislation or stakeholder)

Investigation of how to expedite the Environmental Impact Assessment process

2.

Land use

Special Development Zones

Incentive Zoning

Special Economic Zones (SEZ) (not currently proclaimed for The CoT)

The CoT may explore an opportunity to apply for a proclamation of a SEZ in areas of high industrial activity

3.

Fiscal

Bulk Service Contribution Waiver and/or Rebate

Property Rates Exemption

Property Rebate

Property rate reduction

Waiver of fees related to the application or connection to bulk infrastructure

Alternative and/or Renewable Projects Incentives

Rebate on Electricity Tariffs

Section 12I tax allowance incentive programme administered by the DTI.

Manufacturing incentives (only applies after the construction of industrial properties or factories and applicable to companies) offered by the DTI

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4.

Capital Infrastructure

Possible additional borrowing to augment the capital budget for specific projects (this will not be available to all projects)

Critical Infrastructure Programme incentive (CIP) offered by the DTI

5.

Area Improvement incentives

City Improvement Districts

Spatial Targeting

It is proposed that conditions for the proposed incentives if implemented, must be as follows, inter alia:

• Based on application received from the qualifying developer

• Property rates exemptions will be calculated based on the value of vacant land

• Property rates rebates will be calculated based on the rateable value of the developed property including any additions and/or improvements;

• Rate rebate benefits may not be transferrable; and

• Any failure, by the developer, to comply will result in a penalty to be determined by the CoT and discussed with the developer prior to implementation. Where applicable the penalty may include interest.

• A developer must during this period of the property rates or exemption pay for all other services rendered by the municipality such as electricity, water and sewer, refuse collection etc.

• A service agreement must be in place and signed by the developer;

• In the case of a property rates rebate the developer or investor will be treated as a creditor or supplier as opposed to a debtor or customer during this period (this is to circumvent legislative and financial implications that may stall the application of the incentive);

• Monthly levies of the assessment rates will be raised during billing for services and credits will be passed back against the “supplier” who is a developer or investor (this process must be clearly explained to the “supplier” and must be calculated and reflected in the monthly statement).

• An occupation certificate is required for the property rates rebate to commence. The CoT Rates Policy

• In order for the CoT to make use of a rates exemption as a form of incentive to potential developers, it is necessary that its property rates policy/by-laws prescribes for the granting of such an exemption.

• This will be the case should the City elect to utilise rate exemptions, rebates and/or reductions to incentivise development within its jurisdiction.

City of Tshwane: Engineering Services Policy

• The engineering services policy will have to amended to provide for the discounting and or exemption of the bulk services fees and development contributions

Electricity Tariff Policy

• The electricity tariffs policy is based on the NERSA regulations and must be finalised by a municipality annually for submission to NERSA.

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• It is not advisable to discount the electricity tariffs, unless if there is a compelling proposition.

• If electricity tariffs do get discounted, it must be for a short period of time otherwise the CoT will not realise the revenue that it should enjoy based and thus may increase the cost of supplying electricity.

[1] Tshwane Vision 2055

5. COMMENTS OF THE STAKEHOLDER DEPARTMENTS 5.1 COMMENTS OF THE CHIEF FINANCIAL OFFICER

Cognizance is taken of the proposed Incentive Framework. The salient features of the proposed draft Incentive Framework are set out comprehensively in the document, which indicates the detailed information about incentives in general based on research of both local and international practices. The Group Financial Services Department, in principle, support the objectives of the proposed draft Incentive Framework as it is indicated in this document that governments used incentives as a tool to attract and promote investment, stimulate economic growth and assist with employment creation within a particular regions. It is indicated in the proposed draft framework document that there will be costs associated with the City of Tshwane offering incentives in a form of the revenue foregone for Bulk Services Contribution and/or property rates during and possibly after development. Therefore, it is the opinion of the Group Financial Services Department that all stakeholder departments responsible for Bulk Services Contribution be engage in a joint working session during development of the Incentives Policy with regard to their implications to waive Bulk Services Contribution as the affected stakeholder departments would have to make the necessary budget allocations available in the applicable financial year during the implementation phase of this framework. The Group Financial Services Department will gladly render further financial comments on future reports in this regard.

5.2 COMMENTS OF THE GROUP LEGAL COUNSEL

The purpose of the report is to encapsulate the Incentives Framework for the City of Tshwane (CoT); the conceptualization and implementation of which will be championed by the Economic Intelligence Units located within the Office of the Executive Mayor. The report seeks to address the following Strategic Objectives:

• Promote shared economic growth and job creation

• Improved financial sustainability

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102 In terms of sections 85 and 86 of the Local Government: Municipal Systems Act, (Act 32 of 2000), municipality which wishes to establish internal municipal service districts must adopt a policy framework to guide the establishment, regulation and management of their service districts. When developing this policy framework, municipalities should think about how the establishment of internal service districts will promote social, economic and spatial integration, and local economic development in the municipality. The policy framework must ensure that the needs of parts of the municipality are balanced with the needs of the municipality as a whole. It is important that internal service districts do not entrench or contribute to creating disparities in service provision across the municipal area. The report in paragraph 6.3 aligns the initiative with the constitutional requirements as per Section 152 of the Act 108 of 1996, namely: The objects of local government are-

• to provide democratic and accountable government for local communities;

• to ensure the provision of services to communities in a sustainable manner;

• to promote social and economic development;

• to promote a safe and healthy environment; and

• to encourage the involvement of communities and community organisations in the matters of local government.

Regulations 13 and 14 of the Local Government: Municipal Planning and Performance Management Regulations published under GN R796 in GG 22605 of 24 August 2001, reinforces the above requirements. Therefore, in light of the information provided in this report, the Group Legal Services Department submits that the report is in compliance with the legislative requirements and it renders a fair reflection on service delivery as well as the administration as a whole, wherefore the contents and the recommendations of the report are supported.

5.3 COMMENTS OF THE STRATEGIC EXECUTIVE DIRECTOR: CITY PLANNING

AND DEVELOPMENT

A wide range of incentives are addressed in the report and also many examples of incentives in other cities have been studied. The proposed incentives should relate to spatial planning initiatives in the City. Reference is made to Tshwane Vision 2055 as well as the MSDF and RSDFs. However there should also be alignment to other plans and programmes e.g. the Cities Support Programme and Built Environment Performance Plan (BEPP) as well as the Capital Investment Planning System (CaPs) where spatial priorities to achieve spatial transformation, is established. A prioritisation module is part of the CaPs whereby different projects can be evaluated in terms of value and cost as well as spatial outcomes for the city. The incentives criteria as well concept should be incorporated in this system.

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103 Nodes and corridors/urban hubs and integration zones - as identified per the MSDF and CSP, should be described since these are the major investment areas. New definitions such as Special Zones should be replaced and referenced to the MSDF 2012 definitions and CSP definitions. Detailed comments were submitted as part of the actual policy drafting process. The Department is in support of the report provided that the issues raised are incorporated.

5.4 COMMENTS OF THE STRATEGIC EXECUTIVE DIRECTOR: CORPORATE AND

SHARED SERVICES

The report encapsulates the Incentives Framework for the City of Tshwane (CoT); the conceptualisation and implementation of which will be championed by the Economic Intelligence Units located within the Office of the Executive Mayor. Cognisance is taken of the contents and annexures to this report. The recommendations in the report are noted.

6. IMPLICATIONS 6.1 HUMAN RESOURCES

The CoT must establish a dedicated front end office staffed with customer centric people whose job will be to interact with developers and investors and to play a coordination role with internal CoT Department and functionaries. This office must be supported by a back office which must be staffed with technical people who will review the submissions for land related requirements and advise on the best way of collecting or developing/generating the required information. The back office will liaise with technical staff within the CoT and where necessary, they will interact with external technical service providers.

6.2 FINANCES

Initially the CoT will forego revenue due the discounting of fees, contributions and rates. However the CoT will have facilitated a future benefit in that the developments that will have been granted discounts or exemptions, will have to pay rates after the dispensation period. The properties will have a higher value due to the improvements and thus the rates will be significant. The amount that the CoT will forego will be calculated based on the application and will be tracked through the financial accounting system of the CoT.

6.3 CONSTITUTIONAL AND LEGAL FACTORS

The proposed initiative falls within the mandated requirement as set out in the Constitution Section 152 namely:

(1) The objects of local government are- 1. to provide democratic and accountable government for local communities; 2. to ensure the provision of services to communities in a sustainable manner; 3. to promote social and economic development; 4. to promote a safe and healthy environment; and

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104 5. to encourage the involvement of communities and community organisations in

the matters of local government. This initiative although not directly linked to regulation 3 section 3 of the Municipal Systems Act of 2000 uses these regulations as an underpinning for this initiative.

On Co-operative government:

(3) For the purpose of effective co-operative government, organised local government must seek to- 1. develop common approaches for local government as a distinct sphere of

government; 2. enhance co-operation, mutual assistance and sharing of resources among

municipalities; 3. find solutions for problems relating to local government generally; and 4. facilitate compliance with the principles of co-operative government and

intergovernmental relations.

6.4 COMMUNICATION

This project will require communication between the relevant stakeholders as mentioned.

6.5 PREVIOUS COUNCIL OR MAYORAL COMMITTEE RESOLUTIONS

No previous Council or Mayoral Committee Resolutions exist with respect to the proposed project.

7. CONCLUSION

Incentives are critical in assisting the City to attract developers who will in turn enable it to achieve its long-term development objectives. These objectives are outlined in strategic documents such as the IDP and Vision 2055. This Incentive Framework has considered the incentives that were formulated and implemented by other Cities. The incentives that are proposed for implementation by the CoT bear similarities to the incentives implemented by Cairo and Sao Paolo. For instance Cairo implemented an incentive of modifying and streamlining of local zoning and permit procedures. This incentive allows “The Zone Administrator” with the approval of the Advisory Council to modify zoning regulations, expedite handling of business licensing and streamline local permit procedures in favour of those private sector investors who take part in this land auction procedure. Sao Paolo has implemented the relaxation of development rules as well. The CoT has identified the Incentive Zoning which will offer a basket of rights to a land parcel and by extension, these rights will allow for some form of relaxation of development rules. This incentive will in the short to medium term be available through a specific programme and through the process of creating special development zones.

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105 From the study conducted on the incentives that are currently available in South Africa, it is clear that there are incentives that have a good fit with the activities of the local government. In particular the Critical Infrastructure Programme (CIP) from the DTI is one example of an incentive that can be included in the Incentive Policy of the CoT even though it is managed by a different organ of State. This further confirms that there is no need to for the CoT to develop new incentives. In the core of the incentives that the CoT will package is the: • Non-fiscal incentives aimed at fast tracking of various land parcel related

applications. • Land use Incentives aimed at creating special development zones and

offering an enhanced basket of rights for land parcels. • Fiscal incentives aimed at offering a waiver or rebates or reductions on bulk

service contributions, offering property rates exemptions and rebates and other tax incentives from other organs of State.

• Capital Investment incentives aimed at funding installation of a portion of the

bulk service infrastructure cost. The implementation of incentives is largely a quantitative process which may yield qualitative benefits. As a result of this a quantitative model has been developed to enable the CoT to structure the incentives and calculate the value of revenue forgone. The output of this model forms part of all legal documents that a recipient must sign to commit to the development and to take up the incentive with its associated terms and conditions.

The Mayoral Committee on 12 November 2014 resolved to recommend to Council as set out below: ANNEXURES: A. CoT Incentives Framework Final Draft - CoT Format 19 September 2014 V5.doc -

CoT Incentives Framework Report B. CoT_Incentives_Model_v6.xlsm - CoT Incentives Model - To access the document,

the password is "Password321" RECOMMENDED: 1. That note be taken of the Incentive Framework report; 2. That the Incentive Framework as presented be approved; 3. That the Executive Mayor host an investor summit with investors and developers

during the month of January 2015 to solicit input to the Framework as well as to showcase additional catalytic projects within the City;

4. That the final Incentive Framework with all relevant feedback be tabled to Council

following the investor summit;

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106

5. That the incentives regulatory guideline methodology with timeframes be approved; 6. That the Group Legal Services, Group Financial Services and Services

Infrastructure Departments support this process through their participation in amending the Rates Policy, Electricity Tariff Policy and the Engineering Services Policy to give effect to these incentives in the 2015/16 financial year; and

7. That a category of incentives for social housing be included for specific strategic

sites.

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City of Tshwane

Innovative Land Finance Mechanisms –

Incentives Framework (Final Draft)

18 July 2014

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MarieB1

Typewritten Text

ANNEXURE A

Figures ....................................................................................................................................................................................... 4

Tables ......................................................................................................................................................................................... 5

Acronyms ................................................................................................................................................................................... 6

Definitions .................................................................................................................................................................................. 8

Executive summary ................................................................................................................................................................. 13

1. Introduction & Background ........................................................................................................................................... 16

1.1. Introduction .......................................................................................................................................................... 16

1.2. Background ......................................................................................................................................................... 16

1.3. Tshwane Vision 2055 ........................................................................................................................................... 17

1.4. Purpose of this report ........................................................................................................................................... 18

2. Incentives and Grants Overview ................................................................................................................................... 20

2.1 Discussion ................................................................................................................................................................ 20

2.1.1. Investment incentives ........................................................................................................................... 20

2.1.2. Legal and Regulatory Framework ......................................................................................................... 21

2.1.2.1. The Constitution of the Republic of South Africa, 1996 (The Constitution) ............................................ 21

2.1.2.2. Local Government: Municipal Finance Management Act, 2003 (MFMA) ............................................... 21

2.1.2.3. Local Government, Municipal Property Rates Act, 2004 (MPRA).......................................................... 21

2.1.2.4. Spatial Planning and Land Use Management Act, 2013 ....................................................................... 22

2.1.2.5. Town Planning and Townships Ordinance 15 of 1986 .......................................................................... 22

2.1.2.6. City of Tshwane: Engineering Services Policy ...................................................................................... 23

2.1.2.7. National Treasury: Draft Municipal Development Charges Policy ......................................................... 23

2.1.2.8. City of Tshwane: Property Rates By-laws, 2013 ................................................................................... 23

2.1.3. Incentives Offered by municipalities ..................................................................................................... 24

2.1.4. Provincial Government Incentives Landscape ...................................................................................... 24

2.1.5. National Government Incentives and Grants Landscape ...................................................................... 24

2.2. International and Local Landscape....................................................................................................................... 25

2.2.1. Case Studies ........................................................................................................................................ 25

2.2.2. Cairo (Egypt) ........................................................................................................................................ 25

Table of Contents

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2.2.3. Sao Paulo (Brazil) ................................................................................................................................ 27

2.2.4. City of Austin, Texas (USA) .................................................................................................................. 28

2.2.4.1. Firm-based Incentives .......................................................................................................................... 29

2.2.4.2. The use of project-based incentives in Austin ....................................................................................... 29

2.2.5. City of Johannesburg (South Africa) ..................................................................................................... 31

2.2.5.1. The COJ Inner City Regeneration Strategy........................................................................................... 31

2.2.5.2. Urban Development Zone Policy Implementation ................................................................................. 33

3. Analysis of Incentives .................................................................................................................................................... 35

3.1. Incentives Identified by the CoT ........................................................................................................................... 35

3.2. Analysis of Land Use Management Incentives ..................................................................................................... 36

3.2.1. Incentive Zoning ................................................................................................................................... 36

3.2.2. Special Development Zone (SDZ) ........................................................................................................ 36

3.2.3. Other considerations ............................................................................................................................ 37

3.2.4. Fast Tracking of Land Use Applications ................................................................................................ 37

3.3. Analysis of Fiscal Incentives ................................................................................................................................ 38

3.3.1. Bulk Services Contributions Rebate ..................................................................................................... 38

3.3.2. Property Rates Rebates, Exemptions and/or Reductions ..................................................................... 38

3.3.3. Tax Incentive Programmes ................................................................................................................... 39

3.4. Analysis of Capital Investment Incentives ............................................................................................................ 40

3.4.1. Infrastructure ........................................................................................................................................ 40

3.4.2. Good quality Public Transport .............................................................................................................. 41

3.4.3. Social and Community Facilities ........................................................................................................... 41

3.4.4. Investment in the public environment ................................................................................................... 41

3.5. Analysis of Area Improvement Incentives ............................................................................................................. 41

3.5.1. City Improvement Districts .................................................................................................................... 41

3.5.2. Safety and Security .............................................................................................................................. 42

3.5.3. Expediting rollout of free Wi-Fi in identified development areas ............................................................ 42

3.5.4. Spatial Targeting Incentives ................................................................................................................. 42

3.6. Feedback from External Stakeholders ................................................................................................................. 43

4. Incentives Framework .................................................................................................................................................... 44

4.1. Guiding Principles ................................................................................................................................................ 44

4.1.1. Considerations for developing the incentive framework ........................................................................ 44

4.1.2. Decision matrix for applying incentives to developments ...................................................................... 45

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4.2. Key Driver for development .................................................................................................................................. 48

4.3. Process for developing a new Incentives Policy ................................................................................................... 48

5. Proposed Incentives ...................................................................................................................................................... 50

5.1. Proposed incentives ............................................................................................................................................. 50

5.2. Non-fiscal Incentives – fast tracking of applications.............................................................................................. 51

5.2.1. Pro-active steps ................................................................................................................................... 51

5.2.2. Handling of applications ....................................................................................................................... 52

5.2.3. Locus of control .................................................................................................................................... 52

5.2.4. Deployment of expertise ....................................................................................................................... 52

5.3. Land Use Incentives ............................................................................................................................................ 53

5.3.1. Special Development Zones ................................................................................................................. 53

5.3.2. Incentive Zoning ................................................................................................................................... 54

5.4. Fiscal Incentives .................................................................................................................................................. 54

5.4.1. Bulk Services Contributions Rebates .................................................................................................... 54

5.4.2. Property Rates Rebates on vacant land ............................................................................................... 55

5.4.3. Property Rates Rebates on developed properties ................................................................................. 56

5.4.4. Alternative and/or Renewable Projects Incentives ................................................................................ 56

5.4.5. Rebate on Electricity Tariffs .................................................................................................................. 56

5.4.6. Tax Incentive Programmes ................................................................................................................... 57

5.5. Capital Incentives ................................................................................................................................................ 57

5.5.1. Infrastructure ........................................................................................................................................ 57

6. Structuring of Incentives ............................................................................................................................................... 58

7. Incentives Modelling ...................................................................................................................................................... 60

7.1. Purpose of the model ........................................................................................................................................... 60

7.2. General assumptions ........................................................................................................................................... 60

7.3. Methodology ........................................................................................................................................................ 61

7.3.1. Understanding needs and expectations ................................................................................................ 61

7.3.2. Data gathering ...................................................................................................................................... 61

7.3.3. Data review and verifications ................................................................................................................ 62

7.3.4. Data modeling and analysis.................................................................................................................. 62

7.4. Test Case Scenario ............................................................................................................................................. 63

7.4.1. Summary of Key Input Data.................................................................................................................. 63

7.4.2. Bulk Services Contributions Rebate ..................................................................................................... 64

7.4.3. Property Rates Rebate on vacant land ................................................................................................. 65

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7.4.4. Property Rates Rebate on developed property ..................................................................................... 65

7.4.5. Other Input Data ................................................................................................................................... 66

7.5. Model Outputs/Results ......................................................................................................................................... 66

7.5.1. Income and cash flow over a 20 year period ......................................................................................... 66

7.5.2. Total incentive over a 20 year period .................................................................................................... 67

8. Conclusion ..................................................................................................................................................................... 68

9. Recommendations ......................................................................................................................................................... 70

9.1. Implementation of incentives ................................................................................................................................ 70

9.2. Impact of incentives policy on existing policies ..................................................................................................... 71

9.2.1. The CoT Rates Policy........................................................................................................................... 71

9.2.2. City of Tshwane: Engineering Services Policy ...................................................................................... 71

9.2.3. Electricity Tariff Policy .......................................................................................................................... 72

9.3. Expedient Processing Capability .......................................................................................................................... 72

9.4. Implementation of incentives model ..................................................................................................................... 72

10. References ...................................................................................................................................................................... 73

11. Annexures ...................................................................................................................................................................... 75

11.1. Annexure A: Guidelines for the determination of Incentives/rebates in respect of contributions to engineering services in respect of development areas/projects ............................................................................................... 75

11.2. Annexure B: Incentives available and National and Local government level for a number of development investments. ........................................................................................................................................................ 75

11.3. Annexure C: National Treasury: Draft Municipal Development Charges Policy .................................................... 75

11.4. Annexure D: The COJ Inner City Regeneration Strategy ...................................................................................... 75

11.5. Annexure E: Urban Development Zone Tax Incentive .......................................................................................... 75

11.6. Annexure F: CoT Urban Development Zone Boundaries...................................................................................... 75

11.7. Annexure G: Section 12I income tax incentive ..................................................................................................... 75

11.8. Annexure H: Critical Infrastructure Programme .................................................................................................... 75

Figures

Figure 1: Incentive assessment framework .......................................................................................... 45

Figure 2: Policy development framework .............................................................................................. 49

Figure 3: CoT Metropolitan spatial Development Framework (Source: CoT City Development and Planning Department, 2013) ................................................................................................................. 53

Figure 4: CoT development nodes (Source: CoT Metropolitan Spatial Development Framework, June 2012) ..................................................................................................................................................... 54

Figure 5: Quantitative Incentive Model Development ........................................................................... 61

Figure 6: Percentage rebates for bulk services contributions rebates .................................................. 64

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Figure 7: Key input data to determine whether a development qualifies for bulk services contributions rebate .................................................................................................................................................... 64

Figure 8: Percentage rebates for property rates rebate on vacant land ............................................... 65

Figure 9: Key input data to determine whether a development qualifies for property rates rebate on vacant land ............................................................................................................................................ 65

Figure 10: Applicable period for property rates rebate on developed property .................................... 65

Figure 11: Key input data to determine whether a development qualifies for property rates rebate on developed property ............................................................................................................................... 66

Figure 12: Other key input data specific to the test case scenario ....................................................... 66

Figure 13: Income and cash flow over a 20 year period ....................................................................... 66

Figure 14: Total value of incentives over a 20 year period ................................................................... 67

Tables

Table 1: Summary of the proposed incentives for the City of Tshwane ............................................... 14

Table 2: Summary of the City of Cairo (Egypt) Local Incentives .......................................................... 26

Table 3: Summary of City of Sao Paolo Local Incentives ..................................................................... 27

Table 4: Summary of the City of Austin Local Incentives ..................................................................... 30

Table 2: Summary of the incentives implemented by the COJ through the Inner Regeneration Strategy ................................................................................................................................................. 32

Table 3: Incentives Identified by the CoT .............................................................................................. 35

Table 4: Classification of incentives, according to size in monetary terms ........................................... 45

Table 5: Outcomes of the incentives decision matrix ........................................................................... 46

Table 6: Guidelines to assist in deciding whether or not to offer an incentive ...................................... 47

Table 7: Summary of proposed Incentives for the City of Tshwane ..................................................... 50

Table 8: Criteria the Section 12l tax allowance ..................................................................................... 57

Table 9: Structuring of incentives per property category ...................................................................... 58

Table 10: Structuring of incentives per sector....................................................................................... 59

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Acronyms

The following acronyms are used in the document:

ACRONYM DESCRIPTION

AC Adjudicating Committee

BSC Bulk Service Contributions

Capex Capital expenditure

CID City Improvement District

CFO Chief Financial Officer of the City of Tshwane

CIP Critical Infrastructure Programme

CoJ City of Johannesburg

CoT City of Tshwane

COGTA Department of Cooperative Governance and Traditional Affairs

DORA Division of Revenue Act

DTI Department of Trade and Industry

FIZ Free Internet Zone

IDP Integrated Development Plan

ILFM Innovative Land Financing Mechanisms

IPAP Industrial Policy Action Plan includes these sectors:

Metal Fabrication, Capital and Transport Equipment; Green’ and Energy-Saving; Agro-processing; Automotive; Chemicals (Plastics & Pharmaceuticals); Clothing, Textiles, Footwear and Leather; Bio-fuels; Forestry, Paper, Pulp and Furniture; Cultural Industries and Tourism Linkages; Business Process Services; Nuclear; Advanced Materials and Aerospace.

