development, be it tenants or an investor-buyer; while supply-side refers to the actual construction of new developments. He contends that the supplyside incentives are a number of steps along in the development process. Trevilion confirms this, stating that: “In the end nothing changes unless someone is prepared to fund change whether it be the private or public sector – planners can plan all they want and developers have aspirations but the plans and aspirations need to be funded” (Trevilion 2015). The City has historically offered incentives largely at the end of the development process, once developments have been constructed. This includes incentives such as rates rebates. However, the COF process shows some shift in that approach, with incentives offered earlier on in the development cycle. The City is using location-based incentives as the primary instrument through which to attract investment. Yet international studies suggest that there are a multitude of factors that determine location choices and these differ for individual investors and firms (Ball et al 1998). McGaffin lists some of the determinants for location in the commercial sector, including “technical, institutional, contextual, social and human behavioural reasons” (2015: 24). According to him: Technically, a company will usually take into account the nature of its production process, its ability to access the required factor inputs (labour, materials etc.) and its customers, as well as the availability of suitable space upon which to undertake its production. The suitability of the space will depend on factors such as the availability of infrastructure, quality of space, level of safety and cleanliness of the broader area (McGaffin 2015: 24). Therefore, determining the efficacy of locationbased incentives is tricky. However if the location is desirable then it is easier to attract developers and investors. For instance, attracting a cluster of businesses and investors can support agglomeration economies as has been the case in Sandton. The City should review the optimum locations in the Corridors. Agglomeration appeal and generating an accurate analysis of location requirements will require a detailed study on the locational requirements for a number of commercial activities (McGaffin 2015: 25; Kenyon et al 2012: 9-11).
A review of the supply-side incentives indicates that there are a number of standard incentives that have been in place to date. The Urban Development Zone (UDZ) established by National Treasury is one such incentive, and there has been mention made in the SAFs of extending the UDZ. A more comprehensive and innovative set of incentives is being offered through the COF process. However these incentives are being offered in a context where many of the commitments made in the City’s 2007 Inner City Regeneration Charter (ICRC), for example, have not been fulfilled.19 This has led to frustration being experienced by developers in accessing incentives through City channels, leading to legitimate questions raised as to the likelihood of the efficacy and roll-out of the new incentives under consideration. Some developers have even raised scepticism that the incentives would materialise. As recently as October 2016 private developers have called on the Executive Mayor to streamline development processes and unblock billing problems that inhibit inner city developments. As with many strategies and policies, the implementation of the strategy is a more intricate layered phenomenon than the framework provided. Further, location-based incentives such as the UDZ have historically not been considered critical to investment choices; rather they are a bonus for developers who had selected the area already (according to discussions with property developers undertaken in the study). The point was also made by developers that location and yields were paramount in making development decisions.
4.1. New Approaches to Cutting Development Costs The City has developed a number of new costcutting mechanisms to stimulate market interest in the Corridors. These are in addition to the incentives mentioned above. The new incentives include: • Bulk infrastructure provision • Faster development application process • More permissive development rights • Rates rebates Each of these mechanisms will be discussed in more detail below.
19 W inkler lists these incentives as: “public investments to stimulate new economic activities; tax rebates and tax increment financing schemes; reduced turnaround times on development and building plan applications; flexibility in building-control standards; and a more supportive land-use planning framework” (2013, citing CoJ 2007: 32-34, 51, 55).
Transit corridors & the private sector
Transit corridors & the private sector
Published on Aug 2, 2017
Part of the Spatial Transformation through Transit-Oriented Development in Johannesburg research series. Published by the South African Rese...