Applying Tax Increment Financing in South Africa

This report explores the potential use of Tax Increment Financing (TIF) in South Africa as a tool to fund urban infrastructure (PDF, 20.4MB) by redirecting increases in property tax revenues generated by new development within designated areas. It focuses on the 2015 Dunkeld pilot in Johannesburg, led by the City of Johannesburg, National Treasury, and the World Bank, which tested whether anticipated tax increments from the mixed-use redevelopment of Dunkeld could finance R290 million in infrastructure upgrades. The pilot demonstrated TIF’s potential to generate significant revenue but also highlighted key challenges, including fragmented land ownership, regulatory uncertainty, unclear development plans, limitations on municipal financing, and legal questions about debt treatment and revenue allocation.

Drawing lessons from the pilot, the report outlines critical considerations for municipalities, including establishing a clear legal and regulatory framework, defining project eligibility, structuring financing mechanisms, managing revenue effectively, and ensuring robust administration. It further recommends regulatory reforms, exploration of alternative financing approaches, and additional pilot projects to adapt TIF to South Africa’s urban and fiscal context, positioning it as a viable tool to support sustainable infrastructure investment.

Abstract based on original source.