JOC Joint Operation Committee

LTFS City of Tshwane Long-Term Financial Strategy

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MFMA Local Government: Municipal Finance Management Act, No 56, 2003

MIG Municipal Infrastructure Grant

MPRA Local Government: Municipal Property Rates Act, No 3, 2006

MSA Local Government: Municipal Systems Act, No 32, 2000

MSDF Metropolitan spatial Development Framework

MTREF Medium Term Revenue Expenditure Framework

NDP National Development Plan

NT National Treasury

Opex Operational expenditure

PPP Public Private Partnership

RSDF Regional Spatial Development Framework

SARS South African Revenue Services

SDBIP Service Delivery Budget Implementation Plan

SDF Spatial Development Framework

SDZ Special Development Zone

SEZ Special Economic Zone

SMMEs Small Micro Medium Enterprises

UNCTAD United Nations Conference on Trade and Development

UDZ Urban Development Zone

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Definitions

The table below shows the terms and the associated definitions as used in this document:

* Definitions adopted from City of Tshwane Regional Spatial Development Frameworks 2013

Term Definition

Activity Nodes* Areas of concentration of mixed land uses.

Activity Spines* Mobility routes connect a number of nodes or mixed use areas, serving as the main public transport channels of the region. These routes could support linear development although not necessarily continuous along its length. Higher order land uses should be accommodated in the nodes, but lower order land uses could develop in a linear fashion subject to alternative access opportunities. Densification along these spines should be encouraged to maximise the public transport opportunities provided by these routes.

Activity Streets* Local collector roads supporting lower order land uses in a linear fashion along its length. Direct access to land uses is provided compromising mobility for activity. Development along activity streets should be permitted in accordance with a local spatial development framework.

Capital Core* The Tshwane Inner city is identified as the Capital Core as it is the city’s first order node amongst all metropolitan nodes. Traditionally, the inner city is also the Central Business District (CBD) of major cities. Tshwane is no different. Historically, the inner city was the geographic heart and centre of what is now the Tshwane area. Over time, though, due to the extension of the Tshwane boundaries, the Inner City is no longer geographically central, but still plays a very important role with regards to the concentration of retail, office and government buildings to be found in the area.

Cluster And

Space*

Refers to clustering of residential activities and consolidation of ecological spaces.

Compact* A compact urban form increases efficiency in the way people can use

the city and in the way the city is managed. More people live in a

smaller area in a compact city and this higher density allows for

efficient provision of public transport, social and other services. The

opposite of a compact city is urban sprawl.

Concentration

Zones*

See activity nodes

Commercial Land

Use*

Commercial land use in terms of the Tshwane Town planning Scheme, 2008, refers to land and buildings used for distribution centres, wholesale trade, storage, warehouses, telecommunication centre, transport depot, laboratories and computer centres and may

345

include offices, light industries, a cafeteria and a caretaker’s flat, which are directly related and subservient to the main commercial use which is carried out on the land or in the building.

1

Conservancy* A contractually legitimated co-management entity which involves two or more recognised land and resource authorities formed for the use and conservation of natural resources on land under their jurisdiction.

Consolidated Open

Space*

Refers to open space which is not fragmented into small pockets and

not subjected to the degradation of the ecological integrity of the open

space as a result of the so-called “edge effect” or decreasing

ecological process.

Constitution The Constitution of the Republic of South Africa, Act No. 108 of 1006

Densification* Increase of residential density following the guidelines of the

Densification and Compaction Strategy, May 2005.

Densification

Spine*

Introduction of medium to higher densities as defined in the

Densification and Compaction Strategy along a mobility route to

maximise the benefits of public transport. Densification is proposed at

a block depth, making use of alternative access options, not to

compromise the mobility function of the spine.

Division Of

Revenue Act

(DORA)

This is an annual fiscal process of allocating budgets to National, Provincial and Local Governments. National Treasury is responsible for compiling and allocating budgets to the mentioned spheres of government.

Emerging Nodes*

Over the past few years, certain economic, social and/or residential opportunities have begun to emerge in various localities in the city. The realization of these localities into fully fledged nodes will depend on a number of factors. While the future of these nodes is uncertain, the potential for greater development is clear. Identifying future urban areas also provides an opportunity to plan for the provision of new infrastructure and timely planning for growth that is sustainable. Emerging nodes will be managed subject to growth management principles.

Engineering

Services Policy

The CoT’s policy on levying contributions for the provision of engineering services dated 20 April 2004

Estates* Exclusive development containing a number of dwelling units and associated land uses, that may be marketed as either “golf”, “equestrian”, ”eco”, “nature”, “country living”, etc., within a secure environment. An estate development takes place within a restricted, specified ecological footprint, which will sustain the ecological integrity of the site.

Future Urban Development Area*

An area identified for development in the near future, to accommodate appropriate land uses in accordance with an approved strategy or local spatial development framework.

Higher Order Land Uses*

Land uses normally associated with higher impact on the surrounding environments and high traffic generating land uses. It includes but is not restricted to include the following: retail, entertainment, industrial.

Incentives Policy The incentives policy to be developed pursuant to this incentives framework.

1 Definition from the Tshwane Town Planning Scheme, 2008

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Industrial*

As referred to on the framework plans includes: light or heavy industrial or high-tech and commercial uses. The appropriate intensity of development to be determined on a local level.

Infill* The development of undeveloped or underdeveloped land within a developed urban area with infrastructure available.

Inner City* An area in the City of Tshwane comprising the Pretoria Central Business District and surrounding residential areas.

Institutional* As referred to on the framework plans includes: educational, medical or government uses.

Integrated Development Plan*

A plan to integrate development and management of municipal areas as stipulated in the Municipal Systems Act, 2000. All metropolitan councils are required to formulate and implement an Integrated Development Plan incorporating metropolitan land use planning, transportation planning, infrastructure planning and the promotion of economic development, taking cognisance of the needs and priorities as determined by the metropolitan council concerned.

Intensification* The process of intensifying activities or land use by increasing floor area, height or number of activities

Joint Operation

Committee

Joint Operation Committee or JOC is a committee made up of various

departmental representatives from multi-disciplinary backgrounds

within the City and stakeholders from outside the City (i.e. organs of

state and/or privates individuals and/or companies). The JOC is

convened by the City and is responsible resolving specific issues on

an urgent basis raised by affected individuals or companies who may

be clients of the city or other stakeholders in the City who may be

adversely impacted by service delivery related delays.

Leap-Frog Development*

Development which takes place on undeveloped land, separating the new township from existing development. It is thus not contiguous with existing development.

Linear Zones* As per Densification and Compaction Strategy referring to activity spines and linear channels forming a lattice of movement.

Low Density Zones*

Areas were only limited densification is proposed

Lower Order Land Uses*

Land uses that are not usually associated with high impact on the surrounding environment and with low traffic generating characteristics.

Management Area* Areas outside the built-up areas which are proposed to accommodate land uses at densities not provided for in the built-up areas.

Metropolitan /Development Corridor*

A development strip located between a first or second order mobility route providing visual exposure and a parallel activity route providing access

Metropolitan Core* These are primary nodes of the highest order. These nodes accommodate the highest degree of service specialisation and offer the widest range of services. Often, metropolitan nodes will have regional/provincial relevance. In the Tshwane context, Metropolitan nodes are those nodes within the City (economically) benefiting primarily from the investment of the private sector. Equally important is that these nodes serve as economic hubs and focal points for employment opportunities. The role of the public sector in such nodes is to manage the rate of growth, provide infrastructure in line with the growth management plan and maintain the urban environment

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MFMA Local Government: Municipal Finance Management Act, Act No. 56 of 2003

Mixed Use* Refers to land uses such as offices/commercial/residential/ industrial/retail/entertainment/institutional ect. It also refers to a mix of uses within a specific area (node or corridor). The advantage of mixed uses is that access and convenience are increased as transportation distances are decreased. The combination depends on the specific area. A mixed-use could refer to retail at street level, institutional on the floor above and residential on the upper floors, or only use per erf. Principles regarding retail, commercial and industrial uses / rights are still applicable as indicated in this document. Mixed land use in an industrial area could include industry, commercial and retail uses

Mobility Road*

Primarily serves intra-metropolitan traffic. While this route is characterised by through traffic, trends indicate pockets of mixed use developments located alongside. It serves as the most important linkages between the Metropolitan Activity Areas (Capital Core/Metropolitan Cores/Urban Cores/Specialised Activity Areas)

Mobility Spine A Mobility Spine is an arterial along which through traffic flows with minimum interruption (optimal mobility). Much smaller than highways, Mobility Spines are usually made of two lanes of opposite vehicle flow. It serves the purpose of inter-regional and metropolitan movement.

MPRA Local Government, Municipal Property Rates Act, Act No. 6 of 2004

Municipal

Development

Charges Policy

This refers to the Draft Policy Framework for Municipal Development

Charges issued by the National Treasury in 2011. This has not been

approved and is subject to change.

Node A node is a place where both public and private investment tends to

concentrate. Nodes are usually associated with major road

intersections, or with public transport nodes such as railway stations

and taxi ranks. It offers the opportunity to locate a range of activities,

from small to large enterprises and is often associated with mixed-use

development including high density residential uses. Nodes differ in

size, the types of activity that occur within them, the size of the areas

served and the significance within the city

Ordinance 15 Of

1986

Town Planning and Townships Ordinance 15 of 1986 assented to on

18 December 1986 and commenced on 10 June 1987

Public Transport

Facilities

Including train stations, taxi and bus facilities with ancillary uses.

Spatial Planning

Act

Spatial Planning and land use management Act, Act No. 16 of 2013

Resort Means land and buildings used for accommodating guests/tourists for short periods and includes recreation facilities, dining room and kitchen or restaurant, a conference centre or social hall(s), wedding chapel, caretaker’s flat, staff quarters and ancillary and subservient uses.

Sustainable Development that has integrated social, economic and environmental factors into planning, implementation and decision-making, so as to

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Development ensure that it serves present and future generations.

Suburban

Densification

As per Densification and Compaction Strategy: Residential densification in areas that are not located in concentration zones or along linear development spines.

Transport –

Orientated

Development

(TOD)

Transit-oriented development (TOD) is a mixed-use residential or commercial area designed to maximize access to public transport, and often incorporates features to encourage transit ridership. A TOD neighbourhood typically has a canter with a transit station or stop (train station, metro station, tram stop, or bus stop), surrounded by relatively high-density development with progressively lower-density development spreading outward from the centre. TODs generally are located within a radius of one-quarter to one-half mile (400 to 800 m) from a transit stop, as this is considered to be an appropriate scale for pedestrians.

Urban Core Former township areas were developed as a result of forced relocation programmes. Inevitably, these townships grew to accommodate large populations of low income or unemployed people. The economic circumstance was clearly evident in the quality of the physical environment. Under the new government which was established in 1994, these township areas were identified, not as a blight in the urban fabric as previously thought of, but as beacons of opportunity, through the human capital that was concentrated within the various communities of the townships. Due to the great need that often belies such nodes, the government has to play a more active role in social and economic restructuring, especially in view of the limited private investment, relative to Metropolitan cores. The Neighbourhood Development Programme (NDPG) is a Nationally funded programme that aims to address the improved quality of environment in urban cores.

Urban

Development

Developed areas that will be completely transformed by human

intervention and accommodate a range of intense land uses.

Zone A proposed strategic investment focuses area to have a positive

catalytic effect on development.

E.g. Within the northern areas of Tshwane. This area, running in a

broad band to the north of the Magaliesberg has the most potential for

new development that will benefit most people in the North. The

reason why this area has been identified as the Zone of Choice is

related to its proximity to the Capital Core, existing infrastructure (such

as the N4) and the momentum of existing developments such as the

industrial area of Rosslyn2.

2 Tshwane Vision 2055

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Innovative Land Finance Mechanisms | July 2014 13

Executive summary

This report provides a broad framework for identifying existing incentives, outlines a process of how

to develop new incentives and how to package both existing and new incentives that can

be applied or amended for use by the CoT to encourage further development within its

jurisdiction. The report outlines the legal and legislative framework upon which the

various incentives emanate from and explores the cost and benefit of these

incentives to the CoT. The cost benefit analysis is supported by an input driven

empirical model that models key factors that will be used to quantify the value

of incentives proposed. The value of incentives will be expressed in

monetary terms and is the net difference between the potential revenue

that could be realised in the medium to long term by foregoing some

revenue in the short to medium term. This report contains detailed

information about incentives in general based on research of both local

and international practices.

This report is not a policy statement; rather it provides the guiding

principles for a quantitative model and developing the Incentives Policy..

Four different categories of incentives have been identified, which have the

effect of attracting and promoting investment and development within the CoT

by the private sector. These categories are as follows:

Land use management,

Fiscal tools,

Capital investment,

Urban management.

Incentives, and in particular investment incentives are used as a tool by governments to attract and

promote investment, stimulate economic growth and assist with employment creation within a

particular region. These investment incentives can be used by different spheres of government to

achieve pre-defined strategic objectives contained in the applicable strategy and policy documents.

Investment incentives therefore aim to induce investors to shift an investment decision towards a

particular strategically identified region, sector and/or project. As such, an investment incentive is

broadly understood to be a specific intervention designed to change the behaviour of investors or to

influence their decisions in order to achieve specific outcomes.3

The purpose of incentives is to attract development to areas where the CoT is actively seeking growth

and urban regeneration. Therefore, an incentive must create a beneficial investment climate for a

developer or investor, either from a direct financial perspective or indirectly through improving the

feasibility and marketability of a particular development in a particular area. Incentives are a form of

3 Cited from City of Tshwane Mayoral Committee Report on The Investigation into Mechanisms to Incentivise Development

within the City of Tshwane, March 2013

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intervention that are applied within the economy or markets or local areas and are typically aimed at

attracting customers or investors or to increase the economic activity within the implementation area.

It must be noted that there is a cost associated with offering incentives and this cost is borne by the

entity which offers the incentive. In this case the cost associated with the CoT offering incentives, is

the revenue foregone for Bulk Services Contribution (BSC) at the beginning of the development

and/or property rates during and possibly after development. Incentives that are linked with the

installation of bulk services are deemed desirable as the bulk services are assets to the City and

facilitate service delivery. There are both quantitative and qualitative benefits that will accrue to the

City following the implementation of an incentives framework and policy. These include the increased

revenue that the City will realise due to new properties that will have been developed, or as a result of

new investments made into the City, and the subsequent growth and development in areas identified

as development nodes or zones. The City will thus increase the value of its balance sheet from the

installation of bulk services and will save on having to incur debt (which is costly to service) through

the acquisition of bulk infrastructure.

There are a number of grants and incentives that are available at different spheres of government

from the National to the local level. The majority of grants emanate from the national level wherein

they are managed by different Departments such as the NT, the DTI, and COGTA. These grants can

be classified as either operational or capital. The City is currently using the majority of the national

grants such as the Equitable Share of Revenue4 and the Urban Sustainable Development Grant.

However some of these grants are not necessarily incentives.

There are few incentives that are relevant and/or applicable to municipalities for their own use. These

incentives are managed by national departments and not municipalities, for example the Critical

Infrastructure Programme (CIP) which is managed by the DTI and is aimed at assisting municipalities

to install service delivery related infrastructure. The City has not used all the available incentives

except for an attempt that was made by the CoT to use the Urban Development Zone (UDZ) to

incentivise investors and developers to undertake urban renewal projects. The City has, however,

implemented the City Improvement Districts (CID), which requires residents to pay a determined

surcharge that can be rebated through the property rates.

This report defines what incentives are and explains the rationale behind implementing incentives and

how to quantify the cost and benefit to the CoT. This report can be used to inform an Incentives Policy

document. Further to this, a quantitative model and a user guide have been developed to train super-

users on how to calculate the incentives that will be offered to investors and developers. This report

proposes the following incentives that the City of Tshwane should implement:

Table 1: Summary of the proposed incentives for the City of Tshwane

Category Local Incentives National Incentives

1. Fast tracking

of applications A dedicated process manager as a

single point of contact to facilitate the

flow of information and decision

making

Expedited processing through a Joint

Operation Committee (JOC) of City

experts through a defined meeting or

Investigation of how to

expedite the Environmental

Impact Assessment process

4 The Equitable Share of Revenue is based on the Division of Revenue Act (DORA), which is tabled annually by National

Treasury

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a series of such meetings

Utilisation of experts to augment the

internal CoT team in finalising

outstanding but crucial information

Relaxation of some conditions of

development (not to infringe on any

legislation or stakeholder)

2. Land use Special Development Zones

Incentive Zoning

Special Economic Zones

(SEZ) (not currently

proclaimed for The CoT)

The CoT may explore an

opportunity to apply for a

proclamation of a SEZ in

areas of high industrial

activity

3. Fiscal Bulk Service Contribution Waiver

and/or Rebate

Property Rates Exemption

Property Rebate


Waiver of fees related to the

application or connection to bulk

infrastructure

Alternative and/or Renewable

Projects Incentives


Section 12I tax allowance

incentive programme

administered by the DTI.

Manufacturing incentives

(only applies after the

construction of industrial

properties or factories and

applicable to companies)

offered by the DTI

4. Capital

Infrastructure Possible additional borrowing to

augment the capital budget for

specific projects (this will not be

available to all projects)

Critical Infrastructure

Programme incentive (CIP)

offered by the DTI

5. Area

Improvement

incentives


Spatial Targeting

Expediting rollout of free Wi-Fi in

identified development areas

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1. Introduction & Background

1.1. Introduction

The City of Tshwane is in the process of investigating appropriate means of disposing some parcels

of land within the City for a variety of development options. The CoT has to this point initiated a

project referred to as Innovative Land Finance Mechanisms (ILFM)5.

One of the critical success factors for the disposal of land is to identify appropriate incentives that can

be utilised to attract potential developers and/or investors to develop within the CoT beyond the ILFM

project. Further development within the CoT will not only enhance short-term revenue streams to the

CoT, but will also stimulate long-term local economic development within the metropolitan region.

1.2. Background

The City recognises that infrastructure investment is an important component and driver of the

development of South Africa and the achievement of the objectives as set out in the National

Development Plan (NDP). The CoT also holds international acclaim due to its status as the capital city

of South Africa. As a result, the CoT is diligently working at bolstering its standing among capital

cities. The CoT is actively striving to be a vibrant place to live, work and play for both its visitors and

citizens. The CoT has thus, adopted a forty year vision6 for growth and development, in the form of

Tshwane Vision 2055, to realign its current growth patterns and change the face and fortunes of the

City.

Cities do not develop overnight, but over many decades and the CoT has set itself four decades to

reach its goals. The critical part of this development is that the CoT must be able to attract investors,

who will bring with them the expertise, funds and the capacity to develop new structures and

industries. The CoT will not achieve the desired growth and development without cultivating an

investor friendly environment, efficient processes, proactive but sustainable policies and funding

strategies of its own. The CoT will have to fund part of the growth and development to lay the

foundation for investors to take up specific projects but is also looking for ways to involve these

investors in growing the CoT.

The CoT has recently finalised its Long-Term Financial Strategy (LTFS) aimed at developing a

funding plan for its operations (“running the City”) and most importantly to fund its new strategic

trajectory (“building the City”). In the LTFS, the CoT has identified the following objectives that must

be achieved:

Create a prudent and sound medium to long-term financial framework, which is resilient and

able to absorb future shocks;

Design a plan that ensures sustainability of services through:

investment in infrastructure; and

5 CoT Budget Speech 26 May 2014. 6 Tshwane Vision 2055

353


adequate maintenance of infrastructure;

Identify strategies that will ensure long-term financial sustainability:

operational efficiency initiatives; and

sustainable and alternative revenue streams;

Respond to the long-term strategy of the CoT; and

Improve the CoT’s credit rating.

The City has embarked on large scale projects such as building a city-wide rapid transport system,

installing smart meters, development of the broad band network and redeveloping its administrative

head office among others. These large scale projects require a significant capital outlay and the CoT

needs to secure funding for these and other initiatives. The initiatives of the CoT can be classified

into two distinct activities namely “Running the City” and “Building the City”. “Running the City” refers

to every day operational issues that the CoT has to perform to ensure that the City keeps on running

e.g. installing water meters, collecting and dumping of refuse, keeping the electricity lights on etc. On

the other hand “Building the City” refers to large and often audacious initiatives such as establishing a

new transport system for the City, developing a government boulevard, and changing the metering

system of the City to Smart meters. The CoT has embarked on an initiative to restructure and

strengthen its balance sheet by finding innovative ways of acquiring new assets, maintaining core

current assets, disposing non-core and surplus assets and using strategic land parcels and buildings

to raise the cash to fund the “building the City” type projects. Alongside this initiative, the CoT is

currently running a project specifically aimed at improving the strategic capability of its real estate unit

which manages a significant portion of the land, buildings and various properties of the City. All these

projects require large cash investments and there is only a finite amount of money available. The CoT

has realised that in order to attract investors who have access to cash that can be invested in the

CoT, it must create an investor friendly environment. Part of creating an investor friendly environment

is to offer incentives that may serve to attract investors.

The CoT has been identifying and packaging strategic land parcels for the express purpose of

unlocking developments and guiding the growth patterns of the CoT. The ILFM project seeks to find

new and innovative ways of making land available to developers and investors by departing from the

current and sometimes laborious land disposal process. This process seeks to design a new process

based on applicable legislation and will ultimately invite external investors to purchase strategic land

parcels and develop this city together with the CoT. In so doing, the CoT wishes to create a conducive

environment for investors and developers to develop within the CoT by developing an incentive

framework detailing applicable incentives that are available to investors and developers.

The purpose of incentives is to attract development to areas where the CoT is actively seeking

growth and urban regeneration. Therefore, an incentive must create a beneficial investment climate

for a developer or investor, either from a direct financial perspective or indirectly through improving

the feasibility and marketability of a particular development in a particular area.

1.3. Tshwane Vision 2055

This project takes place against the backdrop of Tshwane Vision 2055, and thus supports the key

desired growth and development outcomes of the CoT in the next forty years. According to Vision

2055, the vision of the CoT translates into six broad outcomes that represent the areas that are key

for the CoT’s broad development logic over the next four decades. The six outcomes are:

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Outcome 1: a resilient and resource efficient City;

Outcome 2: a growing economy that is inclusive, diversified and competitive;

Outcome 3: quality infrastructure development that supports liveable communities;

Outcome 4: an equitable City that supports happiness, social cohesion, safety and healthy

citizens;

Outcome 5: an African capital city that promotes excellence and innovative governance

solutions; and

Outcome 6: South Africa’s capital city with an activist citizenry that is engaging, aware of

their rights and presents themselves as partners in tackling societal challenges.

Central to the CoT’s agenda is the creation of employment, the elimination of poverty, the reduction of

inequality and the creation of a better life for all residents. However, the extent of the impact will

largely be determined by the boldness of the priorities and strategic actions taken by the CoT’s

leadership in each decade of change. The CoT’s choice of actions could influence the future game

changing path that the CoT might follow as explained in the next sections.

In terms of realising Tshwane Vision 2055, the following phases will be followed over the next four

decades of change.

By 2020: consolidating the gains of democracy and tackling the triple challenges of

unemployment, poverty and inequality;

By 2030: managing sustainable urban growth and development;

By 2040: transitioning towards a sustainable urban form and economy; and

By 2050 and beyond: consolidating the gains towards a better and prosperous life for all.

The ILFM project has a direct impact on the first decade of Vision 2055, in that it lays a solid

foundation for sustainable urban growth and development in the second decade. At the core of the

requirements of this project, the CoT plans to use strategic land parcels to accelerate the rate of

growth and development and offer equal opportunities to emerging and new investors or developers

alike to play a meaningful role in the Tshwane economy.

