FOCUS & SCOPE OF THE INCENTIVE POLICY
The Incentive Policy focuses specifically to attract additional investments from new and existing investors to Nelson Mandela Bay in the following key sectors as identified in the NMBM EGDS:
- Manufacturing sub-sectors: fuel, petroleum, rubber products, wood and related products
- Automotive manufacturing sub-sector
- Tourism and hospitality
- Other knowledge and information sectors (incl. BPO)
The Incentive Policy covers the whole metro, but special focus is on the key economic development nodes as identified in the new NMBM Spatial Development Framework (SDF). Key development nodes in the NMB area include the Port Elizabeth CBD, NMBM Industrial areas, Coega IDZ and Uitenhage-Despatch.
The Incentive Policy is directed at new medium to large investments, as defined by the National Small Business Amendment Act (2003), i.e. new investments that will create 50 or more permanent jobs and have minimum asset values of between R2 million and R5 million, depending on which sector the business operates.
TYPES OF INCENTIVES OFFERED
- Joint Financing of Feasibility Study and/or Business Plan Development
- Rebate on Municipal Building Plan Approval Costs for Approved Investments
- Discounts on rates and services for new investments
- Discount on Municipal Land and Buildings
JOINT FINANCING OF FEASIBILITY STUDY &/OR BUSINESS PLAN DEVELOPMENT
There are a number of potential economic development projects identified for Nelson Mandela Bay at the NMBM Growth and Development Summit and in the NMBM EGDS, as identified in Section 4. However, these projects may require more detailed feasibility studies to attract investors. In addition, any local investors have ideas and/or rights to potentially large investment opportunities, but lack the funds to undertake detailed feasibility studies and/or business plans.
The NMBM Investment Facilitation Unit should partner with other organisations and enterprises to provide some financial support for the development of business plans and feasibility studies of potential / new investments where such investments are deemed beneficial to the local economy and within the targeted sectors of the respective municipality. The contribution by the NMBM is dependent on the availability of funds and is limited to R50,000 or 50% of the total cost of developing the business plan and/or , whichever is the lowest. The investor must approach the NMBM individually to apply for this incentive.
REBATE ON MUNICIPAL BUILDING PLAN APPROVAL COSTS FOR APPROVED
The municipality will provide a 100% rebate on approved investments for the approval costs for building plans submitted by investors to the municipality. This will not apply to residential investments or investments on land zoned for residential development. The rebate only applies if:
• The business also owns the premises on which the development is set to take place
• The business has signed at least a 10 year lease agreement for premises in an area in NMB
identified for urban renewal
The rebate does not apply to any additional costs or penalties that the developer may incur when submitting the building plans.
DISCOUNTS ON RATES & SERVICES FOR NEW INVESTMENTS
The first few years of any new investment faces significant cash flow challenges with high capital expenditure costs, low but fast growing income levels, and relative low levels of efficiency in many processes of the new enterprise, amongst others. The aim of this incentive is to lower the start-up costs and initial utility expenses of a new investment to improve cash flow and survival rate. The municipality recovers this investment through higher rates and utility services income in future.
The municipality will provide discounts on municipal services and/or costs to new business investments, or expansion of existing investments, for a limited period (maximum five (5) years) following such investments. The municipal services and rates eligible for discounts are:
• Refuse removal
The specific discounts are:
Year 1: 80% of the relevant municipal services account
Year 2: 60% of the relevant municipal services account
Year 3: 40% of the relevant municipal services account
Year 4: 20% of the relevant municipal services account
Year 5: 0% of the relevant municipal services account (i.e. normal rates apply)
In addition, the full basic service connection fees for electricity, water and sewerage will be refunded on application approval. However, the developer remains liable for the cost of providing and installing cables and municipality owned equipment on the relevant premises for electricity, sewerage and water connections if these are absent or not to the specifications of the developer.
These discounts are similar to those applied by some municipalities in South Africa. The following restrictions apply to these discounts:
- Discounts will only apply where the Nelson Mandela Bay Municipality is the utility service provider.
- Discounts only apply to the municipality’s part of these costs, e.g. it only applies to the NMBM portion of overall electricity costs and does not apply to the basic costs at which the municipality purchases electricity from Eskom.
- Discounts will only apply if the applicant is also the owner of the premises from which the business operates.
Where there are no services at the identified investment site and additional service infrastructure is required for the investment to take place, the NMBM will assist the investor in leveraging the necessary resources such as applications for the DTI’s Critical Infrastructure Programme (C/F Section 2.3) or make special application to the Municipal Infrastructure Grant (MIG) fund at the National Treasury.
It is recommended that the deposits investors must submit to the municipality in order to receive its services be recovered over a period of 1 year, i.e. twelve equal monthly deposits or 4 quarterly deposits. This only applies to applicants that qualify for the discount on rates and services.
DISCOUNT ON LANDS & BUILDINGS
The NMBM has strategic buildings and parcels of land available that might be offered to investors at a reduced rate to ensure the investment takes place. However, the NMBM is bound by the restrictions of the Municipal Finance Management Act (MFMA). The MFMA requires that municipalities, in selling/letting of assets (including land) non-essential for service delivery, have to consider the fair market value of the asset, as well as the economic and community value to be received from selling/letting the asset. The process has to be open and transparent, and aligned with the respective municipality’s supply chain management policy. Selling/letting of municipal land would have a direct cost implication for the municipality if land is sold under market value, e.g. if it is deemed the economic value the investment would generate for the local area exceeds the financial loss to the municipality.
The NMBM will negotiate with the relevant investor about possible discounts on selling/letting of municipal land. Private land sold directly to new investors is not included in this incentive. As per MFMA requirements, the NMBM must determine the economic value of the investment in deciding whether to grant a discount and the size of the discount.
Selling municipal land/buildings to approved investors: the discount will not exceed 25% of the cost of the land and only applies to the purchase price of the land. The economic value of the capital expenditure (excluding the purchase value of the land) of the investment must be at least double the size of the discount of the land.
Rental of municipal land/buildings to investors: the discount will only apply to rental agreements of 5 years or longer and is limited to the first 2 years of the operation. The rental discount for municipal buildings or land is only applicable if it’s economic value of the operational expenditure (excluding the rental fees) in the first three years is at least double the value of the discount in those particular years. The respective rental discount is:
Year 1 40% off the market rental price
Year 2 20% off the market rental price
Year 3+ Normal market rental price applies
OTHER INVESTMENT INCENTIVES
The Department of Trade and Industry (DTI), as well as
other government departments at a national level, developed a list of side
supply measures to be used in accordance with the government’s incentives and initiatives
programme. These side measures range from
direct grants, production support, export promotion, human skills development,
infrastructure and strategic investment support, tax allowances and duty
drawback facilities to name a few. The
regional (provincial) government also focuses on specific support measures such
as investment promotion and investor support services, while local government
focuses on specific requirements, including location and general support
services. The incentives (tabled below) are available to South African and
foreign investors alike.
For more information visit: www.thedti.gov.za