Investment Incentives in South Africa

Overview by

South Africa flag South Africa: Investing

Incentives or guarantees

Forms of Aid
The various forms of aid and incentives provided by government are:
- Foreign Investment Grant: provide up to 15 % of the value of new machinery per entity for relocation to South Africa.
- Industrial Development Zones: provide duty-free import of production-related materials and zero VAT on materials sourced from South Africa.
- The Skills Support Program : provides up to 50% of training costs and 30% of worker salaries for a maximum of three years to encourage the development of advanced skills.
- The Strategic Investment Project Program : offers a tax allowance of up to 100% (maximum if USD 86 million per project) on the cost of buildings, plant and machinery, for strategic investments of at least USD 70 million).
- The Critical Infrastructure Facility: supplements funds up to 30% of the development costs of qualifying infrastructure projects.
Privileged Domains
Infrastructure development (sectors like transportation, telecommunications, and energy), job creation, environment protection, development of manpower skills, creation of healthy competitiveness.
Privileged geographical sectors
The first Industrial Development Zone (IDZ) was set up in South Africa in 2001. IDZs offer duty-free import of production-related materials and zero VAT on materials sourced from South Africa, along with the right to sell into South Africa upon payment of normal import duties on finished goods. There are no exemptions from other laws or regulations, such as environmental and labor laws.

IDZs are currently located at Coega near Port Elizabeth, in East London, Richards Bay, and at Johannesburg International Airport.

Privileged Geographical Zones
No free zones or free ports exist in South Africa.
Country Risk

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Tax incentives offered to foreign investors

Special tax treatments
The South African government has introduced a number of schemes designed to encourage investment in certain industries. Amongst them:
- Industrial Development Zones (IDZs) are purpose-built industrial estates providing facilities and services tailored for export-oriented industries. New investments locating in an IDZ can expect several benefits (attractive regulatory regime and investment facilitation services provided by zone operators; Access to the government's incentive mechanism, Effective infrastructure…)
- Small and Medium Enterprise Development Programme (SMEDP) is a programme designed to generate employment, and create opportunities for the introduction of new and advanced skills to South Africa, as well as to encourage foreign investment in the country (incentives for those planning to expand existing South African based enterprises, or to start new projects in a range of sectors, including manufacturing, tourism, business services, information and communications, technology, and high value agricultural projects).
- Incentives For Manufacturing Start-Ups: a company which incorporated on or after October 1, 1996 contemplating carrying on a manufacturing project as its sole business, may be awarded a tax holiday, up to a maximum of six years, if the project meets certain conditions. The project may consist of one or more of three components, namely a spatial component, an industry component and a human resource component. Such status consisting of a zero rate being applied to taxable income.

The EIP works through an investment grant of between 15% and 30% towards qualifying investment in plant, machinery and equipment and customised vehicles required for establishing new or expanding existing production facilities or upgrading production capability in existing clothing and textiles operations.
The MIP is designed to stimulate investment into the manufacturing and related services sectors as part of the government’s efforts to create further employment and ensure sustained growth within the industry. Although the MIP can be accessed by a range of sectors in the manufacturing industry, the government is focusing on four key sectors that it has identified as having the most potential for achieving its growth objectives: Metal fabrication, Capital and Transport equipment; Automotive and components; Chemicals, plastic fabrication and pharmaceuticals; and Furniture sectors.
Useful Links
Trade and Investment South Africa (TISA)
The New Partnership for Africa's Development

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