1.4. Purpose of this report

This report provides a broad framework for identifying existing incentives, outlines a process of how to

develop new incentives and how to package both existing and new incentives that can be applied or

amended for use by the City in order to ensure further development within its jurisdiction. The report

further outlines the legal and legislative framework upon which the various incentives emanate from.

Furthermore, this report will explore the cost and benefit of these incentives to the CoT. The cost-

benefit analysis is supported by an input driven empirical model that models key factors that will be

used to quantify the value of incentives proposed. The value of incentives will be expressed in

monetary terms and is the net difference between the potential revenue that could be realised in the

medium to long term by foregoing some revenue in the short to medium term. This report also

contains detailed information about incentives in general based on research of both local and

international practices.

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This report is not a policy statement, rather it provides the guiding principles for developing the

Incentives Policy and a quantitative model. The Incentives Policy will be drafted in a separate report

but will to a greater extent flow out of this report. This report will only cover the high level principles of

the quantitative model. A user guide will be developed to explain how to use the quantitative model

and this will be a separate document.

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2. Incentives and Grants Overview

2.1 Discussion

2.1.1. Investment incentives

Investment incentives are used as a tool by governments to attract and promote investment, stimulate

economic growth and assist with employment creation within a particular region. These investment

incentives can be used by different spheres of government to achieve pre-determined strategic

objectives contained in the applicable strategies and/or policy documents. Investment incentives

therefore aim to induce investors to shift an investment decision towards a particular strategically

identified region, sector and/or project. As such, an incentive is broadly understood to be a specific

intervention designed to change the behaviour of investors or to influence their decisions in order to

achieve specific outcomes.

Defining an ‘investment incentive’ as compared to a general incentive is more complex and there is

no standard definition. The United Nations Conference on Trade and Development (UNCTAD),

however, defines an investment incentive as “any measurable advantage accorded to specific

enterprises or categories of enterprises by or at the direction of government”. According to this

definition, a broad reduction in taxes or an improvement in other investment related conditions for all

investors is not considered an incentive This is because incentives must be ‘specific’, hence it must

be restricted to investors who meet particular criteria such as locating in a specific area or operating in

a specific economic sector. 7

An incentive can be in the form of a grant but not all grants can be

considered incentives.

The following categories of investment incentives are generally recognised:

Direct financial incentives, which include:

grants, and

low interest loans

Indirect fiscal incentives, which include:

tax rebates,

tax holidays, and

subsidised and/or reduced service costs.

Other non-fiscal incentives, which include:

technical and/or business support on the part of government.

7 Leveraging Land Incentives Report from CoT

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2.1.2. Legal and Regulatory Framework

Below is a discussion of the relevant legislative and/or policy documents from which the relevant city-

specific incentives, as discussed in this report, emanate.

2.1.2.1. The Constitution of the Republic of South Africa, 1996 (The Constitution)

Section 152 of the Constitution outlines the objectives of local government. Included in these

objectives is a municipality’s duty to promote social and economic development within its area of

jurisdiction. Furthermore, this section requires municipalities to strive to achieve these objectives

within their financial and administrative capacity.

2.1.2.2. Local Government: Municipal Finance Management Act, 2003 (MFMA)

According to section 46 of the MFMA, a municipality may incur long-term debt for the purpose of

capital expenditure on property, plant and equipment to be used for the purpose of achieving its

objectives as set out in section 152 of the Constitution. Section 46, further states that a municipality

may incur long-term debt only if such debt has been approved by a municipal council, through a

council resolution and the accounting officer has to sign this agreement or other document which

creates or acknowledges debt.

Section 48 of the MFMA makes provision for the municipality to provide security for any of its debt

obligation which may include “undertaking to effect payment directly from money or sources that may

become available and to authorise the lender or investor direct access to such sources to ensure

payment of the secured debt or the performance of the secured obligations”. A council resolution is

also required in order to authorise the provision of such security.

According to section 16(2) of the MFMA a rates policy, as discussed below, must accompany the

municipality’s annual budget when it is tabled.

2.1.2.3. Local Government, Municipal Property Rates Act, 2004 (MPRA)

According to section 3 of the MPRA, every municipal council must adopt a rates policy that is

consistent with this Act. This rates policy sets out how rates will be levied on different types of

rateable property within that jurisdiction.

A municipality’s rates policy, including any amendments thereto, requires community participation

before its approval by the municipal council, and must be reviewed on an annual basis. Furthermore,

the rates policy that is approved by the municipal council must accompany the municipality’s annual

budget when this is tabled in terms of section 16(2) of the MFMA.

In terms of section 8 of the MPRA, a municipality may levy different rates for different categories of

rateable property, which categories may be determined according the use of the property, the

permitted use or geographical area in which the property in question is situated. A municipality will

only be entitled to determine such differential rates in accordance with the criteria set out in its rates

policy. This section is subject to the proviso that differential rates to be levied on residential properties

shall only be permissible in the following instances:

In the case of public service infrastructure, differential rates may only be levied on the market

value of the public service infrastructure less 30% of that value or on such lower percentage

as determined by the Minister of Local Government; (section 11(1)(b); and

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In terms of the compulsory phasing in of certain rates on newly rateable property as contained

in section 21 of the MPRA.

Furthermore, section 15 of the MPRA entitles a municipality to provide exemptions, rebates and/or

reductions in rates to specific categories of owners of properties or the owners of a specific category

of properties. Such criteria, again, will be subject to the criteria as set out in the municipality’s rates

policy, but the types of property owners that may be afforded such exemptions, rebates and/or

reductions in rates may include, inter alia, indigent owners, owners temporarily without income and

owners of agricultural properties who are bona fide farmers. In relation to the types of property to

which an exemption, rebate and/or reduction in rates may be applied, this will also be dictated by

those categories that are provided for in the rates policy in question. Such exemptions, rebates and/or

reductions in rates may, however, may not be provided to owners of properties on an individual basis,

and therefore requires that an entire category of owners or properties be provided with the exemption,

rebate and/ or reduction in rates.

The permissive language used in both section 8 and section 15 of the MPRA provides a municipality

with a degree of discretion to decide what categories of differential rates, exemptions, reductions

and/or rebates in rates will be applicable within its jurisdiction. An example of this can be seen in

section 8 which states that “a municipality may levy different rates for different categories of rateable

property, which categories may be determined according…”). This provides municipalities with the

discretion to determine what criteria will form the basis of these benefits (one of which would be an

incentive for development). This will, however, be subject to public participation and input, as well as

municipal council approval.

2.1.2.4. Spatial Planning and Land Use Management Act, 2013

One of the objectives of the Spatial Planning Act is to provide a uniform, effective and comprehensive

system of spatial planning and land use management for South Africa.

In terms of the Spatial Planning Act, each municipality is required to develop a land use scheme that

serves to regulate land use within that jurisdiction within five years of promulgation of the Spatial

Planning Act. Furthermore, this Spatial Planning Act provides that such a land use scheme may

include provisions relating to specific requirements regarding any special zones identified to address

the development priorities of a municipality.

2.1.2.5. Town Planning and Townships Ordinance 15 of 1986

In terms of a new development to be undertaken, Ordinance 15 confirms that the internal engineering

infrastructure is to be installed by the developer and relates to the services required for water,

sanitation, lighting, drainage, and other amenities required. The external engineering infrastructure

relates to bulk infrastructure of roads and pavements, storm water, electrical substations or mini

substations, water reservoirs and supply pipes, sewer pipes, which external engineering infrastructure

is the responsibility of the municipality. Ordinance 15 requires developers to contribute to the

development of bulk services infrastructure by way of BSCs, which are financial contributions required

by developers, and based on the tariffs set by the municipality in question. Each municipality is

required to formulate a BSC policy to guide developers and to provide a framework for enabling

developments to be undertaken within a controlled environment as well as providing for the

circumstances in which the requirement for a BSC can be waived.

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2.1.2.6. City of Tshwane: Engineering Services Policy

The CoT’s Engineering Services Policy makes provision for the CoT to provide developers and

investors with incentives or rebates in respect of BSCs through a document named GUIDELINES

FOR THE DETERMINATION OF INCENTIVES or REBATES or Annexure B of CoT’s Engineering

Services Policy. In this regard, the CoT will be required to approve objective areas and/or objective

projects (in accordance with the procedure as set out in Annexure A of the Engineering Services

Policy) as a priority in order for the CoT to be entitled to offer an incentive in relation to BSCs that

would ordinarily be payable. In terms of the required procedure for determining BSC incentives, the

Engineering Services Policy states that incentives must be determined by a skilled internal or external

multi-disciplinary team, which team must include the strategic executive of service delivery for the

CoT. Incentives are required to be reflected in terms of a percentage discount or a fixed discount

amount based on the method of calculation for the contribution in question. Furthermore, as stated

above, the CoT is required to comply with the provisions of Annexure A to the Engineering Services

Policy which clearly sets out the criteria for identifying development objective areas and or objective

project (see Annexure A: Guidelines for the determination of Incentives/rebates in respect of

contributions to engineering services in respect of development areas/projects).

2.1.2.7. National Treasury: Draft Municipal Development Charges Policy

National Treasury authored a draft policy framework document for Municipal Development Charges

dated 11 October 2011 (see Annexure C: National Treasury: Draft Municipal Development

Charges Policy) which gives guidelines on how to apply the levying of development charges.

According to this policy document a municipality may only provide a subsidy or exemption to the

payment of a Development Charge if the municipality:

Does so in accordance with a municipal Council-approved municipal policy framework and

bylaws on subsidies and exemptions that are applicable to development charges, or a

municipal Council resolution allowing for exemption from such development charges;

Calculates the full Development Charge liability prior to authorising or providing the subsidy or

exemption;

Has made a budgetary provision for the realisation of the revenue foregone through the

granting of a subsidy or exemption from another realistically available source of revenue;

Ensures that the value of the subsidy or exemption together with any other payments by the

land owner or other parties is at least equal to the calculated development charge liability;

and

Discloses the value of subsidies and exemptions provided in its annual report.

It should be noted that since this is a draft and has not yet been approved the document is subject to

change.

2.1.2.8. City of Tshwane: Property Rates By-laws, 2013

The City’s property rates by-laws of 2013 currently provide for the categories of rateable properties

that will be eligible for exemptions, reductions and rebates in rates. In this regard, it is noteworthy that

clause 5.1.3 specifically indicates that vacant land irrespective of zoning shall not be eligible to

exemptions, reductions or rebates in rates, unless such land is agricultural property. However if a

developer has demonstrated commitment to develop a vacant land parcel and has submitted an

application for an incentive, then the land parcel will not be viewed as vacant and the incentive will be

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considered by the City. The Special Ratings Areas provisions within the MPRA will apply and this

framework will conclude with recommendations on the required amendments to the City of Tshwane’s

Rates Policy in order to give effect to the incentives proposed herein.

2.1.3. Incentives Offered by municipalities

There are a range of incentives offered generically across different spheres of government. Incentives

that are offered by some municipalities are listed below:

Differential rates,

Property rates exemptions, rebates and/or reductions,

Urban development zone tax incentive,

Bulk services contributions waiver / rebate, and

Area improvement partnerships (municipal service districts & special rating areas).

2.1.4. Provincial Government Incentives Landscape

Based on our research, the provincial government does not have incentives in place which can be

used by municipalities for the purpose of enabling developments.

2.1.5. National Government Incentives and Grants Landscape

Various national government departments and agencies have developed a range of incentives and

grants that are available to municipalities and/or private sector developers and a range of other

development initiatives. As part of the review process, a suite of available incentives have been

investigated and packaged and annexed to this document (see Annexure B: Incentives available and

National and Local government level for a number of development investments.). These incentives or

grants are clustered according to the following categories:

Land and infrastructure development;

Fiscal Incentives;

Capital investment and manufacturing incentives;

Research and development incentives;

Spatial development nodes / areas; and

Green and environmental efficiency incentives.

A package of national support measures identified in Annexure B includes other incentives and

grants such as those supporting capital investments into manufacturing, which may only be

relevant at a later stage; especially for some of the land parcels that could be developed as

industrial estates or parks. It is necessary to ensure that these incentives be promoted by the CoT to

potential property developers and investors through its publicity and promotional platforms. This may

encourage other potential socio-economic developments that might not necessarily be intertwined

with the immediate need of disposing of the land parcels.

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2.2. International and Local Landscape

2.2.1. Case Studies

In recent years, land-based financing has become one of the important sources of leveraging urban

infrastructure finance in most developing economies. World-wide, public land auctioning is rapidly

emerging as one of the viable options for leveraging the relevant finance, and policy instruments for

urban infrastructure financing if approached and implemented effectively and strategically targeted.

The same instrument can also pose new types of risks and far reaching consequences if poorly

implemented.

The CoT, like other large cities around the world, faces the same challenge with respect to the

provision of civic / basic infrastructure in order to maintain the quality of life of its inhabitants.

Increased population growth and urbanization require that cities such as the CoT undergo a process

of continuous structural change (renewal of existing assets and development of new assets) in their

economic landscapes in order to cope with the growing needs of the citizens and business community

within the City. Part of this transformation is to continuously seek means of financing urban

infrastructure to sustain long-term growth and developmental plans of the CoT.

A brief desktop investigation on a number of similar cities in other parts of the world has been

conducted as a benchmark so that the CoT can measure or assess itself on the provision and

utilization of incentives to entice private sector development around the CoT. Globally, there are

trends and solutions that are being explored by cities to unlock sustainable development within their

jurisdiction, by using land as one of the instruments to achieve the objective of financing urban

infrastructure and the provision of basic services to its inhabitants.

The experiences explored in this section are from the cities that are located mainly in developing

countries. It was also necessary to get the experience from at least one city in a “developed country”

to establish if cities in developed countries also go through similar challenges.

The following case studies are discussed in this document:

Cairo (Egypt),

Sao Paulo (Brazil),

City of Johannesburg (South Africa), and

Austin (Texas, USA).

2.2.2. Cairo (Egypt)

Like many other cities in developing economies, Cairo has had its share of challenges in relation to

devising solutions for sustainable development of the city through land-based financing measures and

real estate development. Historically, Egypt as a state operated both as infrastructure investor and

also as a final estate/property developer, which did not yield positive results and also placed a heavy

burden on already constrained public budgetary resources. These development decisions were often

not driven by market demand, resulting in the installation of public infrastructure where there was no

demand for housing and/or retail, and where there was in fact no economic / industrial activity.

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In the early 2000s, Cairo initiated reforms and adopted a new policy called “new cities” approach that

involved public-private collaborations in land and infrastructure investment. The strategy then

changed completely from a standard practice where the public sector used to install both internal and

external infrastructure at public expense and then allocate serviced land to private investors below

market-related prices for investment in housing projects, commercial and industrial facilities. Through

the state established agency called the New Urban Communities Authority (NUCA), Cairo embarked

on land auctions and PPPs with the private sector. This involved the sale of all substantial land

parcels identified in the new city establishments through a competitive bidding process designed for

middle to upper income housing settlements as well as retail and/or commercial development. This

new policy trend is now giving the private developers greater responsibility for infrastructure

investment (both internal and external to a certain extent).

The first success outcome of this policy happened in or about 2007, where several land auctions

culminated in vast revenue proceeds for the city which exceeded the cost of installing internal

infrastructure. These proceeds were then reinvested in major capital infrastructure projects such as

the highways and subsidies for the provision of low-income housing projects within the new city

development areas.

At the heart of the new reforms in land auctions as an instrument for financing development

by the New Cairo city, has been the use of local incentives to encourage private sector

participation in the abovementioned process.

Table 2 below outlines some examples of local incentives that Cairo offered, and continues to offer to

potential developers and investors. These incentives are also commonly used in other cities such as

Sao Paulo in Brazil; Istanbul in Turkey and Mumbai in India.

Table 2: Summary of the City of Cairo (Egypt) Local Incentives

Name / Type of Incentive Description and/or Extent

Reduced cost of land acquisition

and site preparation.

For projects certified by the Advisory Council, the cost of

land to be acquired and site preparation may be reduced

or shared.

Modification and streamlining of

local zoning and permit

procedures.

The Zone Administrator with the approval of the Advisory

Council can modify zoning regulations, expedite handling

of business licensing and streamline local permit

procedures in favour of those private sector investors who

take part in the land auction procedure.

Permit and fee waiver In certain instances, certain permit fees and/or fees

required for the rehabilitation , expansion or new

construction of the commercial, industrial or

manufacturing property within the zone area, the fee

waiver provided includes all fees charged for the building,

plumbing, electrical, zoning and sewer permit.

Real estate transfer tax

exemption

The transfer of the title to commercial or industrial real

property located within the enterprise zone shall be

exempt from the real estate transfer tax. The tax

exemption provide by this section shall commence with

the first day of the calendar month following the month in

which this ordinance takes effect and shall continue for

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the term of the enterprise zone.

Property tax abatement The Country Clerk is authorized and directed to abate ad

valorem taxes imposed upon commercial or industrial real

property, upon which new improvements have been

constructed or upon which existing improvements have

been renovated or rehabilitated, subject to the following

conditions:

Any abatement of taxes on any parcel shall not

exceed the amount attributable to the construction of

the improvements and renovation or rehabilitation of

the existing improvements in such parcel;

Such abatement shall be allowed only for

commercial, industrial, or manufacturing property

located within the zone area, and not for residential;

Such abatement is allowed only for improvements

the nature and the scope of which building permits

are required and have been obtained ; and

Such abatement shall be at the rate of 100% of the

value of the improvements for the period of three

years, beginning with the first year in which the

improvements are assessed.

2.2.3. Sao Paulo (Brazil)

Sao Paulo’s land-financing solutions came about as a result of the city’s budgetary crisis, when this

city could not meet its mandate in relation to the provision of basic infrastructure and services to its

inhabitants. At this stage, new innovations to finance infrastructure investment had to be explored.

As an alternative to land auctions to capture incremental value generated by public infrastructure

projects, the Sao Paulo public authority considered the sale of development rights. These rights fall

into two categories as follows:

Table 3: Summary of City of Sao Paolo Local Incentives

Name / Type of Incentive Description

The right to convert rural /

agricultural land to urban

use land; and

This is to facilitate the conversion of rural and or

agricultural land to urban use through a township

establishment process.

The right to build at

greater densities than

would normally be allowed

by zoning rules and/or

height restrictions.

The added value and essential difference between a

“development right” and the “actual land” is a

phenomenon which is termed “created land”, which

refers to the right to add additional floor space beyond

the normal height / density restrictions for

development.

To appropriate and implement the sale of

development rights, the public authority established

certain rules and regulations which pronounced that

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developers would not pay a density fee for buildings

that would fall within the normal limitations on floor

space, but, the city authority will charge a

predetermined fee for additional floor space beyond

the normal maximum density in locations that are

declared authorised for these kinds of development.

This acted as an incentive to encourage developers to

purchase these development rights.

.

Selling of development rights to property developers / investors has been a huge incentive to the

private sector in Sao Paulo, which also brought in much needed revenue to the city due to the

following factors amongst others:

Rising land values in the targeted areas;

Increased rates and taxes and therefore increased revenue base for the city;

Improved basic and general infrastructure within and beyond the authorized areas of

development;

Key success factors

Recorded achievements of the City of Sao Paulo in its financing solutions of selling

development rights is that the authority strictly utilized the proceeds from the sale of

development rights to financing ONLY infrastructure projects for which it has direct legal

responsibility.

2.2.4. City of Austin, Texas (USA)

The study on the city of Austin in the United States of America is provided not as a direct benchmark

for the city of Tshwane, but as a learning experience in terms of looking at the future and to avoid the

same mistakes that have been committed by such great cities as Austin. The city of Austin is

completely out of scope and not sharing the same economic landscape and structure as the CoT,

however, it is believed that the City can benefit from the principles of approaching and implementing

incentives learnt from this case study.

Economic Rationale for giving Incentives

Before a public authority (be it at local, provincial or national sphere) adopts a policy decision to

develop and/or implement an incentive, a proper COST / BENEFIT analysis should have been

conducted and recorded, to influence a decision for or against an Incentive. The underlying principle

is simply that – if the long-term benefits of the incentive significantly exceed the cost of forgone

revenue by the government in question, then that incentive is worthwhile.

How much are we giving? What are we getting in return?

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In the city of Austin, there are two categories of incentives that have been applied and used to attract

investors. These incentives are either Firm-based or Project-based.

2.2.4.1. Firm-based Incentives

These incentives are usually in the form of substantial tax breaks and subsidies offered to encourage

companies to locate or expand in Austin. The city of Austin employs a formal review and scoring

process that incorporates reasonable criteria to screen companies seeking incentives. The city of

Austin also recently set aside its former requirement that incentives only be offered to large

establishments, now allowing resources to be targeted to small and medium-sized firms to promote a

more varied economic landscape within the city.

The following evaluation criteria is used for assessing the eligibility of a firm to be offered a

particular incentive by the city of Austin:

Linkages to the local economy;

Labour practices (job creation with emphasis to local labour force, worker training, etc);

Infrastructure impact;

Desirable public benefit and improvement of quality of life;

Green industry / sector initiative.

2.2.4.2. The use of project-based incentives in Austin

Incentives of this type have been used to encourage larger businesses to locate in central Austin

rather than in outlying areas to stimulate residential and retail development. Project-based incentives

are used by the city of Austin to guide the location of projects, or to encourage certain kinds of

development in specific areas or neighbourhoods. Furthermore, the incentives can be distinguished

between incentives for pure private sector developers, and those incentives offered for projects that

are planned and implemented in conjunction with the redevelopment of city property.

The key requirements for a project to be considered for an incentive is that the project should be

located within a declared Desired Development Zone and must conform with applicable

neighbourhood plans and must include two or more land uses (i.e. office, commercial,

retail/entertainment, civic/cultural).

The criteria used by the city to consider awarding an incentive to a project:

Public facilities benefit;

Neighbourhood and environmental considerations;

Location considerations;

Urban design considerations.

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Table 4: Summary of the City of Austin Local Incentives


Firm-based Incentives

Tax abatements / rebates 100% property tax rebate for a period of between 6 and 10

years, depending on the scoring matrix used to evaluate a

firm’s application.

Fee Waivers Firms do not have to pay the set fees because they are

bringing development.

Expedited site approval processes This is about drastically reducing the turnaround times for

issuing records of decision to facilitate the developments.

Up-zoning Up zoning refers to the adding other development rights such

that the firms do not have to request rezoning of land use.

Energy improvements incentives The city of Austin also used other incentives to attract firms to

the city by offering cheaper energy or construction of power

stations and clean energy rebates.

Other types of grants or guarantees These are additional grants or guarantees that the city of

Austin was prepared to offer to incoming firms.

Project-based Incentives

Zoning changes To derive community benefits that would not happen without

an incentive.

Demolitions and site improvement

costs

In the case of projects that would have an impact on existing

structures, the city of Austin carried some costs for demolition

and site improvement.

Infrastructure enhancements

Fee Waivers Waivers apply to zoning / rezoning applications and other

types of applications.

Electricity subsidies This is a subsidy specifically to alleviate the cost of electricity.

Property tax rebates This is a subsidy in the form of a tax rebate to return some

upfront capital expenditure through the tax system.

Parking constructions for employees

of tenants or client usage

This refers to building designated parking areas in the city

alongside the various developments.

Subsidies for construction of retails

space

This is a subsidy specifically to attract retail developments.

Key Aspects for noting (from the Austin experience) are listed below:

Incentives should be part of a coherent economic development strategy and articulate

goals;

Thorough cost/benefit analysis of the Incentive should be conducted upfront, to be able to

articulate how much is being put on the table (cost) and how much is expected to come out

(benefit). Benefits must out-way the costs;

Incentives should be temporary, and the public sector should have a “pull-out strategy” at

some stage, and the private sector should in a position to stand on their own even when the

incentive is no more;

Incentives must be targeted to encourage “specific economic outcomes”;

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Limit retail incentives, except for very exceptional cases where community benefits are

certain, or unless the desired retail service is brought to “under-serviced” neighbourhoods

where there is no retail business closer for the community.

