Review of investment incentives must make SA’s carrots tastier
As funds to attract companies become scarcer, government must focus on what works best, writes Duane Newman
The government is conducting an important review of its basket of investment incentives, but the message from Finance Minister Pravin Gordhan’s recent budget is not encouraging — especially as references were made to World Bank studies stating that tax incentives are not effective for developing countries. The finance minister made it clear that there would be an overall reduction in the incentive pie. And that it would be carved up in a different way. He was vague about what will happen to the structure of support for manufacturing, but more details are expected to emerge in the months to come once the national review of incentives has been completed. SA’s grant and tax incentives cost the taxpayer in the order of R20bn a year, and at a time of strong competition for resources, the government sees a need to assess what benefit, if any, they bring to the economy. When they work well, incentives are a way of rolling out red carpets to replace red tape, to attract investment, both loc...
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