Top button

Top button

Dr J P Reinhardt, Chief Director of South Africa's Regional Industrial Development department, comments on the Government's strategies for encouraging industrial growth

What are the Board's long-term goals, and what are the biggest obstacles that need to be overcome to achieve them?

We aim to raise fixed investment in sustainable, competitive manufacturing concerns. This will allow us to restructure domestic manufacturing towards international competitiveness; facilitate a higher degree of labour absorption; and encourage small and medium-sized manufacturing.

Our major challenge for the new South Africa is to fully exploit the opportunities now offered to us and to become a world player by converting from an inward-oriented protectionist industrial policy to an outward directed policy based on promoting competitive, sustainable industrialisation. Our major advantages are the unique combination of resources, excellent infrastructure and strong fiscal and economic discipline.

What part does the Board play in the Government's Macro-economic commitment to growth, employment and redistribution?

The Board administers the newly announced Tax Holiday Scheme and the Small/Medium Manufacturing Programme as part of the Government's strategy for Growth, Employment and Redistribution (GEAR), to attract competitive, sustainable industry.

What incentives are there for international and private sector investors to get involved with South African industries? Are these incentives working?

The Tax Holiday Scheme and the SMMDP must be seen as key elements in a broad and coherent set of industrial development programmes. That includes the Spatial Development Initiatives, SMME development programmes, Regional Industrial Location Study (RILS), Industrial Development Coporation's Development Finance Programmes, and the Cluster Initiative Programmes to name a few of the supply sided measures aimed at growth, employment and redistribution.

1 - The Tax Holiday Scheme consists of three elements
- Spatial component
- Manufacturing sector component
- Human resource component
The tax holiday status of a company is for a period of:
a) Two consecutive years of asssssment where one component has been certified
b) Four consecutive years of assessment where two components have been certified
c) Six consecutive years of assessment where three components have been certified

A qualifying company is a company or close corporation that incorporated on or after 1 October 1996 with investment in land and buildings, plant and equipment of more than R3 million. The Tax Holiday status of a qualifying company shall commence as from the first year of assessment during which the qualifying company derives a taxable income. Further the company shall not enjoy a Tax Holiday status after the expiry period of 10 assessment years.

"Business believes the Employment Bill promotes ...rigidity and not flexibility"

Foreign Investment Grant

To compensate the foreign investor for the transport cost of new machinery from abroad to South Africa a Foreign Investment Scheme is also available under the Tax Holiday Scheme. Foreign investors must prove at least a fifty per cent shareholding in a qualifying company. The maximum grant is US$250,000.

2 - The Small/Medium Manufacturing Development Programme (SMMDP) consists of four elements
i) A tax free Establishment Grant for three years calculated as 10.5 per cent of the qualifying investment; qualifying investment being land and buildings plant and equipment.
ii) A tax free Profit/Output incentive for an additional one year calculated as 25 per cent of the profit before tax. The Profit/Output incentive should not exceed the annual establishment grant.
iii) Additional two years Profit/Output incentive for compliance with the Human Resouce component, being the labour renumeration expressed as a percentage of the value added ratio which must exceed 55 per cent.
iv) Foreign Investment Grant for foreign investors with at least a fifty per cent shareholding in a qualified company. The grant is to compensate the investor for the transport cost of new machinery and equipment from abroad to South Africa. The maximum grant is US$50,000.

The Tax Holiday Scheme and SMMDP were only launched on 26 November 1997, so it is still relatively early days to predict whether they are working. However the reaction of the private sector has been extremely encouraging as numerous enquiries are handled on a daily basis with respect to information on the programmes as well as requests for application forms.

Unemployment remains high despite several years of economic expansion. What contribution is the Board making towards the goal of creating more jobs?

Special provisions have been made in the Tax Holiday and SMMD Programmes to encourage job creation. For example the Human Resource Intensity Component which provides a two year Tax Holiday and a two year Profit/Output incentive for the SMMDP. Furthermore, one of the criteria employed in the selection process for targeting manufacturing in terms of the two year Tax Holiday manufacturing component is job creation potential.

I believe all the states and provinces have their own marketing arms competing for the same funds. Is this not confusing for foreign investors considering investing in South Africa? And can the Board offer objective advice and assistance in this respect?

A new parastatal called Investment South Africa (ISA) was specifically formed to co-ordinate internal and external investment recruitment by Central Government and the Provinces. ISA closely interacts with all provinces with regard to marketing the country.

Provinces could however introduce their own incentives on a local authority basis, for example, reduced local taxes on industrial land, subsidised factory space, and so on.

What progress has been made in the fields of industrial relations? And has business confidence in this area improved in your view?

Some of the components of industrial relations are:
- The Labour Relations Act (November 1996)
- Basic Conditions of Employment Bill
- Child labour (the International Labour organisation is looking into this matter)
- Equal opportunities and affirmative action
- Occupational Health and Safety Act

Basic Condition of Employment Bill

This Bill is presently under discussion between Business South Africa and COSATU. Some of the issues of the Bill being discussed between the two parties are:
- the number of hours of work per week (40 hours)
- conditions for striking
- maternity leave (six months paid)
- overtime pay

Business believes that the basic conditions of the Employment Bill promotes centralised collective bargaining and not collective bargaining on its own; a right to strike; an organisational right to form unions; rigidity and not flexibility Business also feels that this Bill would not lead to job creation if the number of working hours per week is reduced.

According to the Department of Labour certain industries are already on a 40 hours work week.

Top  |   Back  |  Index  |  Feedback

©Kensington Publications 1997