Collaboration with the private sector such as the local business chambers and property

development associations is very critical, and so is the involvement of the institutions of

higher learning and public/private research institutions located in the city or within reach;

Rigorous deliberations and consultation with the general public of the city, as incentives

involves substantial allocations of scarce state resources;

Prioritise new industries such as the energy and green industries, environmental services,

arts and culture services;

Limit individual “stand-alone” project-based incentives. NB. Individual incentive deals

were under huge criticism by the Austin city inhabitants and stakeholders, which prompted the

city authorities to review their incentive policies which culminated in the city taking a

resolution sometime in 2007 to end offering public incentives to stand-alone private investors;

Incentives must not displace existing businesses (large or small), but should be aimed at

generating new economic activities for the region, and also employ local citizens rather than

the firm bringing in migrants from outside of the local municipality;

The experience from Austin City does acknowledge the role that incentives play in stimulating the

local economy, but incentives on their own will not pull the desired interest or participation from the

private sector. The following factors have been hailed as “deal-breakers” for private investment in the

local community:

Local conditions, i.e. housing costs, quality of life aspects such as public schools, skilled

labour force, good infrastructure, environmental factors and efforts being put in by the

authorities;

City support and investment in arts and culture enriches quality of life;

Support for local small businesses, which ultimately become immediate suppliers to the big

business that are or might be planning to locate in the city;

2.2.5. City of Johannesburg (South Africa)

2.2.5.1. The COJ Inner City Regeneration Strategy

The lessons learnt from the City of Johannesburg (CoJ) involves the Johannesburg Inner City

Regeneration programme (see Annexure D: The COJ Inner City Regeneration Strategy) which

started in the late 1990’s through a bold and deliberate strategy that was adopted by the CoJ. This

regeneration programme was prompted by the fact the inner city was characterised by serious social

challenges associated with economic decline and poverty mainly caused by migration of businesses

from the inner city to the southern regions of Johannesburg, among other factors.

Being cognisant of the fact that the CoJ carries the responsibility of being the economic hub of South

Africa and the continent as a whole, the new vision for the CoJ had to be crafted and adopted. The

Vision, termed “The Golden Heartbeat of Africa”, put economic development and reclaiming quality of

life at the forefront, and was then followed by the adoption of the Inner City Regeneration Strategy in

2003.

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The goal of the Inner City Regeneration programme was clearly set and focussed on

raising and sustaining private investment leading to a steady rise in property values”

The COJ Inner City Regeneration Strategy that was adopted then articulated on five pillars of

achieving the set goal of raising private investment:

Table 5: Summary of the incentives implemented by the COJ through the Inner Regeneration Strategy

Type of Incentive Description

Maintaining / upgrading

infrastructure

This relates primarily to the maintenance and

improvement of service delivery infrastructure,

including among others, the roads, street signs

and robots, electrical power networks, water and

sanitation, etc.

Support to economic sectors This pillar was concerned with the assessment of

areas that have potential for rapid economic

activity that could contribute to the Gross

Geographic Product of the city, with careful and

strategic interventions to assist that growth and the

creation of employment. One example of the

projects under this pillar is the “Open for Business”

support centre for SMMEs and the Fashion District

in the inner city.

Intensive urban management It focussed on efforts to ensure effective by-law

enforcement, management of informal trading,

improved delivery of services and utilities and

maintenance of the public realm, i.e. the CCTV

surveillance and other public-led efforts like the

inner city Task Force. All these efforts build

confidence in the investor community and propel

the decisions to redevelop and/or reinvest in the

inner city.

Addressing Sinkholes Properties that are slummed, abandoned,

overcrowded and poorly maintained and often

neglected by the public sector;

Promoting ripple pond

investments

Catalytic and concerted investments in property

that create confidence for further investment in

adjacent areas, either by the public or private

sector or through PPP arrangements.

Most of the initiatives of the CoJ Inner City Regeneration Strategy were successful because of the

following factors:

Working in conjunction with stakeholders through one of their agencies such as the

Johannesburg Development Agency (JDA), worked together with the City’s business

chambers and coalitions; institutions of higher learning; property owners and agents

associations; civil organization, NGO’s and the general community through ward counsellors

and representatives, etc.;

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Proper governance and institutional arrangements were established to provide clear policy

oversight and decision-making structures, i.e. portfolio and advisory committees as well as

the working groups – with clearly articulated roles and responsibilities;

The Strategy also mapped out the possible risks associated with a programme of this

magnitude and put in place mitigating factors to alleviate the identified risks;

Commitment of resources, including funding / budget to kick-start the project in order to lay an

enabling platform and environment for the private sectors to have confidence in the process

and to buy into it;

Ongoing cost/benefit analysis in terms of what the city was putting into the process and what

the private sector was leveraging; and

With all the above key success factors, the conditions for the CoJ Inner City Regeneration

strategy was enhanced by the introduction of the UDZ tax incentive, as discussed more fully

below, although there have been other support measures that have been used such as

Engineering Service Contributions and Property Rates and Rebates.

2.2.5.2. Urban Development Zone Policy Implementation

The Inner City Regeneration strategy took a dramatic effect as property owners and property

developers started to take advantage of the Urban Development Zone (UDZ) incentive by

redeveloping their properties and also new investors started new developments in the inner city,

including building refurbishments for middle and upper income rental accommodation.

The UDZ tax incentive was promulgated in 2004 (Annexure E: Urban Development Zone Tax

Incentive). It was an accelerated depreciation scheme that acted as a catalyst for private sector

investments and facilities, improving return on investment for those investors. The UDZ incentive

helped address declining land values witnessed in the inner city of Johannesburg which in the past

had corresponded with a decline in assessment rates payable to the city, and in turn further

constrained the extent and quality of services that Johannesburg could offer to the Inner City.

Implementation of the UDZ by the CoJ contributed substantially to the following key objectives of the

urban development zones that the CoJ declared, in that this incentive:

Stimulated buoyant economic development, and attracted private sector businesses to areas

where interest would otherwise be lacking and thus reverse urban decay;

Promoted private sector investment in construction and improvement of buildings, thereby

stabilising and increasing land values, and so growing assessment rates and tax revenues

used to pay for key City services;

Increased investment in and utilisation of the existing infrastructure;

Used the property and land at the CoJ’s disposal to promote B-BBEE and previously

disadvantaged groups participation in the mainstream economy; and

Increased opportunities for employment near affordable housing, reducing the opportunity

costs of sprawl, and improving the quality of life for people living, working, or visiting this

targeted urban area.

Through the Inner City Regeneration Strategy of the CoJ and implementation of the incentive support

measures such as the UDZ, the CoJ was able to leverage up to R12 billion worth of investments in the

city, with the CoJ only spending about R400 million from its internal resources for general bulk

infrastructure project. However, the CoJ still had some urban decline in some areas and the intention

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was to ensure continued take-up of the UDZ and to also look at other possible incentives to

complement the use of the UDZ tax incentive, which the CoJ has been able to negotiate with NT for its

extension.

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3. Analysis of Incentives

3.1. Incentives Identified by the CoT

The following categories and incentives have been identified by the CoT in the Council Item

“Leveraging Land Incentives”. This section will discuss those incentives as identified by the CoT, as

well as discuss the advantages and disadvantages of these incentives. External stakeholder

comments have also been taken into account in this regard.

Table 6: Incentives Identified by the CoT

Category Incentive Name

Land Use Management Special Development Zone (SDZ)

Incentive Zoning

* Fast Tracking of Land Use Applications

Fiscal Tools Bulk Services Contributions

Property Rates Rebates, Exemptions and Reductions

Tax Incentive Programmes

Subsidies and Urban Development Grants

Capital Investment Infrastructure

Good quality Public Transport

Social and Community Facilities

Investment in the public environment

Area Improvement City Improvement Districts

Safety and Security

Expediting rollout of free Wi-Fi in identified development areas

* The CoT has identified that the various applications made against current land parcels aimed at

changing the land use must be processed expediently and that the turnaround time must be

reduced significantly. This is one of the critical factors in facilitating an investor friendly

environment and removing inefficiency (“red tape”). This is an area that requires innovative

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thinking and structuring of some functions in the City to enable a smooth through flow and

processing of applications and resolutions or records of decision. This is a crucial incentive for

attracting investment as it builds confidence in the investor that the City values investors and that it

will play its part of guiding the investor through the “maze” of processes and requirements, revert

back to the investor with a full response within an acceptable timeframe. The City must play the

triple roles of a facilitator of investment, advisor on processes and as competent processor of

applications!

3.2. Analysis of Land Use Management Incentives

3.2.1. Incentive Zoning

Incentive zoning means a zoning in which, an incentive such as a relaxation in zoning restrictions are offered to a developer for providing public benefits like building a desired public improvement, or building in areas that require economic development.

It is the process whereby the local authority may grant additional development rights in exchange for the developer's provision of a public benefit or amenity.

Incentive zoning should be applied to encourage developers to maximise the development potential of a land parcel. The success of incentive zoning will depend on the development facilitative mindset of the Council departments. The City needs to adapt a pro-development mindset to encourage the principle of highest and best zoning in the evaluation of land use applications.

Examples of Incentive Zoning include additional land use rights subject to:

the consolidation of properties;

the upgrading of the public domain;

promotion transport oriented development;

promotion affordable housing;

reduction of parking;

wavering of existing policy conditions to promote catalytic development; and

promotion of recreational / social space on site.

3.2.2. Special Development Zone (SDZ)

This incentive is earmarked to facilitate pro-active rezoning of special development zones, also known

as growth management areas whereby the municipality in question designs and assigns a basket of

rights to all the properties in a particular area, and establishes such rights through zoning overlays in

the municipality’s land use scheme.

A land use scheme would have the force of law and all land owners, including the municipality in

question, would be bound by the land use scheme, and the rights associated with allocated special

development zones. This incentive requires an innovative Land Use Scheme as well as alignment

with the municipal valuation and rating functions.

The City uses Spatial Development Frameworks (SDF) whereby an area will be earmarked for certain

land uses. Individual property owners have the choice to apply for the proposed zoning identified in

the SDF. The Council of the City of Tshwane has compiled the RSDF 2014 for the seven regions

during April/May 2014. The Hatfield SDF was included as guideline for future development in the

area.

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The Special Development Zones (SDZ) must not be confused with the Special Economic Zones

(SEZ) as defined by the DTI through the SEZ Act. SEZs have been announced to focus on stimulating

local economies of specific geographical areas to facilitate investment that will grow local the

economy and create jobs. There are proposed SEZs in all nine provinces of the country that are

currently being investigated. The Special Economic Zone initiative is not applicable to the City of

Tshwane and there has been no indication of this initiative being considered within the City.

However, this does not constrain the City from approaching the DTI to explore a possibility of an SEZ

to augment the industrial development objectives of the City.

The SDZ will be treated as part of the growth and development imperatives of the City that is

contained in the Metropolitan Spatial Development Framework (MSDF) of the City of Tshwane. The

demarcation of SDZ will benefit a wider pool of investors as opposed to developers only. The

incentive zoning can be implemented in such a way that it supports the special demarcation of SDZ or

be implemented on specific land parcels as deemed fit by the City. The SDZ and zoning incentive will

enable the unlocking of developments and fast-tracking of approvals or waiving of some conditions

precedent to the approval of developments.

Based on the fact that most of the impediments to developments are the delays in the process of

receiving approvals or records of decision from the municipalities, there is a need to redesign the

development application process, such that the turnaround time is significantly reduced. The fast

tracking of the land use application process is a crucial ingredient to eliminating the delays that

investors or developers face when they would like to undertake developments. The fast tracking of the

land use application process can be seen as a key incentive to investors and developers as this will

enable them to put developments within desired timeframes.

The fast-tracking of land use applications will be used as a basis for designing a process efficiency

incentive that will address all the factors that form part of the investment value chain. The fast tracking

of applications of whatever form or nature that is related to land parcels will be a category of

incentives like the other three categories of land use, fiscal and capital infrastructure.

3.2.3. Other considerations

Should a specific land parcel be deemed as catalytic in achieving the City’s growth and development objectives but fall outside the criteria outlined in this document, then identified incentives will still apply.

3.2.4. Fast Tracking of Land Use Applications

Fast-tracking of development application processes in priority development areas can be utilised as

part of the incentive strategy of a municipality.

Fast-tracking will be an attraction to developers on condition that it is significant, for example approval

within 30 days after close of objection period.

An average rezoning approval takes approximately 6 to 12 months, given no serious objections. By

improving processes of the planning officials, the approval time can be drastically reduced, which will

save developers holding and development costs. The speedy processing of applications will also

have a direct benefit to the City in terms of revenue from rates and sales of services, as the sooner

the development comes on line the quicker these revenues will accrue to the City.

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3.3. Analysis of Fiscal Incentives

3.3.1. Bulk Services Contributions Rebate

A rebate on BSC in areas where development is desirable or in Special Development Zones can act

as an incentive, as it will lower the cost of the development in relation to other locations and may (if

the rebate is significant) offset the higher cost of land in more centrally located areas.

This principle was applied during 1990’s by the former City Council of Pretoria to stimulate

development in the City. However, based on a report from the City8 the boundaries of Spatial

Development Zones were not clearly defined which resulted in some level of confusion regarding the

difference between properties that qualified and those that did not qualify for the rebates. The former

City Council of Pretoria levied zero bulk contributions for a specified period in order to stimulate

development. This can also be a consideration in areas where development or specific development

is a high priority. Bulk service contributions rebates can also stimulate the redevelopment of Hatfield

as all services infrastructure has to be upgraded. The BSC is a cost that has to be paid before a

development can commence and this cost can be significant depending on the size of the

development. The payment of the bulk service contribution is largely seen by developers as

unnecessary and unfair. As per Ordinance 15 of 1986, the municipality is in control of the process of

instituting a tariff for the bulk service contribution and thus it may also discount or waive it completely.

Any form of discount or complete waiver of the bulk service contribution can be used to incentivise

investors and developers to choose to develop in a particular area9.

3.3.2. Property Rates Rebates, Exemptions and/or Reductions

Lower property rates in certain areas may act as an incentive. In terms of the section 3 of the MPRA,

a municipality must adopt a policy in terms of which they may determine different categories of

properties to which different rates may apply. However, in terms of section 19, a municipality may only

levy different rates on residential areas in the following instances:

In the case of public infrastructure; and

In relation to newly rateable property, in terms of which the rates levied must be phased in for

a period of three years.

This incentive will be positive in older and neglected areas as identified within the City’s RSDF’s. It

should be used to stimulate SMMEs and small industries for the purpose of promoting job creation.

In areas where this incentive will be applied, the property owners have to establish a City

Improvement District (CID) as part of their social investment in their areas.

The requirement to establish a CID can be included in the spatial framework for the area and can be

negotiated during approval process of the land use rights. Council can only facilitate the

establishment process. The owners have to submit the application for the CID.

Property taxes emanate from the MPRA and its aim is for the municipality to recover costs for

providing non-billable and/or subsidised services to all areas within its geographical boundaries. The

municipality has full control for levying property taxes and thus can invoke specific clauses to exempt

and/or offer rebates to specified Erven. This exemption and/or rebate can be an incentive for land

8 Leveraging Incentives report from CoT 9 Cited from The CoT Mayoral Committee report

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owners who would like to develop the land. The exemption and/or rebate may be applicable

especially during the development phase and possibly after the development. The City may apply an

exemption or rebate to the property rates for a specified period of time based on a defined criteria.

3.3.3. Tax Incentive Programmes

Tax incentive programmes have been defined by National Treasury to give tax rebated to companies

that satisfy the criteria of creating jobs and contributing to the growth and development of the area.

The City can include tax incentives as part of its own package of incentives by simply including the

criteria and process that companies must follow to access the tax rebates.

Tax incentive programmes such as the Urban Development Zone tax incentive of National Treasury

are used to incentivise the private sector to assist with the regeneration of specified areas.

The UDZ allowance is applicable in respect of the:

Erection, extension or improvement of or addition to an entire building;

Erection, extension, improvement or addition of part of a building representing a floor area of

at least 1 000 m²;

Erection, extension, improvement or addition to low-cost housing; or

Purchase of such a building or part of a building directly from a developer on or after 8

November 2005, provided that certain requirements are met.

A taxpayer will only qualify for the UDZ allowance in respect of a building or part of the building

constructed, improved or purchased directly from a developer within an UDZ, if the building or that

part of the building is used solely for purposes of that person’s trade and was brought into use for

these purposes on or before 31 March 2014.

A deduction in respect of the UDZ allowance will be allowed in the determination of the taxable

income of a person that constructed, improved or purchased a building from a developer, provided all

the requirements are complied with.

In a statement issued by National Treasury on 09 December 2004, the City of Tshwane was amongst

the seven municipalities whose applications for a UDZ were approved. The City of Tshwane’s UDZ

area includes the CBD, parts of the Nelson Mandela Development Corridor, parts of Pretoria West

adjacent to the central business district and Marabastad. The UDZ consists of roughly the following

boundaries:

North: Boom Street, the Bell Hombre Station and Pretoria Zoo, including Marabastad,

West: Schutte Street / Railway line up to Soutter Street in the South and Retief Street in the

North,

South: Railway line up to Nelson Mandela Drive,

East: Nelson Mandela Drive.

The CoT did not enjoy much success with implementing projects under the UDZ dispensation and

thus the status eventually expired and was never renewed. For further information on the UDZ in the

CoT, see Annexure F: CoT Urban Development Zone Boundaries.

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3.4. Analysis of Capital Investment Incentives

3.4.1. Infrastructure

Linking infrastructure investment to a spatial development vision can be a powerful motivator for

private investment consistent with the vision. Spatial development has the potential to generate

income to pay for infrastructure. The land use rights approved by the City should be sufficient to

generate income (property tax) to finance infrastructure.

The idea is to establish a relationship between the income of Council (rates & taxes) and the

infrastructure costs, i.e. road construction cost R2 million / km - land use rights approved should then

generate an income over a payback period to “finance” the infrastructure.

The capital infrastructure investment has been identified as an incentive because this is a planned

process of installation of bulk services in areas which have been proclaimed as townships. The City

spends its “own” money to install these bulk services. This may become an incentive where the City

either accelerates to the process of installing the bulk services or increasing the capacity as a result of

a reprioritisation of the areas which may be driven by requests from investors or developers. This

would mean that investors or developers will not have to suffer any delays or spend excessively on

the installation of engineering services.

The City has a capital budget allocation for the installation of bulk services and this budget is often

insufficient due to the high demand for bulk services in new and existing areas, backlogs and the

rapid growth of various nodes. In order to develop this category into an incentive, the City may decide

to partner with investors and developers and play an active role in reprioritising its capital budget

based on the development applications lodged with the City. The CoT may also move a step further to

actively “co-fund” rapid installation of bulk services and alter or increase the current capacity and may

choose to spend more money that it would normally have to spend. The City can also borrow money

specifically (outside of the capital budget process) for the rapid installation or alteration of bulk and

engineering services.

The City may also take advantage of the Critical Infrastructure Programme (CIP) to increase its

capital budget or support private companies in applying for available grants (both government and

non-government funds).The CIP has been developed by the DTI and complements the numerous

grants that are available from National Treasury and COGTA, to leverage private investment, but it

will also promote certain public sector investments that create an enabling environment that leads to

private investments.

The CIP is one of the investment incentives that the South African government is implementing to

stimulate investment growth in line with the National Industrial Policy Framework (NIPF) and its

Industrial Policy Action Plan (IPAP). The incentive programme aims to enhance investment by

supporting critical infrastructure, thus lowering the business costs of investment.

The scheme offers a grant of the minimum of 10% to a maximum of 30% of the total infrastructural

development costs, based on achieved score in the Economic Benefit Criteria. The maximum

available grant will be capped at R30 million per project.

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3.4.2. Good quality Public Transport

Good quality public transport services in priority development areas can act as an incentive for

investment in those areas.

There is direct relationship between the Gautrain and bus rapid transport (BRT) projects in

Johannesburg and other global cities and growth in property values. Good locations generate higher

values. The CoT is also implementing its own BRT and this likely to yield similar results and benefits

that have been realised by other cities around the world. This however is not an incentive but a

necessary investment in good transportation system to enable mobility and better flow of traffic in the

city and from one point to the other.

3.4.3. Social and Community Facilities

The availability of good quality social and community facilities in a particular area can act as an

incentive for higher density development. The University of Pretoria is a major driver of high-density

developments. Student numbers increase annually and residential space is limited, this drives high-

density development.

This however is not an incentive but a necessary investment in good quality social and community

facilities that will improve the liveability of the City and may attract new developments which in turn

pull people to live in those areas which have good public facilities.

3.4.4. Investment in the public environment

High quality public environments play an important role when developers want to choose the location

of their developments and this is more so for high profile developments.

Great streets and public squares are attractors of more investments. These areas allow people to

socialise and stimulate walkable environments.

This is, however, not an incentive but a basic human right as stated in the bill of rights. A public

environment that has clean air, water bodies, ground coverage of flora is most appealing to people

and this may attract them to want to live in such a space. This in turn creates a demand for residential

units and subsequently a demand for retail and business units to serve the people who reside in that

area.

3.5. Analysis of Area Improvement Incentives

3.5.1. City Improvement Districts

Priority development areas should include special urban management arrangements to allow for good

quality urban environments. There are a number of tools and mechanisms that can be utilised to

assist with regeneration in these zones, including (i) City Improvement Districts (CID), (ii) Municipal

Service District and (iii) Special Rating Areas. Although some developers may see the additional

taxes and levies as disincentives, the guarantee of a well-managed and maintained environment will

certainly be an incentive for certain investors (large corporates), in particular those with a long term

interest in a particular area. A good example is the Barclays head office in the city of Johannesburg.

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CID’s are successful in urban regeneration projects. Property owners have a direct influence in their

immediate areas and allow them the freedom to influence the management of the area.

There are four CID’s in Tshwane at present: i.e. Hatfield, Arcadia, Church Street and Sunnyside. CIDs

are more appropriate in areas which have been identified for brown field developments as opposed to

new areas. The success of CIDs depends on the critical mass of existing residents who will contribute

additional monies towards the general upkeep of an area and may be demarcated based on the

geographical size and economic status of the people residing in that area. Newer areas may not have

the high numbers of people to contribute sufficient money to make the CID viable. The use of CIDs is

not an incentive but a mechanism of improving the aesthetics of an area as opposed to the underlying

bulk service infrastructure.

3.5.2. Safety and Security

Improved safety and security will act as an incentive for people to invest, live and work in certain

priority development areas. This include increased visible policing (patrols), CCTV, fast response

times etc.This attracts customers and leads to low vacancies in buildings and the potential to

generate higher rent which subsequently results in higher tax income for the city.

This however is not an incentive but a basic human right as stated in the bill of rights. A safe and

secure place is most appealing to people in general and the business fraternity. A safe and secure

space will serve to attract people and business people to such a space. This in turn creates a demand

for residential unit and subsequently a demand for retail and business units to serve the people who

reside in that area.

3.5.3. Expediting rollout of free Wi-Fi in identified development areas

The City, in conjunction with Project Isizwe, is in the process of rolling out free Wi-Fi through the establishment of Free Internet Zone (FIZ) locations. FIZ locations allow users to access free Internet without any logins or passwords. Users have access to a maximum of 250MB per day. The rollout of Phase 1 has resulted in more than 60 000 unique users accessing free Wi-Fi in the various FIZ locations. The CoT has now moved into Phase 2 of the rollout and it is expected to increase the number of user to one million.

The process of rolling out free internet can be expedited by the City as an incentive for growth and development in specific areas. Fast-tracking the rollout in certain areas may also incentivize investment in those areas.

