Tax incentives created thousands of new jobs

© Kurhan – 123RF.com

This emerged from a briefing on Tuesday by the economic and employment cluster of ministers chaired jointly by Rural Development and Land Reform Minister Gugile Nkwinti and Science and Technology Minister Naledi Pandor.

The Department of Trade and Industry's incentive programme incorporates the automotive, clothing, critical infrastructure, film and business-process outsourcing sectors, as well as special economic zones and the manufacturing-competitiveness enhancement programme.

The incentive expenditure of the department is sometimes criticised for being a waste of money, but Trade and Industry Minister Rob Davies told MPs the World Bank had noted in an update report on SA the country's investment tax incentives "have contained job destruction in industrial sectors" and "have encouraged additional investment in agriculture, construction, manufacturing, trade and other services".

The job multipliers of investment in manufacturing were another strong argument in favour of the incentives, Davies said in a briefing to Parliament's trade and industry committee on the significance of President Jacob Zuma's state of the nation address for his department.

The World Bank report also concluded that the additional investment generated by tax incentives exceeded the revenue foregone by the government in granting them. It recommended that incentives be reoriented towards those industrial sectors that would create additional jobs at no additional cost to the fiscus.

Davies said that the 2017-18 budget allocated R5.5bn for incentives with R16.9bn for the three years of the medium-term expenditure framework.

Special economic zones are allocated R605m in 2017-18 and manufacturing development incentives R3.6bn.

The department plans to accelerate the black industrialist programme to achieve the three-year target of financing 100 industrialists by the end of 2017-18. To date, 27 black industrialists have been supported at R577m, which Davies said had resulted in R2.5bn in privatesector investment.

InvestSA, which would be launched in March, would promote and facilitate investments. The Cabinet had identified about 40 projects that could be created over the next few years.

On trade, Davies said the framework agreement for the tripartite free-trade area incorporating 26 African countries had been finalised and would be presented to Parliament for ratification in the second half of 2017. Tariff negotiations with the East African Community and Egypt were far advanced.

The aim was to conclude them well before the end of 2017. The tripartite free-trade area is a building block for the envisaged continental free-trade area for which a legal framework would hopefully be concluded in 2017.