CONTENTS

• Overall Incentives Landscape
• Manufacturing Incentives
• Infrastructure Incentives
• Innovation Incentives
• Services Incentives

Overall Incentives Landscape

Although this year’s national budget did not specifically highlight industrial development incentives, government has reaffirmed its ongoing commitment to supporting South African businesses. Over the next three years, R16.9 billion has been allocated to the cash grants Incentives Programme. Of this, 51.5% (R9.1 billion) is earmarked for manufacturing development, followed by 21.4% (R3.6 billion) for infrastructure investment support and 19.1% (R3.2 billion) for services sector development. Tax incentives are separate and in addition to the cash grants provided.

Through the Sectors Programme, the Department of Trade, Industry and Competition (dtic) will continue driving implementation of the Clothing, Textile, Leather and Footwear (CTLF) Master Plan, with R1.5 billion allocated over the medium term.

While the overall framework for grants and tax incentives remains unchanged, providing welcome continuity and certainty for businesses, it was somewhat disappointing that no additional support measures were announced for exporters that were affected by US tariffs, despite earlier indications that such assistance would be considered. Similarly, there was no further allocation of targeted support for the automotive sector. It is hoped that more detail in these areas may follow as policy discussions progress.

Manufacturing Incentives

R 9.1 Bn over 3 years (MTEF) growing from R 3.1 Bn to 3.3 Bn per annum

Manufacturing incentives account for more than half of the funds allocated for cash grants in the DTIC’s medium-term budget. Over this period, the manufacturing incentives allocation will increase from R3.1 billion to R3.3 billion.

These incentives are designed to stimulate additional investment in the manufacturing sector, which remains a key driver of employment. Support is provided for qualifying capital expenditure, including machinery, equipment, delivery vehicles, tools, and production-related software, among other assets.

The key manufacturing incentive programmes include:

• Automotive Investment Scheme (AIS): Targeted support for investment in the automotive sector.
• Agroprocessing Support Scheme (APSS): Incentives aimed at strengthening and expanding agroprocessing businesses.
• Manufacturing Support Programme (MSP): Broad-based support for general manufacturing enterprises across various sub-sectors.

Infrastructure Incentives

R 3.6 Bn over 3 years (MTEF) growing from R 1.1 Bn to 1.3 Bn per annum

The Infrastructure Incentives Programme aims to develop world-class economic infrastructure by supporting industrial parks, Special Economic Zones (SEZs), and other strategic assets that drive accelerated economic growth.

The programme provides grant funding for two primary industrial infrastructure initiatives:

• Special Economic Zones (SEZs)
• Critical Infrastructure Programme (CIP)

These initiatives are designed to strengthen industrial infrastructure and regional development, attract investment into productive sectors, and promote the export of value-added goods. Government has allocated R3.6 billion to infrastructure incentives over the Medium-Term Expenditure Framework. The total programme budget is projected to increase from R1.1 billion in 2025/26 to R1.3 billion in 2028/29, reflecting an average annual growth rate of approximately 3.4%.

Infrastructure-linked incentives, particularly SEZ-based investments, remain a strategic priority, with steady albeit moderate projected growth.

Interestingly, for the first time National Treasury has explicitly quantified the revenue cost of the 15% SEZ corporate tax rate in the Tax Expenditure Statement. This is a significant development, as it positions the incentive as a measurable fiscal instrument, tracked alongside other key policy tools such as the R&D Tax Incentive, the Employment Tax Incentive (ETI), and learnership allowances. These tax incentives are additional to the DTIC’s R16.9 Bn cash grants budget.

In doing so, Treasury is signalling that the SEZ tax incentive is a policy instrument with a defined fiscal cost that must demonstrate clear economic value.

Innovation Incentives

Including tax incentives which are additional to the R 16.9 Bn in cash grants

Innovation support is primarily delivered through a tax-based mechanism, the Research & Development (R&D) Tax Incentive (Section 11D). This incentive allows companies to claim a 150% tax deduction on qualifying scientific and technological research and development expenditure.

Although the 2026 Budget does not include forward-looking projections on the value of potential claims, it does provide historical tax foregone data:

• R295 million in 2020/21
• R368 million in 2022/23

This represents a compound annual growth rate (CAGR) of approximately 11.7%, albeit from a COVID-19-impacted base.

In terms of sectoral uptake (2022/23), the incentive is predominantly utilised by the Financial and business services (53%) sector followed by the Manufacturing sector (28%).

Other incentives for innovation which will continue to receive government support include the Support Programme for Industrial Innnovation (SPII) and the Technology and Human Resources for Industry Programme (THRIP).

Services Incentives

R 3.2 Bn over 3 years (MTEF) growing from R 1.06 Bn to 1.13 Bn per annum

Of the R16.9 billion allocated to Incentives Programmes over the period ahead, services investment incentives account for 19.5% (R3.3 billion). While expenditure grew by an average of 0.8% annually between 2022 and 2026, it is projected to increase by 3.5% per year over the next three years, with forecast spending of R1.06 billion in FY27, R1.1 billion in FY28 and R1.13 billion in FY29. Although services incentives will represent a slightly smaller share of the total allocation compared to previous years, the absolute value is higher.

These incentives aim to promote investment and job creation in the services sector and include programmes such as the Global Business Services (GBS) Programme and Film and Television Production incentives. The GBS Programme, administered by the DTIC, seeks to attract offshore BPO and shared services operations to South Africa, supporting export revenue and employment, particularly for youth, through performance-based grants linked to verified job creation and compliance with prescribed requirements.