3.5.4. Spatial Targeting Incentives

The CoT is also keen to implement incentives that are aimed at targeting specific areas within the City

of Tshwane. The target areas must meet a defined criteria and or be part of the development and

growth imperatives as identified by the CoT through the various documents such as The City of

Tshwane Vision 2055, the MSDF etc. As in the case of the city of Cape Town which has come up with

the Spatial Targeting Incentives, the CoT would like to implement the concept on specific areas with a

view of catalysing developments within these categories. The CoT Spatial Targeting Incentives will

cover the following areas:

The CoT inner city revitalization,

The township revitalization programmes,

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East capital development (mainly in the Bronkhorstspruit and immediate surrounding areas),

and

TRT routes and stations.

The Spatial Targeting Incentives will enjoy a combination of the incentives mentioned above

depending on the development requirements of that area.

3.6. Feedback from External Stakeholders

Property developers and town planners were approached to determine possible challenges they

experience when engaging with the CoT. These challenges may be a deterrent to them investing in

the CoT. The following are some proposals based on key issues that were identified:

The CoT should consider introducing an interactive valuations system (perhaps internet

based) which allows query and response within very short time periods (approximately 14

days) so that property valuation queries may be resolved quickly.

The CoT should introduce a system of staged “Rates Holidays” for developers in order to

assist bringing developments to fruition and bedding them down over a 3-5 year period. Both

of these items would be extremely positive moves to attracting development to Tshwane.

The CoT should view town planners and developers as prioritised customers who initiate

processes which result in income to the City in the form of rates and create vital employment

opportunities for the City. Presently this is not the case.

The CoT should introduce much shorter legislated periods for Town Planning applications,

including building line relaxations, rezoning, servitudes, occupational certificates and the like.

Presently rezoning commonly takes up to 24 months to be approved once received in Council

which is largely prohibitive to developers and end users having to wait this long. Often other

more desirable alternative locations will be secured as a preference resulting in lost business

for the region, or the opportunity becomes lost altogether. Stream lining of the relevant

departments and systems within the CoT will be required in order to achieve this apart from

the legislative issues.

The introduction of Special Development Zones in which special dispensations are provided

to developers via tax incentives, rates holidays, bulk infrastructure discounts, speedy Town

Planning applications per the high level details herein.

Review of quantum and methodology surrounding Bulk Services Contributions (BSC). The

ability to offset BSC against infrastructure improvements performed by the developer should

be a legislated option, and the CoT staff should be able to approve this as a matter of course.

The quantum should be fair and reasonable, and not structured by the City to fund income

shortfalls within their budgets. Developers wish to move quickly and effectively in dealing with

BSC’s, and would perceive formal improvements in this system very positively.

The above items are viewed as having high mutually beneficial results for the CoT and

developers/investors when looking to invest in the city.

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4. Incentives Framework

4.1. Guiding Principles

4.1.1. Considerations for developing the incentive framework

The incentives that are packaged and recommended must be directed at unlocking development

within the CoT that have the potential to promote growth and development of the CoT, thus resulting

in high economic impact. They can also be used to stimulate growth in line with the City’s

development objectives.

This incentives framework is based on a number of factors that include inter alia:

The type of development and the scale (determines the assessment rate revenue),

The size of development,

Location of development,

Social and economic impact through the number of jobs to be created during and after

construction,

The extent of the infrastructure and type that is installed (i.e. roads, bulk water pipes,

electrical infrastructure etc.), and

The capacity of the new infrastructure and amount of load it can handle over and above the

requirements of the development.

It is important to define the criteria for applying incentives to enable the implementation of such

incentives. The criteria may be classified according to the size or scale expressed in monetary terms.

We propose that the classification be as follows:

Micro,

Small,

Medium,

Large, and

Mega

The following table shows the classification of property development projects according to size or

scale (in monetary terms) based on a benchmark from Ekurhuleni Metropolitan Municipality. However

this can be calibrated to the various types of property development projects within the City.

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Table 7: Classification of incentives, according to size in monetary terms

# Category Rand Value (Rand)*

1. Micro Less than R 10 million

2. Small R 10,000,000 – R 49,000,000

3. Medium R 50,000,000 – R 399,000,000

4. Large R 400,000,000 – R 999,999,999

5. Mega 1,000,000,000 and above

*The Rand Value above refers to the total Rand Value of a project.

Revenue is a key driver of outcomes and/or benefits that must flow out of major development. The

economic impact of incentives must be understood in the context of the financial benefit to the CoT

derived from the improvements in infrastructure, increased land values and sale of subsequent

services. With the application of the incentives there will be an initial loss of revenue during the

construction phase. However, post construction the City will benefit from increased property rates and

the levying of the full bundle of municipal services, inter alia, electricity, water and sanitation, and

waste management. Therefore, when considering the revenue that will be derived from the offering on

the incentive in question, a long-term consideration of these benefits must be had.

4.1.2. Decision matrix for applying incentives to developments

The key drivers mentioned below will be computed in a matrix to determine the suitability of the

development, given that a single decision must be made and communicated to the developer.

Figure 1: Incentive assessment framework

The above assessment will be reduced to a rating that will inform the eligibility of the application for

incentives. The outcomes will be communicated as captured in the table below:

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Table 8: Outcomes of the incentives decision matrix

# Category Comments

1. Non Starter The economic impact is low and the amount of investment required is high.

1. Doubtful Starter Both the economic impact and amount of investment required is low.

2. Possible Starter Both the economic impact and amount of investment required is high.

3. Definite Starter The economic impact is high and the amount of investment required low.

Other factors that could be used as a guideline for deciding whether to offer incentives to an

applicant, and the quantum of such incentives, are listed below.

It is thus suggested that the CoT, pay particular attention to the economic impact of developments

based on the scale or magnitude as indicated in Figure 1: Incentive assessment framework) of such

developments and the amount of investment required to facilitate such a development. The sub

factors that will be taken into account are:

Revenue that can levied and collected by the CoT during the development and after the

completion of the development;

Type of development and the scale (determines the assessment rate revenue);

The type and extent of the infrastructure that may be installed (i.e. roads, bulk water pipes,

electrical infrastructure etc.);

The capacity of the new infrastructure and amount of load it can handle over and above the

requirements of the development.

The table below captures some of the key questions that must be answered before the incentives can

be offered to a developer or investor. There are three possible answers i.e. Yes, No or Not Applicable

(N/A). The desired answer to the questions below is “Yes”. The scoring has been simplified by

assigning scores to each response i.e. a Yes = 5, No = 2.5 and N/A carries no score.

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Table 9: Guidelines to assist in deciding whether or not to offer an incentive

# Factors Yes, No or N/A

Implication

1. Is it a new development? If yes, the application for incentives must be supported, the extent of which will be decided by the City.

2. Is it a redevelopment If yes, the application for incentives must be supported, the extent of which will be decided by the City.

3. Rezoning required? Fast tracking of rezoning process subject to the City’s Development Facilitation JOC chaired by the City Manager.

4. Land owned by Developer? If yes, the developer will not have to go through a transfer of ownership process. The development can proceed faster.

5. Inside the COT development priority areas? If yes, then the development will be in support of the MSDF of the CoT and is this driving development in the desired direction.

6. Estimated value of development > R400 million but < R1billion?

If yes, this will be a large development. Large developments will generally have a significant economic impact..

7. Estimated value of development > R1 billion? If yes, this will be a mega development. Mega developments will generally have a greater economic impact.

8. Is the Bulk Infrastructure in place? If yes, then the cost to install the infrastructure will be less.

9. Are the Development contributions that will be charged sufficient to cover the cost of installation of bulk infrastructure?

If yes, then the CoT will not have to find additional funding or not approve the development due to a lack of budget for infrastructure.

10. Developer has funding for own installation of bulk infrastructure or not?

If yes, then the developer can go ahead and spend their own money to install the bulk infrastructure which will also benefit the CoT and other adjacent developments

11. Is the duration of development less than five years? If yes, this means the likelihood of revenue flowing from the development to the CoT will be sooner.

12. Does the development have a high potential economic impact of developments?

The CoT must encourage developments which will have a far reaching impact in the City.

13. Revenue to be generated for the COT (assessment rates and services) can pay back the rebate within a defined period?

The CoT must not give away or forego revenue for periods that are 2 times longer than the MTREF period of 3 years. Therefore the CoT must favour developments which will have a significant contribution to the revenue of the CoT.

The questions above are aimed at gathering information that will determine if the developer or

investor is planning to develop a large to mega scale project or smaller. The CoT must deliberately be

biased toward large to mega scale project that did not previously exist or a significant expansion to an

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existing development. New developments and redevelopments have a multiple impact on the CoT’s

growth and development i.e. increase revenue, create new economic hubs, possible job creation etc.

4.2. Key Driver for development

Engineering infrastructure is a key driver for enabling developments to proceed and it can be broken

up into two categories i.e. internal and external engineering infrastructure. The internal engineering

infrastructure is installed by the developer and relates to the services required for water, sanitation,

lighting, drainage, and other amenities to be in place as per requirements. The external engineering

infrastructure relates to bulk infrastructure of roads and pavements, storm water, electrical substations

or mini substations, water reservoirs and supply pipes, sewer pipes. The external engineering

infrastructure is the responsibility of the municipality.

The incentives may be directed at encouraging investors to install both internal and external

engineering infrastructure where the capacity for such infrastructure is insufficient or where the

infrastructure does not existent. The quantum of incentives may therefore be based on the following

scenarios:

Scenario 1: where external engineering infrastructure does exist and the capacity is

adequate to support the planned development.

Scenario 2: where external engineering infrastructure does exist but the capacity is not

adequate to support the planned development.

Scenario 3: where external engineering infrastructure does not exist at all and therefore the

planned development will not be possible.

4.3. Process for developing a new Incentives Policy

The process of developing new incentives is laborious and can be onerous given the number of

factors that must be considered in order to develop a policy that is effective and in compliance with all

the legal statutes of the country. The process of redeveloping or simply packaging existing incentives

is the same as that of developing new incentives, but the only difference will be the amount of effort

required on a particular step given that the “thinking” and material may already exist. The following

recommended policy process may be used to develop and/or package new incentives:

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Need

Identification &

Assessment

Evaluation

(Impact Assessment)

M&E

Research

Figure 2: Policy development framework

The first step that must be undertaken when developing policy is to identity the “need” that must be

satisfied or the “void” that must be closed. The “need” refers to the goal that must be achieved or

obstacles that must be resolved through a set of well-orchestrated steps and or initiatives and or

projects. The “void” bears similarity to the “need” however, it should be understood to be a lack of

precedence or principles to guide the resolution of a need within the economy or market. In order to

tabulate the steps that must be taken to address the “need” or the “void” that exists, a policy

document is thus drafted by the authorities. After a “need” or “void” has been identified, a process of

assessing or evaluating the veracity of the “need” is then carried out through research (primary and or

secondary).

The second step in the policy development framework is to conduct a quantitative study using data

that is pertains to the “need” or “void” that has been identified with a view of creating a rationale for a

policy or set of solutions that are aimed at addressing the prevailing situation. The quantitative study

can be in the form of an economic impact analysis or a model. If the results of the quantitative study

are conclusive, then a decision can be taken whether to continue with the process of developing a

concept of the solution or not. In the case where a decision is affirmative (i.e. to continue with the

concept), a concept paper will be drawn up and presented to the relevant authorities for endorsement.

Once the concept document is endorsed as valid, then the concept must be tested using a set of

scenarios. If the test results are positive, then the policy document (product or incentive) is developed.

Thereafter a pilot of the incentive must be undertaken for a specified period of time to ascertain if the

results that were obtained in a closed and controlled environment can be obtained in an open

environment (in the field or real world/location where the product or incentive will be applied). After a

field study has been conducted, the results will be collected and analysed with a view of refining the

product or incentive. The refinement of the product or incentive will result in a final policy being written

and taken through a defined approval process and thereafter implemented. After the policy has been

implemented, the process of evaluating the success or failure will then be undertaken with a view of

refining the policy and the product or incentive.

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5. Proposed Incentives

5.1. Proposed incentives

The City of Tshwane is currently utilising most of the grants from National government departments

for Opex and Capex purposes. There are new incentives and grants that the City must take

advantage of, such as the Critical Infrastructure Programme (CIP) to augment its capital budget and

expedite the installation of bulk services infrastructure. The CIP will be part of the package of

incentives that will be recommended to attract potential investors to the City of Tshwane.

The incentives that will be packaged for the purpose of implementing the Innovative Land Financing

Mechanisms project will be made up of incentives and grants from National and local government

spheres as well as new incentives that have been identified by the City.

It is not recommended that the City develop any new incentives in the short to medium term. This

section discusses those incentives that have been proposed by the CoT and/or nationally, which

incentives may be applied selectively based on the desired outcome and the land use or the type of

development.

Table 10: Summary of proposed Incentives for the City of Tshwane


1. Fast tracking

of applications Applicable for applications that meet

the defined criteria as per the

determination of qualifying projects

and possibly the CaPs prioritisation

methodology of the CoT.

A dedicated process manager as a



making













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Incentive Zoning








activity


and/or Rebate

Property Rates Exemption on vacant

land during development

Property Rates Rebate the

developed properties




infrastructure


Projects Incentives



incentive programme

administered by the DTI






offered by the DTI

4. Capital







offered by the DTI

5. Area

Improvement

incentives


Spatial Targeting

Expediting rollout of free Wi-Fi in

identified development areas

5.2. Non-fiscal Incentives – fast tracking of applications

5.2.1. Pro-active steps

This refers to being able to identify and resolve non-financial constraints facing developers and other

investors looking to invest within the City. This can also include providing the developer with

information on the other incentives and grants available from National Government and facilitating the

process of accessing the incentives.

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5.2.2. Handling of applications

The submission of land use applications is a long established process in the City, but applications can

be delayed in the processes because of missing information, incomplete forms or other factors that

would affect the processing thereof. This is an area of facilitation and advisory before the applications

are lodged. Delayed applications can have a significant financial impact on the City and the

developers looking to invest in the City. If an application were speedily approved, the construction and

improvements would potentially result in a higher municipal valuation and in certain type of

developments increased sales of services. All of which contribute to the City’s revenue, however, the

longer the delays the greater the loss of potential increased revenue to the City.

It is recommended that the City form a Joint Operation committee (JOC) to deal with specific

applications. This committee is made up of various departmental representatives from multi-

disciplinary backgrounds within the City and stakeholders from outside the City (i.e. organs of state

and/or privates individuals and/or companies). The JOC is convened by the City and is responsible for

resolving specific issues on an urgent basis raised by affected individuals or companies who may be

clients of the City or other stakeholders in the City who may be adversely impacted by service delivery

related delays. This JOC must be dedicated to dealing only with the applications relating to strategic

developments.

5.2.3. Locus of control

The City must adopt a different way of dealing with strategic land use applications that fall in the

category of large to mega developments and have “process owners” to run with these applications.

The City must define the processes and appoint a “single point of contact” – a project manager who

will own the processes of applications, advisory and facilitation. This may require some restructuring

identify officials that have the requisite capacity to become “process owners”. Where such capacity

does not exist the City may consider appointing the relevant individuals or service providers.

5.2.4. Deployment of expertise

The facilitation, advisory and handling of large to mega developments requires a multi-disciplinary

team of experts to be consulted and tasked with performing specific tasks that may be urgent and

complex. The City must build dedicated internal and external expertise and must have the capacity to

wade through laborious volumes of strategic and technical documents. This must be in support to the

abovementioned “process owners” who will serve as the interface with the potential investor.

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5.3. Land Use Incentives

5.3.1. Special Development Zones

The City has identified nodes and specific zones of development in its metropolitan spatial

development framework (MSDF). The diagram below shows the seven regions of the CoT, the

development radius of 25 kilometres and the nodes of developments.

Figure 3: CoT Metropolitan spatial Development Framework (Source: CoT City Development and Planning Department, 2013)

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The CoT has identified 24 nodes (indicated in the legend) that will be the springboard of development,

based on the metropolitan spatial development framework of June 2012.

Figure 4: CoT development nodes (Source: CoT Metropolitan Spatial Development Framework, June 2012)

5.3.2. Incentive Zoning

Incentives, both fiscal and non-fiscal, should be packaged and/or bundled in a manner that allows the

City to access the development potential of a specific area. The packaging should therefore be

aligned to the long-term development objectives of that area, as outlined in the long-term strategic

plan of the City. The guidelines indicating the application of incentive zoning in the various nodes or

special development zones or land parcels will be contained in the Incentives Policy.

5.4. Fiscal Incentives

5.4.1. Bulk Services Contributions Rebates

Bulk services contributions rebates should be used to incentivise the development of specific types of

properties in special development zones and development nodes, identified by the City (see Figure

4). The rebate can also be used to encourage the development of green bulidings as well as attract

investment in specific sectors within the City. These sectors may include the following, but not limited

to:

Research and development,

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Agro-processing,

Manufacturing, and

Tourism.

The criteria for properties eligible for bulk services contributions rebates must be clearly defined by

the City. Such criteria may include the following, but not limited to:

Qualifying properties must be located in a clearly demarcated development zone or node (see

Figure 4),

Qualifying property owners must be willing to start development within a specific timeframe

set by the City, this may vary depending on location, and/or

Only certain types of developments and/or sectors may be eligible for rebates and this should

be aligned to the development objectives of each zone.

The actual rebate, in monetary terms or percentages, for qualifying properties or property owners may

be classified according to the size of development (see Table 4). Therefore mega developments will

be expected to receive a higher rebate than other smaller developments such as large, medium, small

and micro developments.

The implementation of Bulk Service Contributions Rebates should take into consideration the

provisions of the Draft Municipal Development Charges Policy, Engineering Services Policy and the

Water Services Policy (see section 2.1.2 of this report).

5.4.2. Property Rates Rebates on vacant land

Property rates rebates on vacant land should be used to incentivise developers to start construction and complete the development within a specific period. The criteria for properties that are eligible for such rebates may include the following, but are not limited to:

Qualifying properties or property owners must be located in a clearly demarcated

development zone or node (see Figure 4),

Qualifying property owners must be willing to start development within a specific timeframe

set by the City, this may vary depending on location,

Qualifying property owners must be willing to complete development within specific timelines

set by the City; and/or

Only certain types of developments (e.g. mixed or multiple purpose use developments, retail

developments, developments that will result in densification of residential units etc.) may be

eligible for rebates and this should be aligned to the development objectives of each zone.

In order for the COT to offer these rebates as a form of incentive to potential developers, it is

necessary that its property rates policy/by-laws prescribes the granting of such a rebate. This will be

the case should the City elect to utilise rate exemptions, rebates and/or reductions to incentivise

development within its jurisdiction.

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5.4.3. Property Rates Rebates on developed properties

Providing access to bulk services infrastructure is a responsibility of the City, however this is subject

to its budgetary constraints or limitations. In instances where a developer wants to develop in an area

where the necessary bulk services infrastructure either does not exist or the capacity is not sufficient,

property rates rebates may be used to incentivise such a developer. However the developer must be

willing to provide such infrastructure, and incur the related costs, on behalf of the CoT.

The criteria for property owners or developers eligible for property rates rebates on developed land

may be as follows, but not limited to:

The rebates may be applicable over a period agreed to between the City and the developer,

The developer must be willing to install bulk services infrastructure where it does not exist or

the capacity is not sufficient,

The total Rand value of the rebates over the agreed period must not exceed the total bulk

infrastructure costs incurred by the developer, taking into consideration the time value of

money as well as economic/opportunity cost, and

The developer must be able to present the City with auditable evidence relating to the costs

incurred to install the bulk infrastructure.

5.4.4. Alternative and/or Renewable Projects Incentives

Investment in alternative and/or renewable energy projects can be incentivised through Property

Rates Exemptions. The City should therefore consider amending its Rates Policy to incorporate a

category for alternative and/or renewable energy projects. The category should be zero rated, at

least for the first three year MTREF. Thereafter the performance of this incentive should be assessed

so as to determine whether the property category should continue to be zero-rated.

5.4.5. Rebate on Electricity Tariffs

The City should consider a rebate on electricity tariffs in order to attract investment in specific sectors

that are key to its economic growth and development. The modelling and/or structuring of this

incentive can be benchmarked against TATA Steel that has made multi million Rand investment in the

City of Umhlathuze municipal district and is being charged discounted electricity tariffs. For the last

seven years TATA Steel has been charged electricity tariffs that are, on average, 8.5% lower if

compared to a similar 132 kV customers.

However the rebates must not result in tariffs that are lower than the cost of providing electricity

services. Block rising or stepped tariff structures should be applied for such rebates so as to ensure

that the customers that use lowest volumes (i.e. kWh) have the highest percentage rebates.

Additionally rebates to be offered may also vary depending on the growth and economic impact of

each of the specific sectors.

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5.4.6. Tax Incentive Programmes

5.4.6.1. Section 12I income tax incentive

National government is solely responsible for developing and administering Tax incentive

programmes. Local government does not have any powers to develop a tax incentive, unless if it is

developed in conjunction with National government. National Treasury in conjunction with SARS has

developed the Section 12I income tax incentive. The Section 12I is an income tax allowance for

industrial policy projects (see Annexure G: Section 12I income tax incentive). The project can

either be classified as a Greenfield (new investment project) or brownfield (expansion of existing

project) project. The extent of the additional investment allowance will depend on the qualifying status

obtained by the project.

The City has land parcels which are suitable for industrial developments and thus a land owner or

investor or developer can be encouraged to develop industrial property and have the benefit of

accessing this tax allowance. The Section 12I can be included when packaging incentives land

parcels that have industrial development rights. The Section 12I tax allowance has three components

namely i.e. The Preferred status projects, Normal status projects and an Additional Training Incentive.

Table 11: Criteria the Section 12l tax allowance

Component Description

The Preferred status projects

offers the following benefits

55% of the cost of new and unused manufacturing assets

100% if located in an Industrial Development Zone (IDZ)

The Normal status projects offers

the following benefits

35% of the cost of new and unused manufacturing assets

75% if located in an IDZ

Real estate transfer tax exemption The Transfer of the title to commercial or industrial real

property located within the enterprise zone shall be

exempt from the real estate transfer tax. The tax

exemption provided by this section shall commence with

the first day of the calendar month following the month in

which this ordinance takes effect and shall continue for

the term of the enterprise zone

It is recommended that the City includes this incentive in the final set of incentives especially for land

parcels with industrial rights.

5.5. Capital Incentives

5.5.1. Infrastructure

5.5.1.1. Critical Infrastructure Programme

The Critical Infrastructure Programme incentive (see Annexure H: Critical Infrastructure

Programme) fits in well with the incentive that the City seeks to implement and in fact unlocks

additional funding that the municipality would not other have had or it would have had to borrow the

funds as a cost. This grant must be included in the package of incentives that the City is developing.

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6. Structuring of Incentives

The following table shows how the CoT can structure the proposed incentives for each property category in the Rates Policy.

Table 12: Structuring of incentives per property category

Fa

st

tra

ckin

g o

f

ap

plic

atio

ns

Sp

ecia

l

De

ve

lop

me

nt

zo

nes

Incen

tive

s

zo

nin

g

Bu

lk

se

rvic

es

co

ntr

ibu

tio

ns

reb

ate

Pro

pe

rty

rate

s

exem

ptio

n

Pro

pe

rty

rate

s

reb

ate

Ta

x

ince

ntive

pro

gra

mm

e1

0

Cri

tical

Infr

astr

uctu

re

Pro

gra

mm

e1

1

Residential

Business and commercial

Industrial Municipal property

State-owned property

Agricultural

Vacant

Non-permitted use

Public benefit organisation

Independent schools

Educational institutions

Mining

Echo-tourism and game farm

Public worship

Public serv. Infrastructure

Protected areas

State trust land

Multiple use

11 CoT does not have control of this incentive however it may be valuable to inform developers seeking to invest in the

industrial properties in the City.

