The National Treasury has proposed a 15% corporate income tax rate for businesses in some of South Africa’s special economic zones (SEZs).

In Budget documents, tabled in Parliament by Finance Minister Pravin Gordhan on Wednesday, he indicated he would authorise tax incentives in certain SEZs in the country after consultation with Trade and Industry Minister Dr Rob Davies.

The incentives included a tax deduction for employing workers earning less than R60 000/y, as well as an accelerated depreciation allowance for buildings in these areas, which would be based on the existing regime for urban development zones, to encourage investment in industrial premises.

Gordhan stated that government’s expenditure on economic services in 2013/14 would amount to R48-billion, including R5.3-billion for its Manufacturing Competiveness Enhancement Programme and R2.9-billion for SEZs.

Meanwhile, government also proposed that the R14-million turnover threshold for small business corporations be increased to R20-million and that the graduated tax structure for such corporations be revised.

The current nontaxable income threshold of below R63 556/y, would be increased to below R67 111/y in 2013/14.

Similarly, the next bracket of R63 557/y to R350 000/y, where small businesses currently had to pay 7% in yearly taxes, would move up to between R67 112/y and R365 000/y.

The last bracket, which applied to small businesses that earned more than R350 000/y and currently had to pay 28% of their yearly income to the tax man, would be split in two. Businesses earning between R365 001/y and R550 001/y would have to pay 21% in yearly taxes, while those earning more than R550 000/y would pay 28%.

Meanwhile, the National Treasury pointed out that the application of the same rate structure to the trading activities of public-benefit organisations would also be explored.

“The feasibility of special support for social-impact businesses, which have profit-making and social objectives, is being explored. Encouraging investment in such businesses is in line with the policy objectives of small business development, social solidarity and job creation,” it said.

Last year, Cabinet approved the SEZ Bill to address challenges in the country's Industrial Development Zone (IDZ) model. However, Davies indicated that IDZs would not be scrapped, but would exist as SEZs under the new Bill.

MANUFACTURING STATS

Overall manufacturing output in South Africa strengthened during the fourth quarter of 2012, but increased marginally by 2.1% during the year, despite relatively strong growth in the petrochemicals, wood and paper, and food and beverages sectors.

Manufacturing production had fallen in industries closely linked to mining.

The 2013 SBP SME Growth Index, which surveyed 500 established small and medium-sized businesses that employ ten or more workers in the manufacturing and business services sector in South Africa, revealed that over 70% of firms experienced 2012 as a difficult year, with a small average increase in turnover of 9% and declining employment.

More than 25% of firms identified rising input costs, such as electricity and municipal rates and services, as constraints. Other challenges included poor work ethic, an increasing regulatory burden, inadequate sources of finance and skills shortages.

Concentrated product markets also inhibited small, medium-sized and micro enterprise growth.