Study objective to assess need for amendments to the programme in order to enhance project selection.
Key questions:
Perceptions on Marketing and Promotion of SIP
Assessment of Impact of SIP on the firm’s Investment Decision
Assessment of the suitability of the project selection criteria
Perceptions of Administrative Processes.
SIP Review (Feb 2004)
Awareness challenges: Of the 75 manufacturing Capex projects announced by IDC (Jan 2001 to Jun 2003), only 7 of the 38 projects potentially eligible for SIP applied
Chemicals, metals dominance: Most applicants were from sectors with a natural diversity in products, processes and technology, which can easily match the industrial upgrading criteria
Only 3 out of 19 approvals were FDI: SIP seemed to attract investors with existing operations in SA that are able to exploit the tax allowance soon after project implementation
Impact on investment decision: SIP was effective in influencing investment decision of 2/3 of approved projects
Bias for capital intensive projects: due to the R50m investment requirement, SIP attracted more capital-intensive that labour-intensive projects. The projects however had potentially larger spin-offs for other economic activities
Cost-benefit analysis:In a longer term, the additional tax revenue from SIP approved project will more than pay for the cost of the incentive (tax allowance)
SIP Review (Feb 2004)
Impact analysis: A further analysis is necessary to determine the real economic impact of the SIP approved projects that have established to date
Better targeting: Future [tax] incentive programmes can be structured to better target strategic (including FDI) in line with the National Industrial Policy Framework
Maintain good practices: Independent review by Paul Babour (Dec 2006) indicates that SIP has a sound design framework, has transparent processes and the Act requiring regular reviews and reporting to parliament.