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Additionally, incentives for the different types of sectors can be structured as follows:

Table 13: Structuring of incentives per sector

Fa

st

tra

ck

ing

of

ap

plic

ati

on

s

Sp

ec

ial

De

ve

lop

me

nt

zo

ne

s

Inc

en

tiv

es

zo

nin

g

Bu

lk

se

rvic

es

co

ntr

ibu

tio

ns

reb

ate

Pro

pe

rty

ra

tes

ex

em

pti

on

Pro

pe

rty

ra

tes

reb

ate

Ta

x

ince

nti

ve

pro

gra

mm

e

Ele

ctr

icit

y

tari

ffs

dis

co

un

t/re

ba

te

Cri

tic

al

Infr

as

tru

ctu

re

Pro

gra

mm

e

Research and development

Agro-processing

Manufacturing

Green economy

Alternative/renewable energy projects

The following conditions, inter alia, are proposed for the proposed incentives, when implemented:

All applications for incentives must be accompanied by a municipal account which must never

be in arrears, otherwise the application will not be processed.

Based on application received from the qualifying developer.

Property rates exemptions will be calculated based on the value of vacant land.

Property rates rebates will be calculated based on the rateable value of the developed

property including any additions and/or improvements.

Rate rebate benefits may not be transferrable.

Any failure, by the developer, to comply will result in a penalty to be determined by the COT

and discussed with the developer prior to implementation. Where applicable the penalty may

include interest.

A developer must during this period of the property rates or exemption pay for all other

services rendered by the municipality such as electricity, water and sewer, refuse collection

etc.

A service agreement must be in place and signed by the developer.

In the case of a property rates rebate the developer or investor will be treated as a creditor or

supplier as opposed to a debtor or customer during this period (this is to circumvent

legislative and financial implications that may stall the application of the incentive).

Monthly levies of the assessment rates will be raised during billing for services and credits will

be passed back against the “supplier” who is a developer or investor (this process must be

clearly explained to the “supplier” and must be calculated and reflected in the monthly

statement).

An occupation certificate is required for the property rates rebate to commence.

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Innovative Land Finance Mechanisms | June 2014 60

7. Incentives Modelling

7.1. Purpose of the model

The model analyses the cost benefit to the City as well as the reduction in the cost of investment for

the developer, for the proposed fiscal incentives. This analysis may be applied for different scenarios

and it is based on the following proposed fiscal incentives:

Bulk Services Contributions Rebate,

Property Rates Exemption on vacant land, and

Property Rates Exemption on developed properties.

7.2. General assumptions

The eligibility criteria for each scenario in the model are based on criteria already discussed in this

report (see section 5.4.1, 5.4.2 and 5.4.2). The model further assumes that the proposed incentives

will be effective in the 2014/15 financial year. However it also makes provision for instances where the

effective date is changed to any financial year after 2014/15. Therefore incentives cannot be applied

retrospectively.

The model was not developed for a specific set of land parcels. In order to conduct the cost benefit

analysis of any of the identified land parcels the model assumes that the following key information will

be available:

The current market value of vacant land or property,

Total estimated value of the project or development,

An indication whether the land parcel or property is located in a specially zoned area,

Type of property to be developed (i.e. residential, business and commercial, multiple purpose

use),

If a multiple purpose use property is to be developed the apportionment of use must be

provided,

If a residential property is to be developed then it must be clearly indicated whether it is a high

density residential development,

BSC payable by the developer,

Does the bulk services infrastructure exist and is the capacity sufficient for the development,

The date on which the land was acquired,

The date on which the developer intends to start construction,

The estimated duration (in years) for the construction, and

Total estimated cost of the project.

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7.3. Methodology

The following diagram shows the methodology or approach followed in building the fiscal incentives

model.

Figure 5: Quantitative Incentive Model Development

7.3.1. Understanding needs and expectations

Understanding the needs and expectations of the CoT is critical in ensuring that the model will

produce results that will address specific needs. The model therefore analyses the cost of each

incentive and the associated benefit to the CoT. It also shows the potential cost reduction of each

investment to the developer. This is in accordance with the Task/Deliverable 2 of the ILFM project.

The cost of each incentive to the CoT is the revenue foregone for BSC at the beginning of the

development, property rates both during and, possibly, after development. Possible benefits to the

CoT include growth and development in areas identified as development nodes or zones, completion

of development projects within timeliness set by the City and the acquisition of bulk infrastructure

possibly reducing the need to incur debt in accordance to section 46 and 48 of the MFMA.

7.3.2. Data gathering

The data gathering process included desktop research and interaction with officials of the City. Data

collected from the officials of the CoT is specific, whereas general data was collected through a

desktop study. The latter includes the following five years forecasts of:

Inflation (CPI),

Prime lending rate, and

Risk free rate or instrument.

Data that was collected from the City, through its officials and website, includes the following:

Year on year increases in property rates,

Property rates per property type,

Sample of actual bulk services contributions calculations; and

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List of vacant land currently owned by the City and identified as strategic land parcels.

7.3.3. Data review and verifications

Primary data such as property rates and projected year on year increases was gathered from the City,

no data verification was undertaken. Other data, such as sample data on bulk contributions and

vacant land parcels is only used for testing and will therefore not material affect the reliability of the

model.

7.3.4. Data modeling and analysis

The criteria for each of the proposed fiscal incentives as discussed in sections 5.4.1 to 5.4.3 were

used in order to model each of the proposed fiscal incentives. The model shows the cost to the City

in terms of revenue foregone and the benefit to the City in terms of increased revenue from property

rates levied on developed property over the long term. The reduction in construction costs for the

developer is also shown. Benefits to the developer are equivalent to the revenue foregone by the

City.

Based on our data analysis, developers of properties in categories with lower rates, such as

residential properties, public benefit organisations and independent schools were not considered

eligible for any of the fiscal incentives. This is because their low property rates charges serves as an

incentive to develop vacant land since the charge on vacant land is higher than the charge on

developed land. Zero rated properties such as places of worship were also not included.

Agricultural properties also have a low rates charge in terms of the cents in a Rand. However were

only included in the list of properties eligible for the bulk services contributions because they are

expected to have a higher economic impact over the long term if compared to other properties with a

similar rates charge.

Property rates charges on multiple purpose use properties are based on the apportionment of use.

Therefore these properties were only considered eligible for bulk contributions and property rates

exemptions because the property rates chargeable after development may be greater than the

rebates, equivalent to the cost of bulk infrastructure, if the proposed model of rebates incentives is to

be applied.

Properties that were considered eligible for any of the fiscal incentives analysed in the model include

the following:

High density residential properties

Business and commercial properties,

Industrial properties,

Educational institutions,

Mining properties,

Eco-tourism and game farms, and

Multiple purpose or mixed use properties.

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It is important to note that the property categories and the naming thereof are based on the CoT

property rates policy.

7.4. Test Case Scenario

7.4.1. Summary of Key Input Data

The model was not developed for specific land parcels but it can be used to analyse the cost benefit

of each land parcel. In order to conduct the cost benefit analysis the model assumes that key input

information discussed in Section 7.2 will be available:

In order to test the output/results of the model the following assumptions regarding the key input data

were made:

Market value of vacant land is R2.5 million,

Land parcel is located in a specially zoned area,

Developer intends to build an office park, therefore it is classified as Business and

Commercial property according to the City’s rates policy/by-laws,

The office park will be used by an entity or organisation in the research and development

sector,

The development complies or qualifies as a green building,

The present value BSC payable by the developer is R1.02 million, this is based on an

average of sample data from the City (see Table 11),

Bulk infrastructure does not exist and the present value cost is R1.5 million,

The total estimated cost of construction for the development is R5 million

The land was acquired before July 2014,

Construction is scheduled to start in June 2015,

The development intends to develop within 3 years, and

The property rates rebates will be applicable for a period of 10 years

The following table shows the BSC sample data from the City.

Table 11: BSC sample data from the City

Type of development

Category of property

Contributions for main roads

Contribution for local streets (rebate)

Storm water contribution

Total contribution

Residential Residential R 111 950.91 (R 11 241.26) R 122 556,67 R 223 266,32

Industrial Industrial R 391 995.12 (R 211 509.94) R 929 964,24 R 1 110 449,42

Mixed use Multiple purpose

R 1 811 387.95 (R 232 192.37) R 213 868,35 R 1 793 063,93

Offices Business and commercial

R 152 949.46 (R 37 978.77) R 129 676,94 R 244 647,63

Residential and Hostels (student accommodation)

Residential R 48 908.20 (R 15 148.94) R 33 486,23 R 67 245,49

Residential Residential R 370 142.26 (R 31 060.13) R 99 973,07 439 055,20

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Type of development

Category of property

Contributions for main roads

Contribution for local streets (rebate)

Storm water contribution

Total contribution

Residential and shopping centre

Multiple purpose

R 2 582 196.58 (R 230 429.34) R 881 839,30 R 3 233 606,54

Average R781 361,50 (R 109 937.25) R 344 480,69 R1 015 904,93

7.4.2. Bulk Services Contributions Rebate

The percentage rebate for bulk services contributions rebate is based on the total Rand value investment or cost of each project. An additional rebate is based on whether the development or investment is in any of the sectors identified as key to the growth and development of the City. Green buildings will also qualify for an additional rebate. Developers and/or property owners eligible for bulk service contributions rebates must be willing to start their project within two years after acquiring the vacant land. The percentage rebates applicable for bulk service contributions rebate are shown below.

Figure 6: Percentage rebates for bulk services contributions rebates

Key input data for a specific development or project is required in order to determine whether such a development or project qualifies for a bulk services contributions rebate. This data, specific to the test case scenario, is shown below.

Figure 7: Key input data to determine whether a development qualifies for bulk services contributions rebate

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7.4.3. Property Rates Rebate on vacant land

The percentage rebate for property rates rebate on property or vacant land is based on the total Rand value investment or cost of each project. Developers that are eligible for this rebate must be able to complete the construction of such property or vacant within three years.

Figure 8: Percentage rebates for property rates rebate on vacant land

Key input data for a specific development or project is required in order to determine whether such a development or project qualifies for a property rates rebate on vacant land. This data, specific to the test case scenario, is shown below.

Figure 9: Key input data to determine whether a development qualifies for property rates rebate on vacant land

7.4.4. Property Rates Rebate on developed property

Property rates rebate on developed land is applicable for a specific period. Based on the test case scenario such a rebate will be applicable for a 10 year period and this is shown below.

Figure 10: Applicable period for property rates rebate on developed property

Key input data for a specific development or project is required in order to determine whether such a development or project qualifies for a property rates rebate on developed property. This data, specific to the test case scenario, is shown as follows.

402


Figure 11: Key input data to determine whether a development qualifies for property rates rebate on developed property

7.4.5. Other Input Data

Other key input data includes the total Rand value of bulk services contributions payable by the developer as well as the cost of installing bulk services infrastructure and the total value of the investment. This data, specific to the test case scenario, is shown below.

Figure 12: Other key input data specific to the test case scenario

7.5. Model Outputs/Results

7.5.1. Income and cash flow over a 20 year period

Key output or results from the model included as overview of total income and cash flow over a 20 year period. This is shown below. Therefore developments with the higher cost will automatically have the higher percentage rebate. This is shown in the figure below.

Figure 13: Income and cash flow over a 20 year period

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7.5.2. Total incentive over a 20 year period

The model also calculates the total cost, in Rand value, of incentives over a 20 year period and this is

shown below.

Figure 14: Total value of incentives over a 20 year period

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8. Conclusion

Incentives are critical in assisting the City to attract developers who will in turn enable it to achieve its

long-term development objectives. These objectives are outlined in strategic documents such as the

IDP and Vision 2055. Proposed incentives are achievable in the short to medium-term however there

is a proposed policy development framework to assist the City to develop new incentive schemes in

the long-term. Ideally new incentives should only be considered in the long term once the proposed

incentives have been thoroughly explored and/or implemented.

The CoT has embarked on an important initiative and electing to create an investor friendly

environment particularly for developments. A number of Cities around the world including the World

Bank have grappled with the notion of how to structure incentives to attract investors and developers.

In a study12

undertaken by G.E. Peterson of the World Bank, a number of lessons relating to the use

of incentives have been drawn out. Over and above discussing the various instruments which can be

used to finance urban infrastructure with a sole purpose of making land development initiatives to be

more attractive to developers or investors, the World Bank has cautioned that:

Local governments / city authorities must not utilise land-financing instruments as long-term

generators of recurring revenue for their “operational expenditures”, but strictly for capital

urban infrastructure projects;

The city in question must maintain transparency and consult with the local communities when

embarking on public land auctions as a means of creating revenue streams;

Proper institutional arrangements such as establishing a municipal agency / authority to

oversee the land-based infrastructure financing strategies and plans are required.

The above lessons are crucial for the CoT to learn from, especially the fact that incentives are simply

a means to an end and not an end in itself. Incentives are not meant for the CoT to merely tick the

box as having completed and implemented an Incentive Policy, but it must address the specific needs

and requirement of the people or organisations that it is intended for.

The legal and regulatory framework is important when developing policies. This Incentive Framework

is based on specific legislation beginning with the Constitution of the Republic of South Africa and

thereafter citing specific legislation such as the MFMA, MPRA, Town Planning and Townships

Ordinance of 1986 and internal policies of the CoT. It is therefore required that the various pieces of

legislation be followed to the letter to ensure that the eventual Incentive Policy is not in violation of any

laws of South Africa. As a result of this Incentive Framework being based on various legislation and

policies, some of the existing policies such as the CoT Rates Policy will be impacted by the new

policy. Thus, the policies that are impacted will have to be updated to include a reference to the

Incentive Policy in order to make it legitimate.

This Incentive Framework has considered the incentives that were formulated and implemented by

other Cities. The incentives that are proposed for implementation by the CoT bear similarities to the

12 “Unlocking Land Values to Finance Urban Infrastructure” report published in 2009

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incentives implemented by Cairo and Sao Paolo. For instance Cairo implemented an incentive of

modifying and streamlining of local zoning and permit procedures. This incentive allows “The Zone

Administrator” with the approval of the Advisory Council to modify zoning regulations, expedite

handling of business licensing and streamline local permit procedures in favour of those private sector

investors who take part in this land auction procedure. Sao Paolo has implemented the relaxation of

development rules as well. The CoT has identified the Incentive Zoning which will offer a basket of

rights to a land parcel and by extension, these rights will allow for some form of relaxation of

development rules. This incentive will in the short to medium term be available through a specific

programme and through the process of creating special development zones.

From the study conducted on the incentives that are currently available in South Africa, it is clear that

there are incentives that have a good fit with the activities of the local government. In particular the

Critical Infrastructure Programme (CIP) from the DTI is one example of an incentive that can be

included in the Incentive Policy of the CoT even though it is managed by a different organ of State.

This further confirms that there is no need to for the CoT to develop new incentives. In the core of the

incentives that the CoT will package is the:

Non-fiscal incentives aimed at fast tracking of various land parcel related applications.

Land use Incentives aimed at creating special development zones and offering an enhanced

basket of rights for land parcels.

Fiscal incentives aimed at offering a waiver or rebates or reductions on bulk service

contributions, offering property rates exemptions and rebates and other tax incentives from

other organs of State.

Capital Investment incentives aimed at funding installation of a portion of the bulk service

infrastructure cost.

The implementation of incentives is largely a quantitative process which may yield qualitative benefits.

As a result of this a quantitative model has been developed to enable the CoT to structure the

incentives and calculate the value of revenue forgone. The output of this model forms part of all legal

documents that a recipient must sign to commit to the development and to take up the incentive with

its associated terms and conditions.

Finally this document is not an Incentive Policy but it is a framework that provides the basis for the

eventual policy to be drafted. The implementation of a policy emanating from this document as well as

the implementation of proposed incentives will require approval from the Mayoral Council and may

possibly result in an amendment of the City’s rates policy/by-laws and other relevant policies.

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9. Recommendations

9.1. Implementation of incentives

The implementation of the identified incentives requires that an Incentive Policy be developed by the

CoT. The Incentive Policy will define guidelines on how to implement each incentive and how to

package different incentives together for application to a single or multiple projects or interventions.

The CoT must implement the following incentives:


1. Fast tracking

of applications A dedicated process manager as a



making















Incentive Zoning








activity


and/or Rebate

Property Rates Rebate on vacant

land

Property Rates Rebate on developed

land



incentive programme

administered by the DTI.






407




infrastructure


Projects Incentives


offered by the DTI

4. Capital







offered by the DTI

5. Area

Improvement

incentives


Spatial Targeting

Expediting free Wi-Fi rollout

9.2. Impact of incentives policy on existing policies

9.2.1. The CoT Rates Policy

In order for the CoT to make use of a rates exemption as a form of incentive to potential developers, it is necessary that its property rates policy/by-laws prescribes for the granting of such an exemption.

This will be the case should the City elect to utilise rate exemptions, rebates and/or reductions to incentivise development within its jurisdiction.

The current Rates Policy should be amended to provide a framework and/or criteria for applying property rates exemption and rebates to the identified properties. Such a framework must include eligibility of each property and the period for which the rebates and exemptions will be applicable.

Inclusion of a property category in the CoT Rates Policy for alternative and/or renewable energy projects where an exemption or rebate will be applicable for such property categories for at least one MTREF.

The rates policy will have to be amended to allow for Rates Section to reconsider charging rates on a vacant land based on its current land use only after the owner has granted an incentive and the owner has thus accepted and signed the required contractual documents.

9.2.2. City of Tshwane: Engineering Services Policy

The engineering services policy will have to be amended to provide for the discounting and or exemption of the bulk services fees and development contributions.

A review of the BSC Policy will be required so as to outline the framework for the proposed BSC rebate. This framework must include the following:

List of qualifying properties types,

Special development zones and nodes where the rebates will be applicable, and

List of various sectors that are eligible and/or qualify for an additional BSC Rebate.

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9.2.3. Electricity Tariff Policy

The electricity tariffs policy is based on the NERSA regulations and must be finalised by a municipality annually for submission to NERSA.

The inclusion of new user categories based on the various sectors that the City intends to attract for investment purposes, in its area of jurisdiction.

The proposed electricity tariff rebate should be applied for at least one MTRF whereafter it should be reviewed annually to determine the economic impact and continued viability.

9.3. Expedient Processing Capability

The CoT must establish a dedicated front end office staffed with customer centric people whose job

will be to interact with developers and investors and to play a coordination role with internal CoT

Department and functionaries. This office must be supported a back office which must be staffed with

technical people who will review the submissions for land related requirements and advise on the best

way of collecting or developing/generating the required information. The back office will liaise with

technical staff within the CoT and where necessary, they will interact with external technical service

providers.

It is recommended that in order for the CoT to realise efficiencies in the processing of land related

applications, the entire process must be automated. To this effect, a technology platform must be

sourced and implemented.

9.4. Implementation of incentives model

The CoT must approve and implement the incentives model.

The required thresholds and inputs must be defined and locked down for a period of six to twelve months to enable the calibration of the model.

CoT must identify specific staff (preferably with a financial background or quantitative skills) who will own and use the model.

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10. References

1. Constitution of the Republic of South Africa, Act 108 (Parliament of RSA December 18,

1996).

2. Consulting, D. (2014). DT SA Tax Incentives presentation. Johannesburg: Deloitte

Consulting.

3. DTI. (2012). CIP Application Guidelines. City of Tshwane: Department of Trade and

Industry.

4. Green Building Development By-Law, PROMULGATED PROV GAZ No 79 LAN 328

(City of Tshwane March 27, 2013).

5. Guide To The Urban Development Zone Tax Incentive, Income Tax Act, No. 58 of 1962

(South African Revenue Service: Republic of South Africa September 09, 2009).

6. Kwele, L., Myeza, M., Dajo Associates, Malikane, C., Mangcu, X., Otieno, F., Mathekga,

R. (2013). Tshwane Vision 2055 Remaking South Africa's Capital City. City of Tshwane:

Strategy Development and Implementation City of Tshwane.

7. Makgata, A. (2009). 10. Item 10 Report on the identification of Council owned Strategic

Land Parcels in Tshwane. City Of Tshwane: Council of the City Of Tshwane.

8. Makgata, A. (2014). Report on the Investigation into Mechanisms to Incentivise

Development Within the City of Tshwane. City of Tshwane: Mayoral Committee: City

Planning and Development Department.

9. Mokopo, R. (2010). 09. Proposed alienation of Strategic Land Parcels as approved by

Council. City of Tshwane: Council of the City of Tshwane.

10. MSDF RSDF Council Approved Report, CPD 9/5/1/78 (Council of the City of Tshwane

June 28, 2012).

11. Municipal Finance Management Act, 56 (Republic of South Africa 2004).

12. Municipal Property Rates Act, 6 (Republic of South Africa 2004).

13. Municipal Systems Act, 32 (Republic of South Africa 2000).

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14. Oden, M. D. (2008). Building a More Sustainable Economy Economic Development

Strategy and Public Incentives in Austin. Texas: Community and Regional Planning

Program University of Texas at Austin.

15. Deloitte obo CFO (2013, November). CoT Long Term Financial Strategy v1 03 May

2013. City of Tshwane, Gauteng, South Africa.

16. CFO (2011). CoT Draft Policy Special Rating Areas 2011. City of Tshwane: Finance

Department of the City of Tshwane.

17. CFO. (2014). CoT Tshwane Property Rates By Laws and Property Rates Policy. City of

Tshwane: Finance Department.

18. Ramokgopa, K. (Cllr) (2014, May 26). Budget speech 2014 of the City of Tshwane. City

of Tshwane, Gauteng, South Africa.

19. Peterson, G. E. (2009). Unlocking Land Values to Finance Urban Infrastructure.

Washington D.C: The World Bank Public Private Infrastructure Advisory Facility.

20. Town Planning and Townships Ordinance, No.15 (Republic of South Africa 1986).

411


11. Annexures

11.1. Annexure A: Guidelines for the determination of Incentives/rebates in respect of contributions to engineering services in respect of development areas/projects

11.2. Annexure B: Incentives available and National and Local government level for a number of development investments.

11.3. Annexure C: National Treasury: Draft Municipal Development Charges Policy

11.4. Annexure D: The COJ Inner City Regeneration Strategy

11.5. Annexure E: Urban Development Zone Tax Incentive

11.6. Annexure F: CoT Urban Development Zone Boundaries

11.7. Annexure G: Section 12I income tax incentive

11.8. Annexure H: Critical Infrastructure Programme

412

KEY PARAMETERS

2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32 2032/33 2033/34

Property rates increase 10.0% 8.0% 8.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%

CPI 6.1% 5.8% 5.4% 5.6% 5.4% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5%

Prime lending rate 9.5% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%

Risk free rate 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%

SA inflation target 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32 2032/33 2033/34

Min target 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

Max target 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Prime lending rate for the first five (5) years is based on the IDC Macro-economic forecast - June 2014

The risk free rate is based on the yield for the R204 government bond

Notes and Guidelines

Property rates increases for the first three (3) years are based on the approved increase for the 2014/17

MTREF

Property rates increase for the remaining years are based on the City's Long-term Financial Strategy

CPI for the first five (5) years is based on the IDC Macro-economic forecast - June 2014

CPI for the remaining years is based on RSA inflation target average of between 3% and 6%

10.0%

8.0% 8.0% 7.0% 7.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2014/15 2015/16 2016/17 2017/18 2018/19

5 Year Forecast

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2014/15 2015/16 2016/17 2017/18 2018/19

5 Year Forecast

Key parameters

Property rates increase CPI

Prime lending rate Risk free rate

413

marieb1

Typewritten Text

ANNEXURE B

PROPERTY RATES

1 cent in Rand 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32 2032/33 2033/34

2

3 Residential 0.938 1.013 1.094 1.171 1.253 1.341 1.435 1.535 1.642 1.757 1.880 2.012 2.153 2.304 2.465 2.638 2.823 3.021 3.232 3.458

4 Business and commercial 2.830 3.113 3.362 3.597 3.849 4.118 4.406 4.714 5.044 5.397 5.775 6.179 6.612 7.075 7.570 8.100 8.667 9.274 9.923 10.618

5 Industrial 2.830 3.113 3.362 3.597 3.849 4.118 4.406 4.714 5.044 5.397 5.775 6.179 6.612 7.075 7.570 8.100 8.667 9.274 9.923 10.618

6 State-owned property 2.830 3.113 3.362 3.597 3.849 4.118 4.406 4.714 5.044 5.397 5.775 6.179 6.612 7.075 7.570 8.100 8.667 9.274 9.923 10.618

7 Agricultural 0.235 0.259 0.280 0.300 0.321 0.343 0.367 0.393 0.421 0.450 0.482 0.516 0.552 0.591 0.632 0.676 0.723 0.774 0.828 0.886

8 Vacant 6.086 6.695 7.231 7.737 8.279 8.859 9.479 10.143 10.853 11.613 12.426 13.296 14.227 15.223 16.289 17.429 18.649 19.954 21.351 22.846

9 Non-permitted use 7.075 7.783 8.406 8.994 9.624 10.298 11.019 11.790 12.615 13.498 14.443 15.454 16.536 17.694 18.933 20.258 21.676 23.193 24.817 26.554

# Public benefit organisation 0.235 0.259 0.280 0.300 0.321 0.343 0.367 0.393 0.421 0.450 0.482 0.516 0.552 0.591 0.632 0.676 0.723 0.774 0.828 0.886

# Independent schools 0.235 0.259 0.280 0.300 0.321 0.343 0.367 0.393 0.421 0.450 0.482 0.516 0.552 0.591 0.632 0.676 0.723 0.774 0.828 0.886

# Educational institutions 2.830 3.113 3.362 3.597 3.849 4.118 4.406 4.714 5.044 5.397 5.775 6.179 6.612 7.075 7.570 8.100 8.667 9.274 9.923 10.618

# Mining 2.830 3.113 3.362 3.597 3.849 4.118 4.406 4.714 5.044 5.397 5.775 6.179 6.612 7.075 7.570 8.100 8.667 9.274 9.923 10.618

# Echo-tourism and game farm 2.830 3.113 3.362 3.597 3.849 4.118 4.406 4.714 5.044 5.397 5.775 6.179 6.612 7.075 7.570 8.100 8.667 9.274 9.923 10.618

# Public worship 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

# Public serv. Infrastructure 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

# Protected areas 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

# State trust land 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

# Multiple use

# Municipal property

Rate according to apportionment of category of use

Rate according to category of use


Projected property rates for the first three (3) years are based on

the % increase approved in the 2014/17 MTREF

Projected property rates for the remaining years are based on the

% increase in the City's Long-term Finanacial Strategy2.83 3.113

3.362 3.597

3.849

0.00

1.00

2.00

3.00

4.00

5.00

2014/15 2015/16 2016/17 2017/18 2018/19

cen

ts in

Ran

d

7.075

6.086

2.830

2.830

2.830

2.830

2.830

2.830

0.938

0.235

0.235

0.235

0.000

0.000

0.000

0.000

0.00 2.00 4.00 6.00 8.00

Non-permitted use

Vacant

Echo-tourism and game farm

Mining

Educational institutions

State-owned property

Industrial

Business and commercial

Residential

Independent schools

Public benefit organisation

Agricultural

State trust land

Protected areas

Public serv. Infrastructure

Public worship

cents in Rand

Property rates

10.0%

8.0% 8.0% 7.0% 7.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2014/15 2015/16 2016/17 2017/18 2018/19

YoY Property rates increase

414

BULK SERVICES CONTRIBUTIONS REBATE PROPERTY RATES REBATE ON DEVELOPED PROPERTY

Category

Min project

value (Rands)

Max project

value (Rands) Rebate %

Micro R0 R9 999 999 10.0% Applicable period: 10

Small R10 000 000 R49 999 999 20.0%

Medium R50 000 000 R399 999 999 35.0% PROPERTY RATES REBATE ON VACANT LAND

Large R400 000 000 R999 999 999 40.0%

Mega R1 000 000 000 and above 50.0%

Additional rebate per sector Rebate % Micro R0 R9 999 999 20.0%

Small R10 000 000 R49 999 999 30.0%

Research and development 35.0% Medium R50 000 000 R399 999 999 40.0%

Green economy 35.0% Large R400 000 000 R999 999 999 60.0%

Agro-processing 35.0% Mega R1 000 000 000 and above 70.0%

Tourism 35.0%

Green buldings 35.0% Duration of construction 3

Qualifying tourism developments must not be less than: R5 000 000

Duration between acquisition and construction 2

Applicable rebate period

Bulk services contributions rebates are applicable for development projects in clearly identified key development nodes or areas

Bulk services contributions rebate are applicable to qualifying developers willing to start development within 2 years after acquiring vacant land

Property rates exemptions are not applicable for development of multiple use properties outside specially zoned areas (i.e. UDZs, CIDs), zero rated properties and residential properties

that are not considered high-density properties


Bulk services contributions rebates are offered as a once off rebate at the beginning of the development

Category

Property rates rebates on vacant land are applicable for qualifying developers willing to complete development within 3 years

Property rates rebates on developed property applicable for all types of developments except multiple use properties outside specially zoned areas (i.e. CIDs), zero rated properties and

residential properties

Property rates rebates on developed property are applicable over a period not exceeding 10 years

Min project value

(Rands)

Max project

value (Rands) Rebate %

415

SCENARIO BUILDER

Bulk services contributions rebate Property rates rebates on vacant land Project cost Multiple purpose use per category

Date of acquisition: 1 Duration of construction: 3 PV of bulk services contributions: R1 015 905 Residential 0%

Construction start date (within 1 year): 12 Expected end date: May-18 PV of bulk service infrastructure required: R1 000 000 0%

Property is situated in specially zoned area: 2 Is the area favoured for multiple use: 1 Current market value: R1 500 000 0%

Type of development: 2 Property rates rebates on developed property Cost of construction: R5 000 000 Public worship: 0%

Additional bulk services contributions rebate Duration for property rates rebate: 10 FV of bulk services contributions: R1 015 905 Income and cash flow

Select sector: Status of bulk services infrastructure: 3 FV of bulk service insfrastructure required: R1 177 579 Total income over 20 Years: R8 417 817

Development qualifies as green building: 1 End date for property rates rebate: May-28 Estimated future market value: R6 500 000 Total cashflow over 20 Years R6 017 928

1 88% R7 401 913

Total incentives Incentives (%) Incentives- 20 Year overview Incentives- 20 Year overview

Bulk services contribution rebate: R457 157Bulk services contribution rebate R457 157

Property rates rebate on vacant land: R226 017 Property rates rebate (vacant land) R226 017Property rates rebate (developed property)R1 716 715

Property rates rebate on developed property: R1 716 715

Total incentives: R2 399 889

Bulk services contribution rebate: 19%

Property rates rebate on vacant land: 9%

Property rates rebate on developed property: 72%

Income - 20 Year overview Net income (income less incentives) - 20 Year overview Cashflow - 20 Year overview Property rates rebate (vacant land) - 20 Year overview

(R5

)

(R80)

(R70)

(R60)

(R50)

(R40)

(R30)

(R20)

(R10)

R0

Tho

usa

nd

s R1

10

7

R0

R200

R400

R600

R800

R1 000

R1 200

Tho

usa

nd

s R 6

45

R0

R100

R200

R300

R400

R500

R600

R700

R800

Tho

usa

nd

s

R 6

45

R0

R1 000

R2 000

R3 000

R4 000

R5 000

R6 000

R7 000

Tho

usa

nd

s

R4

62

R0

R100

R200

R300

R400

R500

Tho

usa

nd

s

$,0

$,200

$,400

$,600

Tho

usa

nd

s

Property rates rebate (developed property)

Property rates rebate (vacant land)

Bulk services contributions rebate

$457,157, 19%

$226,017, 9%

$1716,715, 72%

Bulk services contribution rebate

Property rates rebate (vacant land)

Property rates rebate (developed property)

416

SCHEDULE

Financial year Month

Bulk services

contributions

rebate (Rands)

Property rates

exemption

(Rands)

Property rates

rebate (Rands) Total incentives

Bulk services

contribution

payable (Rands)

Applicable

property rate

(cents in Rand)

Chargeable

property rate

(Rands)

Total revenue

(Rands)

Total income

(Rands)

2014/15 Jul-14 R0 R0 R0 R0 R0 6.086 R7 608 R7 608 R7 608

2014/15 Aug-14 R0 R0 R0 R0 R0 6.086 R7 608 R7 608 R7 608

2014/15 Sep-14 R0 R0 R0 R0 R0 6.086 R7 608 R7 608 R7 608

2014/15 Oct-14 R0 R0 R0 R0 R0 6.086 R7 608 R7 608 R7 608

2014/15 Nov-14 R0 R0 R0 R0 R0 6.086 R7 608 R7 608 R7 608

2014/15 Dec-14 R0 R0 R0 R0 R0 6.086 R7 608 R7 608 R7 608

2014/15 Jan-15 R0 R0 R0 R0 R0 6.086 R7 608 R7 608 R7 608

2014/15 Feb-15 R0 R0 R0 R0 R0 6.086 R7 608 R7 608 R7 608

2014/15 Mar-15 R0 R0 R0 R0 R0 6.086 R7 608 R7 608 R7 608

2014/15 Apr-15 R0 R0 R0 R0 R0 6.086 R7 608 R7 608 R7 608

2014/15 May-15 R0 R0 R0 R0 R0 6.086 R7 608 R7 608 R7 608

2014/15 Jun-15 R457 157 R5 325 R0 R462 482 R1 015 905 6.086 R7 608 R1 023 512 R561 030

2015/16 Jul-15 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2015/16 Aug-15 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2015/16 Sep-15 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2015/16 Oct-15 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2015/16 Nov-15 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2015/16 Dec-15 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2015/16 Jan-16 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2015/16 Feb-16 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2015/16 Mar-16 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2015/16 Apr-16 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2015/16 May-16 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2015/16 Jun-16 R0 R5 858 R0 R5 858 R0 6.695 R8 369 R8 369 R2 511

2016/17 Jul-16 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2016/17 Aug-16 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2016/17 Sep-16 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2016/17 Oct-16 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2016/17 Nov-16 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2016/17 Dec-16 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2016/17 Jan-17 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2016/17 Feb-17 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2016/17 Mar-17 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2016/17 Apr-17 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2016/17 May-17 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2016/17 Jun-17 R0 R6 327 R0 R6 327 R0 7.231 R9 039 R9 039 R2 712

2017/18 Jul-17 R0 R6 770 R0 R6 770 R0 7.737 R9 671 R9 671 R2 901

2017/18 Aug-17 R0 R6 770 R0 R6 770 R0 7.737 R9 671 R9 671 R2 901

2017/18 Sep-17 R0 R6 770 R0 R6 770 R0 7.737 R9 671 R9 671 R2 901

2017/18 Oct-17 R0 R6 770 R0 R6 770 R0 7.737 R9 671 R9 671 R2 901

2017/18 Nov-17 R0 R6 770 R0 R6 770 R0 7.737 R9 671 R9 671 R2 901

2017/18 Dec-17 R0 R6 770 R0 R6 770 R0 7.737 R9 671 R9 671 R2 901

2017/18 Jan-18 R0 R6 770 R0 R6 770 R0 7.737 R9 671 R9 671 R2 901

2017/18 Feb-18 R0 R6 770 R0 R6 770 R0 7.737 R9 671 R9 671 R2 901

2017/18 Mar-18 R0 R6 770 R0 R6 770 R0 7.737 R9 671 R9 671 R2 901

2017/18 Apr-18 R0 R6 770 R0 R6 770 R0 7.737 R9 671 R9 671 R2 901

2017/18 May-18 R0 R6 770 R0 R6 770 R0 7.737 R9 671 R9 671 R2 901

2017/18 Jun-18 R0 R0 R14 306 R14 306 R0 3.597 R19 484 R19 484 R5 178

2018/19 Jul-18 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2018/19 Aug-18 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2018/19 Sep-18 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2018/19 Oct-18 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2018/19 Nov-18 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2018/19 Dec-18 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2018/19 Jan-19 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2018/19 Feb-19 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2018/19 Mar-19 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2018/19 Apr-19 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2018/19 May-19 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2018/19 Jun-19 R0 R0 R14 306 R14 306 R0 3.849 R20 849 R20 849 R6 543

2019/20 Jul-19 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2019/20 Aug-19 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2019/20 Sep-19 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2019/20 Oct-19 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2019/20 Nov-19 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2019/20 Dec-19 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2019/20 Jan-20 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2019/20 Feb-20 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2019/20 Mar-20 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2019/20 Apr-20 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2019/20 May-20 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2019/20 Jun-20 R0 R0 R14 306 R14 306 R0 4.118 R22 306 R22 306 R8 000

2020/21 Jul-20 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2020/21 Aug-20 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2020/21 Sep-20 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2020/21 Oct-20 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2020/21 Nov-20 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2020/21 Dec-20 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2020/21 Jan-21 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2020/21 Feb-21 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2020/21 Mar-21 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2020/21 Apr-21 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2020/21 May-21 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2020/21 Jun-21 R0 R0 R14 306 R14 306 R0 4.406 R23 866 R23 866 R9 560

2021/22 Jul-21 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

417

2021/22 Aug-21 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

2021/22 Sep-21 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

2021/22 Oct-21 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

2021/22 Nov-21 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

2021/22 Dec-21 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

2021/22 Jan-22 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

2021/22 Feb-22 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

2021/22 Mar-22 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

2021/22 Apr-22 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

2021/22 May-22 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

2021/22 Jun-22 R0 R0 R14 306 R14 306 R0 4.714 R25 534 R25 534 R11 228

2022/23 Jul-22 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2022/23 Aug-22 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2022/23 Sep-22 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2022/23 Oct-22 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2022/23 Nov-22 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2022/23 Dec-22 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2022/23 Jan-23 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2022/23 Feb-23 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2022/23 Mar-23 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2022/23 Apr-23 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2022/23 May-23 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2022/23 Jun-23 R0 R0 R14 306 R14 306 R0 5.044 R27 322 R27 322 R13 016

2023/24 Jul-23 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2023/24 Aug-23 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2023/24 Sep-23 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2023/24 Oct-23 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2023/24 Nov-23 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2023/24 Dec-23 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2023/24 Jan-24 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2023/24 Feb-24 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2023/24 Mar-24 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2023/24 Apr-24 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2023/24 May-24 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2023/24 Jun-24 R0 R0 R14 306 R14 306 R0 5.397 R29 234 R29 234 R14 928

2024/25 Jul-24 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2024/25 Aug-24 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2024/25 Sep-24 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2024/25 Oct-24 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2024/25 Nov-24 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2024/25 Dec-24 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2024/25 Jan-25 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2024/25 Feb-25 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2024/25 Mar-25 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2024/25 Apr-25 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2024/25 May-25 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2024/25 Jun-25 R0 R0 R14 306 R14 306 R0 5.775 R31 281 R31 281 R16 975

2025/26 Jul-25 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2025/26 Aug-25 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2025/26 Sep-25 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2025/26 Oct-25 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2025/26 Nov-25 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2025/26 Dec-25 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2025/26 Jan-26 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2025/26 Feb-26 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2025/26 Mar-26 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2025/26 Apr-26 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2025/26 May-26 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2025/26 Jun-26 R0 R0 R14 306 R14 306 R0 6.179 R33 470 R33 470 R19 164

2026/27 Jul-26 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2026/27 Aug-26 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2026/27 Sep-26 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2026/27 Oct-26 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2026/27 Nov-26 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2026/27 Dec-26 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2026/27 Jan-27 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2026/27 Feb-27 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2026/27 Mar-27 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2026/27 Apr-27 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2026/27 May-27 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2026/27 Jun-27 R0 R0 R14 306 R14 306 R0 6.612 R35 815 R35 815 R21 509

2027/28 Jul-27 R0 R0 R14 306 R14 306 R0 7.075 R38 323 R38 323 R24 017

2027/28 Aug-27 R0 R0 R14 306 R14 306 R0 7.075 R38 323 R38 323 R24 017

2027/28 Sep-27 R0 R0 R14 306 R14 306 R0 7.075 R38 323 R38 323 R24 017

2027/28 Oct-27 R0 R0 R14 306 R14 306 R0 7.075 R38 323 R38 323 R24 017

2027/28 Nov-27 R0 R0 R14 306 R14 306 R0 7.075 R38 323 R38 323 R24 017

2027/28 Dec-27 R0 R0 R14 306 R14 306 R0 7.075 R38 323 R38 323 R24 017

2027/28 Jan-28 R0 R0 R14 306 R14 306 R0 7.075 R38 323 R38 323 R24 017

2027/28 Feb-28 R0 R0 R14 306 R14 306 R0 7.075 R38 323 R38 323 R24 017

2027/28 Mar-28 R0 R0 R14 306 R14 306 R0 7.075 R38 323 R38 323 R24 017

2027/28 Apr-28 R0 R0 R14 306 R14 306 R0 7.075 R38 323 R38 323 R24 017

2027/28 May-28 R0 R0 R14 306 R14 306 R0 7.075 R38 323 R38 323 R24 017

2027/28 Jun-28 R0 R0 R0 R0 R0 7.075 R38 323 R38 323 R38 323

2028/29 Jul-28 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2028/29 Aug-28 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2028/29 Sep-28 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2028/29 Oct-28 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2028/29 Nov-28 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2028/29 Dec-28 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2028/29 Jan-29 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2028/29 Feb-29 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2028/29 Mar-29 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2028/29 Apr-29 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2028/29 May-29 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2028/29 Jun-29 R0 R0 R0 R0 R0 7.570 R41 004 R41 004 R41 004

2029/30 Jul-29 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2029/30 Aug-29 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2029/30 Sep-29 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2029/30 Oct-29 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2029/30 Nov-29 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2029/30 Dec-29 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2029/30 Jan-30 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2029/30 Feb-30 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2029/30 Mar-30 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2029/30 Apr-30 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2029/30 May-30 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2029/30 Jun-30 R0 R0 R0 R0 R0 8.100 R43 875 R43 875 R43 875

2030/31 Jul-30 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2030/31 Aug-30 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2030/31 Sep-30 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2030/31 Oct-30 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2030/31 Nov-30 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2030/31 Dec-30 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2030/31 Jan-31 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2030/31 Feb-31 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2030/31 Mar-31 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2030/31 Apr-31 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2030/31 May-31 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2030/31 Jun-31 R0 R0 R0 R0 R0 8.667 R46 946 R46 946 R46 946

2031/32 Jul-31 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2031/32 Aug-31 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2031/32 Sep-31 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2031/32 Oct-31 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2031/32 Nov-31 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2031/32 Dec-31 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2031/32 Jan-32 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2031/32 Feb-32 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2031/32 Mar-32 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2031/32 Apr-32 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2031/32 May-32 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2031/32 Jun-32 R0 R0 R0 R0 R0 9.274 R50 234 R50 234 R50 234

2032/33 Jul-32 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2032/33 Aug-32 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2032/33 Sep-32 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2032/33 Oct-32 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2032/33 Nov-32 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2032/33 Dec-32 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2032/33 Jan-33 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2032/33 Feb-33 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2032/33 Mar-33 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2032/33 Apr-33 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2032/33 May-33 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2032/33 Jun-33 R0 R0 R0 R0 R0 9.923 R53 750 R53 750 R53 750

2033/34 Jul-33 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

2033/34 Aug-33 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

2033/34 Sep-33 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

2033/34 Oct-33 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

2033/34 Nov-33 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

2033/34 Dec-33 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

2033/34 Jan-34 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

2033/34 Feb-34 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

2033/34 Mar-34 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

2033/34 Apr-34 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

2033/34 May-34 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

2033/34 Jun-34 R0 R0 R0 R0 R0 10.618 R57 514 R57 514 R57 514

418

COT LAND INCENTIVES

ESTIMATION

Client name:

CONTACT DETAILS

Physical address Postal address

Street address: Box No.

Surburb/town: Surburb/town:

City: City:

Postal code: Postal code:

Tel: Date issued: 30-Oct-2014

Cell: Estimated start date: 01-Jun-2015

Email: Estimated end date: 02-May-2028

INCENTIVES

Description Estimated amount

Bulk Services Contributions Rebate R457 157.22

Property Rates Rebate On Vacant Land R226 016.88

Property Rates Rebate On Developed Property R1 716 715.36

Total incentives R2 399 889.45

20 Year Overview of incentives

19%

9%

72%

Bulk services contribution rebate

R4

62

48

2

R7

0 2

98

R7

5 9

26

R8

8 7

75

R1

71

67

2

R1

71

67

2

R1

71

67

2

R1

71

67

2

R1

71

67

2

R1

71

67

2

R1

71

67

2

R1

71

67

2

R1

71

67

2

R1

57

36

6

20

14/1

5

20

15/1

6

20

16/1

7

20

17/1

8

20

18/1

9

20

19/2

0

20

20/2

1

20

21/2

2

20

22/2

3

20

23/2

4

20

24/2

5

20

25/2

6

20

26/2

7

20

27/2

8

20

28/2

9

20

29/3

0

20

30/3

1

20

31/3

2

20

32/3

3

20

33/3

4

419

Property Rates Policy

Effective Date – 1 July 2015

(As Amended)

420

MarieB1

Typewritten Text

ANNEXURE C

Rates Policy City of Tshwane Metropolitan Municipality Effective 1 July 2015

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PREAMBLE

WHEREAS the Constitution of the Republic of South Africa, entitles municipalities to impose rates on property in their areas, subject to regulation in terms of national legislation; AND WHEREAS the Constitution enjoins local government to be developmental in nature, in addressing the service delivery priorities of our country and promoting the economic and financial viability of our municipalities and in general to meet its’ obligation in terms of section 152 of the Constitution of the Republic of South Africa, 1996; AND WHEREAS there is a need to provide local government with access to a sufficient and buoyant source of revenue necessary to fulfil its development responsibilities; AND WHEREAS income derived from property rate is a critical source of revenue for municipalities to achieve their constitutional objectives, especially in areas that have been neglected in the past due to racially discriminatory, inadequate or inappropriate legislation and regulation; AND WHEREAS, it is essential that municipalities exercise their power to impose rates within a statutory framework that not only enhances certainty, uniformity and simplicity across the nation, but also accounts for historical imbalances and the rates burden on the poor; AND WHEREAS the Constitution of the Republic of South Africa confers on Parliament the power to regulate the exercise by municipalities of their fiscal powers; Now THEREFORE, the Council of the City of Tshwane Municipality and all its entities adopt the PROPERTY RATES POLICY as set out in this document.

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TABLE OF CONTENTS

1. Definitions

2. Guiding Principles

3. Determination of the criteria for the levying of different rates

3.1 Different categories of rateable properties

3.2 Levying of rates

3.2.1 Period for which rates may be levied

3.2.2 Amount due for rates

3.2.3 Liability for rates

3.2.4 Properties eligible to Rate Ratios

3.2.4.1 Farm / Smallholding Properties

3.2.4.2 Public Benefit Organisation properties

3.2.4.3 Independent Schools - Registered as Public Benefit Organisation

4. Exclusion from rates

5. Exemptions, Reductions and Rebates

5.1 Different categories of rateable properties:

5.1.1 Residential properties

5.1.2 Multiple use properties

5.1.3 Categories of properties not eligible to exemptions, reductions or rebates

5.1.4 Municipal property - Rateable

5.2 Different categories of owners of rateable properties:

5.2.1 Indigents Households

5.2.2 Pensioners

5.2.3 Physically and Mentally disabled

5.2.4 Owners temporarily without income

5.2.5 Grants-in-Aid

5.2.6 Defined Owners of Land Alienated by the Municipality after January 2015

5.2.7 Owners of Catalytic Investment Properties

6. Inspection of and Objections to the Valuation Roll

7. Date of Implementation

8. Disclaimer

9. Delegation of Power

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1. DEFINITIONS

In this policy, any word or expression to which a meaning has been assigned in the Act, bears

that meaning unless the context indicates otherwise, and any expression which denotes any

gender, includes the other gender or the singular only, also includes the plural and vice versa.

- “the Act” means the Local Government: Municipal Property Rates Act, 2004 (Act No. 6

of 2004) and “MPRA, 2004” shall have the same meaning;

- “Agricultural property” in terms of the Municipal Property Rates Regulations, means

property envisaged in section 8(2)(d)(i), (e), and (f)(i) of the MPRA, wherein:

Section 8(2)(d)(i) refers to farm properties used for agricultural purposes;

Section 8(2)(e) refers to farm properties not used for any purpose; and

Section 8(2)(f)(i) refers to smallholdings used for agricultural purposes;

- “business/commercial” as a property category for the levying of different rates means a

property used for the activity of buying, selling or trade in commodities or services and

includes any office or other accommodation on the same erf, the use of which is

incidental to such business and properties registered in township Title

- “category” means category in relation to properties for the purpose of levying different

rates; and category in relation to owners of properties for the purpose of granting

exemptions, rebates and reductions;

- “Chief Financial Officer” means the Chief Financial Officer of the Municipality

- “Constitution of the Republic of South Africa” means the Constitution of the Republic

of South Africa, 1996 (Act 108 of 1996);

- “Council” means the Council of the City of Tshwane;

- “Educational institutions” as a property category for the levying of different rates,

mean Private or Public primary and secondary schools, Universities, Colleges and

Crèche’s (regardless of whether subsidized or not), registered as educational institutions

as per applicable legislation;

- “farm property/smallholding” in relation to the levying of rates, and with reference to

the definition of agricultural property as contained in the Amended Municipal Property

Rates Regulations on the Rate Ratios between Residential and Non-residential

properties, means any farm property, agricultural property or smallholding not used for

any purpose; or used for bona fide farming and/or agricultural activity, meaning farm

property, agricultural property or smallholding that is used primarily for gain for purposes

of the cultivation of soils; for purposes of planting and gathering of crops, forestry in the

context of planting or growing of trees in a managed and structured fashion; the rearing of

livestock and game, or the propagation and harvesting of fish; and this excludes, the

use of a property for purposes of eco-tourism or for the accommodation of members of

the public for gain, or any portion that is used for the accommodation of visitors for gain;

the use of a property primarily for residential, other business and commercial or industrial

purposes; in respect of property on which game is reared, traded or hunted; or property

on which game or other animal is kept for sporting, domestic, or other recreational

purposes”;

- “grant-in-aid” means an additional grant awarded to persons who are in receipt of an old

age grant, disability grant or war veteran’s grant, and are unable to care for themselves;

- “improvement” means any building or structure on or under a property excluding-

(i) A structure constructed solely for the purpose of rendering the property suitable

for the erection of any immovable structure thereon; and

(ii) Buildings, structures and equipment or machinery referred to in Section 46(3) of

the Act;

- “Income Tax Act, 1962” means the Income Tax Act, 1962 ( Act No. 58 of 1962);

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- “independent school” as a property category for the levying of different rates means a

private school being a public benefit organisation of the kind referred to in items 4(a) of

Part I and 3(a) Part II of the Ninth Schedule of the Income Tax Act, 1962;

- “indigent” as a category of owner of property for the purpose of granting exemptions,

rebates and reductions, means any household that is legally resident in the RSA and

resides in the City of Tshwane’s juristic area, who due to a number of economic and

social factors are unable to pay Municipal basic services as per the City’s Indigent Policy;

- “Industrial” means a branch of trade or manufacturing, production, assembling or

processing of finished or practically finished products from raw materials or fabricated

parts, on so large scale that capital and labour are significantly involved. This includes

factories and any office or other accommodation on the same property, the use of which

is incidental to the use of such factory;

- “land reform beneficiary” in relation to a property, means a person who acquired the

property through the Provision of Land and Assistance Act, 1993, or the Restitution of

Land Rights Act, 1994, or holds the property subject to the Communal Property

Association Act, 1996.

- “land tenure right” means an old order right or a new order right as defined in section 1

of the Communal Land Rights Act, 2004 (Act No. 11 of 2004);

- “market value” in relation to a property, means the amount the property would have

realised if sold on the date of valuation in the open market by a willing seller to a willing

buyer;

- “mining” means any operation or activity for the purpose of extracting any mineral on, in

or under the earth, water or any mineral residue deposit, whether by underground or open

working or otherwise and includes any operation or activity incidental thereto;

- “MPRA” means the Local Government: Municipal Property Rates Act, 2004 (Act No. 6 of

2004);

- “multiple purpose” means a property that cannot be assigned to a single category due

to the different uses of such property in which event the property will be valued based on

the apportionment of uses in accordance with the applicable category of property in terms

of this policy;

- “municipal property” means any rateable or non-rateable property owned by the City;

- “Municipality” means the City of Tshwane Metropolitan Municipality established by

General Notice 6770 in Provincial Gazette Extraordinary 141 of 1 October 2000 in terms

of the Local Government: Municipal Structures Act, 1998 (Act No. 117 of 1998), and

subsequent proclamations and amendments thereof and the City shall have the same

meaning;

- “Newly rateable property” means any rateable property on which property rates were

not levied before the end of the financial year receding the date on which this Act took

effect, excluding:-

- (a) a property which was incorrectly omitted from a valuation roll and that reason

was not rated before that date, and

- (b) a property identified by the Minister by the notice in the Gazette where the

phasing in of a rate is not justified or

- (c) property that is the result of sub-division or consolidation of land or new

township establishment.

- “non-permitted use” as a property category for the levying of different rates, means any

use of property that is inconsistent with or in contravention with the permitted use of that

property in which event, and without condoning the non-permitted use thereof, the

property shall be valued as if it were used for such non-permitted purpose only;

- “occupier” means a person in actual occupation of a property, whether or not that

person has a right to occupy the property;

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- “owner”:

(i) in relation to a property referred to in paragraph (a) of the dentition of “property”

means a person in whose name ownership of the property is registered.

(ii) in relation to a right referred to in paragraph (b) of the definition of “property” means a

person in whose name the right is registered.

(iii) in relation to a land tenure right.

- “pensioner” as a category of owner of property for the purpose of granting exemptions,

rebates and reductions, for purposes of the rates policy and eligibility for old age rebate,

pensioner means any owner of rateable property who has reached the age of 60 years or

more, who receives a State pension as the main income during the Municipality’s

financial year;

- “permitted use” means the limited purposes for which the property may be used in

terms of-

(i) A condition of title;

(ii) A provision of the City’s applicable Town Planning or Land Use Scheme as

amended from time to time;

(iii) Any legislation applicable to any specific property or properties; or

(iv) Any alleviation of any such restriction;

- “Person” includes both a natural and a juristic entity as the case may be;

- “physically or mentally disabled” as a category of owner of property for the purpose of

granting exemptions, rebates and reductions, means a person who, owing to physical or

mental disability, is unfit to obtain by virtue of any service, employment or profession the

means needed to enable him or her to provide for his or her maintenance. (Social

Assistance Act, No. 6 of 2004);

- “property” means –

(a) immovable property registered in the name of a person, including, in the case of

sectional title scheme, a sectional title unit registered in the name of a person;

(b) a right registered against immovable property in the name of a person, excluding a

mortgage bond registered against the property;

(c) a land tenure right registered in the name of a person or granted to a person in terms

of legislation; or

(d) public service infrastructure;

- “protected area” as a property category for the levying of different rates, means an area

that is or has to be listed in the register referred to in section 10 of the National

Environmental Management: Protected Areas Act, 2003;

- “public benefit organisation (PBO)” as a property category for the levying of different

rates, means property owned by public benefit organisations and used for any specified

public benefit activity listed in item 1 (welfare and humanitarian), item 2 (health care), and

item 4 (education and development) of part 1 of the Ninth Schedule to the Income Tax

Act, 1962;

- “public service infrastructure” as a property category for the levying of different rates,

means publicly controlled infrastructure as defined by the MPRA;

- “public worship” as a property category for the levying of different rates, means

property registered in the name of and used primarily as a place of public worship by a

religious community, including an official residence registered in the name of that

community which is occupied by an office-bearer of that community who officiated at

services at that place of worship. Property used primarily as an office of a religious

community or property used as parking facilities, camping sites not operated for gain and

cemeteries for that religious community will also receive a 100% rebate for rates.

- “rate” means the cent in the Rand on the market value of a rateable property that may

be levied on the ratepayer as may be determined by the Council from time to time during

the City budget process;

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- “rateable property” means property on which the City may levy a rate subject to the

criteria to be applied as defined in this policy, excluding property fully excluded from the

levying of rates in terms of Section 17 of the MPRA;

- “rate ratio” means a prescribed ratio to the rate as referred to in section 19(1)(b) of the

MPRA;

- “rebate” in relation to a rate payable on a property, means a discount granted in terms of

Section 15 of the MPRA, on the amount of the rate payable on the property;

- “reduction” in relation to a rate payable on a property, means the lowering in terms of

Section 15 of the MPRA, of the amount for which the property was valued and the rating

of the property at that lower amount;

- “residential property” as a property category for the levying of different rates, means a

dwelling which form a living unit that is exclusively used for human habitation purposes

only, or a multiple number of such units on a property, including old-age homes,

retirement villages and life right schemes. But for purposes of this rates policy, this

definition excludes hostels, communes, boarding and lodging undertakings, places of

instruction, hotels, guesthouses, and any vacant land irrespective of its zoning or

intended usage;

- “section title unit” means a section of a building together with its undivided share in the

common property apportioned in accordance with the participation quota of the section;

- “Special rating area” means a special rating area approved by the Council in

accordance with the provisions of section 22 of the Property Rates Act.

- “State-owned properties” as a property category for the levying of different rates,

means property owned and exclusively used by an organ of state, excluding farm

properties used for residential or agricultural purposes or not in use and properties owned

by parastatals or public entities;

- “state trust land” means land owned by the state –

(i) in trust for persons communally inhabiting the land in terms of a traditional system of

land tenure;

(ii) over which land tenure rights were registered or granted; or

(iii) which is earmarked for disposal in terms of the Restitution Land Rights Act, 1994

(Act No. 22 of 1994);

- “vacant land” as a property category for the levying of different rates, means any land,

other than farm property and / or smallholding, where no immovable improvements have

been erected, and whereas immovable improvements according to the City’s Town

Planning Scheme, the Land Use Rights and By-Laws, means permanent structures on a

property, that have been erected in accordance with approved plans by the local authority

and the issuance of a Certificate of Occupancy in terms of the City’s Building

Regulations”.

2. GUIDING PRINCIPLES

This Property Rates Policy is guided by the following principles:

(a) Equity, i.e. that all categories of property and categories of owners be treated equitable in

relation to each other

(b) Affordability for the taxpayer, i.e. that the rate policy should take into account issues of

affordability across categories of owners

(c) Poverty Alleviation, i.e. that the rate policy should facilitate poverty alleviation within the

context of the mechanism at its disposal

(d) Social and Economic Development, i.e. that the rate policy should be cost efficient and

should enhance the financial sustainability of the municipality

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(e) Financial sustainability, i.e. that the rate policy should utilize the mechanism at its

disposal to encourage the development of property in line with the socio-economic

development needs and goals of the municipality.

(f) Cost efficiency, i.e. That the administrative cost related to rate policy is minimal taken into

consideration amounts required to finance exemptions, rebates, reductions and phase –in

of rates as approved by the municipality.

(g) Community Participation, i.e. that municipality will in amending this policy commits itself to

a process of community participation and will engage interested parties and structures

such as ratepayers’ organisations and ward committees.

(h) Encourage development of property in the City, that the rate policy does not discourage

improvements of properties within jurisdiction area of the municipality

(i) Access to collective municipal goods and services such as but not limited to; roads,

medical clinics, traffic infrastructure, fire fighting facilities, libraries, parks, recreational and

sports facilities.

(j) Access to basic and other municipal services such as but not limited to; water, sewerage,

electricity, waste removal.

3. DETERMINATION OF THE CRITERIA FOR THE LEVYING OF DIFFERENT RATES


In this rates policy, the determination of property categories of rateable property

for the purpose of levying different rates, was determined according to the

following criteria:

o Use of the property

o Permitted use of the property

The municipal valuer of the City will be responsible for the categorising of

rateable properties in accordance with this policy and the maintenance thereof,

and any change in the actual use of the property, may result in a change of

categories.

Categories of rateable property for purposes of levying differential rates as

informed by the criteria are determined as follows:

o Residential properties

o Business and commercial properties

o Educational Institutions

o Industrial properties

o Mining

o Independent schools ( Registered as Public Benefit Organisations)

o Municipal properties

o State-owned properties

o Public Service Infrastructure

o Agricultural properties

o Non-permitted use

o Protected Areas

o Public Worship

o Vacant land

o State Trust land

o Public Benefit Organisation

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3.2 Levying of rates

3.2.1 Period for which rates may be levied

When levying rates, a municipality must levy the rate for a financial year, and this rate

lapses at the end of the financial year for which it was levied.

(a) The levying of rates must form part of a municipality’s annual budget process;

and a municipality must annually at the time of its budget process review the

amount in the Rand of its current rates in line with its annual budget for the next

financial year.

(b) A rate levied for a financial year may be increased during a financial year only as

provided for in Section 28(6) of the Municipal Finance Management Act.

(c) A rate becomes payable as from the start of a financial year.

3.2.2 Amount due for Rates

The Municipality shall as part of its annual operating budget, determine a rate in the

rand for every category of rateable property.

Rates are levied in accordance with the MPRA as an amount in the Rand on the

market value of all rateable property as reflected in the valuation roll and any

supplementary valuation roll.

3.2.3 Liability for Rates

A rates levied by the Municipality on a property must be paid by the owner of the

property.

Rates will be levied monthly.

If an amount due for rates levied is unpaid by the owner of the property, the City

may recover the amount from the tenant of occupier of the property.

The amount due for rates may be recovered from the agent of the owner.

Where the rates levied on a particular property have been as a result of a

supplementary valuation made in terms of Section 78(1) of the MPRA, these

rates will be payable with effect from either of the dates as contemplated in

section 78(4) (a), (b), (c) or (d) of the MPRA.

Recovery of rates due will be in accordance with the City’s Collection Policy

(credit and debt control).

3.2.4 Properties eligible to Rate Ratios

3.2.4.1 Agricultural Properties

The rate applicable on agricultural property as contained in the definition of farm

property, and as prescribed by the Municipal Property Rates Regulations which took

effect from 1 July 2009:

The ratio in relation to residential property is:

Residential property 1:1 Agricultural property 1:0.25

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3.2.4.2 Public Benefit Organisation properties

The rate applicable on property registered as Public Benefit Organisation, as

prescribed by the Amended Municipal Property Rates Regulations published in

Government Notice No. 33016 of 12 March 2010 that took effect on 1 July 2010, may

not exceed the ratio to the rate on residential properties where:


Residential property 1:1 Public Benefit Organisation property 1:0.25

3.2.4.3 Independent Schools - Registered as Public Benefit Organisation

The rate applicable on Public Benefit Organisation property, as prescribed by the

Amended Municipal Property Rates Regulations published in Government Notice No.

33016 of 12 March 2010 that took effect on 1 July 2010, may not exceed the ratio to

the rate on residential properties where:


Residential property 1:1 Public benefit organisation property 1:0.25

4. EXCLUSION FROM RATES

The City will not levy rates on the following:

(i) Public Service Infrastructure

(ii) On those parts of a special nature reserve, national park or nature reserve within the

meaning of the Protected Areas Act, or of a national botanical garden within the

meaning of the Protected Areas Act, or of a national Environmental Management:

Biodiversity Act, 2004, which are not developed or used for commercial, business,

agricultural or residential purposes;

(iii) On mineral rights within the meaning of paragraph (ii) of the definition of “property” in

section 1 of this rates policy;

(iv) On a property belonging to a land reform beneficiary or his or her heirs, provided that

this exclusion lapses ten years from the date on which such beneficiary’s title was

registered in the office of the Registrar of Deeds;

(v) On the first R15 000 of the market value of a property assigned in the valuation roll or

supplementary valuation roll of a municipality to a category determined by the

municipality For residential properties; and for properties used for multiple purposes,

only on the component of the property that is used for residential purposes.

(vi) On a property registered in the name of and used primarily as a place of public

worship by a religious community, including an official residence registered in the

name of that community which is occupied by an office-bearer of that community who

officiates at services at that place of worship; and

(vii) The property exclusively used and/or occupied by the City.

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In an event of any change in use, ownership and/or status of any nature that may

affects the exclusion of rates hereof during a financial year, the beneficiary in receipt

of such exclusion from rates must notify the municipality and immediately becomes

liable for any rates payable on the property, effective from the date such change may

have occurred.

5. EXEMPTIONS, REDUCTIONS AND REBATES

Exemptions, Reductions and Rebates will apply to specific categories of properties and

specific categories of owners of properties in the following manner:


5.1.1 Residential Properties

In addition to the impermissible rate on the first R15 000 of the market value of

specific categories of a property as referred to in paragraph 4(v) above, a further

R60 000 reduction on the market value of a property will be applicable;

Residential property shall include smallholdings unless the owner can provide

sufficient proof to the Chief Financial Officer that he/she/it is conducting bona fide and

sustainable farming activities on such property; provided that the keeping of animals

or plants for sports and / or recreational activities shall not be deemed to be bona fide

use for agricultural purposes; provided further any such activities that are merely

incidental to the primary use of the property shall not be taken into account. In its

exercising as to whether proof is provided the Chief Financial Officer shall inter alia

take the following into account in exercising its’ discretion:

a) Income and expenditure statements

b) The actual primary use of the property

c) Provision of an income Tax Clearance Certificate issued by the South African

Receiver of Revenue in respect of such agricultural activities.

5.1.2 Multiple use properties

Properties in this category will be granted a reduction, rebate and/or exemption applicable in

accordance with the apportionment of the value in use in respect of such a property.

5.1.3 Categories of properties not eligible to exemptions, reductions or rebates

(a) Business and Commercial property

(b) Independent Schools not registered as PBO’s

(c) Industrial Property

(d) Non-permitted Use

(e) Vacant land irrespective of zoning, except agricultural property, land alienated by the

Municipality after January 2015 and catalytic investment properties.

(f) State owned property (excluding government residential property)

5.1.4 Municipal property – Rateable

Properties in this category will be granted a reduction, rebate and/or exemption applicable

only in accordance with the use of such a property.

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5.2 Different categories of owners of rateable properties

The following owners of rateable property may be granted further rebates on rates as

hereunder stipulated

5.2.1 Indigent households

Indigent as defined in the Municipality’s indigent policy, 100% rebate will be granted to

registered indigents in terms of the Indigent Policy of the City.

5.2.2 Pensioners

(a) A further maximum/total rebate of 50% (on remaining property tax, after the

applicable residential rebates have been granted) will be granted to owners of

residential rateable property, who have reached the age of 60 years or more during

the financial year, subject to total gross income of the applicant and/or his/her

spouse, if any, not to exceed an amount equal to twice the annual state pension as

approved by the National Government for a financial year, which amount may be

reviewed during the City’s annual budget process;

(b) A further maximum/total rebate of 40% (on the remaining property tax , after the

applicable residential rebates have been granted) will be granted to owners of

residential rateable property, who have reached the age of 60 years or more during

financial year , subject to joint income of the applicant and/or his/her spouse if any,

not to exceed R130,000 for a financial year which may be reviewed during the City’s

annual budget process;

(c) The rateable property concerned must be occupied only by the applicant and his/her

spouse, if any, and by dependants without income;

(d) The applicant must submit proof of his/her age and identity and proof of annual

income from a state pension;

(e) The applicant’s account must be paid in full, or if not, an arrangement to pay the debt

should be in place; and

(f) The property must be categorised as “residential”.

5.2.3 Physically or mentally disabled

(a) A further maximum/total rebate of 50% will be granted to owners of residential

rateable property, who are physically and mentally disabled, subject to total gross

annual social pension for a financial year, which amount may be reviewed during the

City’s annual budget process;

(b) A further maximum/total rebate of 40% will be granted to owners of residential

rateable property, who are physically and mentally disabled, subject to total gross

income of the applicant and/or his/her spouse, if any, that exceeds an amount equal

to twice the annual social pension for a financial year, but not to exceed R130, 000.00

which amount may be reviewed during the City’s annual budget process;

(c) The rateable property concerned must be occupied only by the applicant and his/her

spouse, if any, and by dependents without income.

(d) The applicant must submit proof of his/her identity, proof of certification by a medical

Officer of Health and also proof of annual income from a social pension;

(e) The applicants’ account must be paid in full, or if not, an arrangement to pay the debt

should be in place; and

(f) The property must be categorised as “residential”.

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5.2.4 Owners temporarily without income

The Indigent criteria may be applied temporarily on an approved application in terms of the

Indigent Policy of the City of Tshwane.

5.2.5 Grants-in-Aid

The Municipality may award a 100% grant-in-aid on the assessment rates of rateable

properties of the classes hereunder indicated, and after the owner of such property has

applied to the Chief Financial Officer in the prescribed format for such grant and the

application hereof approved.

Should there arise dissatisfaction in respect of the evaluation result of the application, the

matter may be referred to the City Manager of the Council for further review.

The following classes of rateable properties are referred:

rateable property registered in the name of an institution or organisation in terms of

the Non-profit Organisations Act, 1997 (Act No. 71 of 1997);

hospitals, clinics and institutions for mentally ill persons which are not operated with

the intention to make profit;

cemeteries and crematoriums which are registered in the names of private persons

and which are used exclusively for burials and cremations, as the case may be;

museums, art galleries, libraries and botanical gardens which are registered in the

names of private persons and which are open to public, whether admission is

charged or not;

rateable property registered in the name of a trustee or any organisation which is

being maintained for the welfare of war veterans as defined in Section 1 of the Social

Aid Act (House of Assembly), 1989 (Act No. 37 of 1989),

sports grounds used for the purposes of amateur sport and any social activities which

are connected with such sport;

rateable property registered in the name of the Boy Scouts, Girl Guides, Sea Scouts,

Voortrekkers or any organization which is, in the opinion of the municipality, similar or

any rateable property let by a municipality to any such organisation;

rateable property registered in the name of a declared institution as defined in Section

1 of the Cultural Institutions Act, 1969 (Act No. 29 of 1969), or the Cultural Institutions

Act (House of Assembly), 1989 (Act No. 66 of 1989.

A grant-in-aid granted in this regard shall not exceed the amount which may be levied as a

rate in any financial year in respect of the rateable property concerned.

All reductions and rebates are subject to application and approval for such rebates or

reductions as the case may be.

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5.2.6 OWNERS OF LAND ALIENATED BY THE MUNICIPALITY AFTER JANUARY 2015

Defined Owners of land alienated by the Municipality will be granted rebates in terms of the

Development Investment Incentives Policy of the City.

5.2.7 OWNERS OF CATALYTIC INVESTMENT PROPERTIES

Owners of Catalytic Investment Properties will be granted rebates in terms of the

Development Investment Incentives Policy of the City.

6. INSPECTIONS OF AND OBJECTIONS TO THE VALUATION ROLL

(a) Once the Council has given notice that the valuation roll is open for public inspection,

any person may within the period as stated in the notice, inspect the roll and lodge an

objection with the Municipal Manager against any matter reflected in, or omitted from

the roll.

(b) An objection must be in relation to a specific individual property and not against the

valuation roll as such.

(c) The lodging of an objection does not defer liability for payment of rates beyond the

date determined for payment.


This rates policy takes effect from 1 July 2015 and will be reviewed annually.

8. DISCLAIMER

A rate cannot be challenged on the basis of non-compliance with the rates policy and must be

paid in accordance with the required payment provisions.

Where a ratepayer believes that the Council has failed to properly apply the provisions of the

rates policy, he/she may raise the matter with the Municipal Manager of the City.

9. DELEGATION OF POWER

Safe as otherwise provided for in this Property Rates Policy, the Chief Financial Officer shall

be empowered to apply and administer all powers pursuant thereto.

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