Pechiney was awarded the tax incentive under the government's Strategic Industrial Project (SIP) after it agreed to build a $2.2 billion (R13 billion) first-generation aluminium smelter at Coega, near Port Elizabeth.
But plans to erect the smelter soon changed after Pechiney was taken over by Canadian aluminium group Alcan in 2003.
Alcan has indicated that if it went ahead with plans to build the smelter at Coega, it would be the current generation of smelters, which cost significantly less than the originally proposed smelter. The withdrawal of Pechiney's tax incentive was prompted by this alteration in the investment plan.
According to Newton Cockcroft, an associate director at accounting firm Deloitte, companies had almost exhausted the R10 billion provided by the government for the SIP scheme.
He said Pechiney's tax allowance withdrawal would create opportunities for industrial firms with ambitions to set up large new plants.
"This basically means that the R2.2 billion will go back to the pot, and it will then be available for other applicants of the SIP scheme," said Cockcroft.
A source close to the department of trade and industry said: "If the application is withdrawn, the tax allowance that Alcan received will be freed up for other people unless Alcan reapplies."
The scheme's beneficiaries, such as chemicals and energy group Sasol and packaging firm Nampak, said SIP played a key role in promoting large investments, but declined to say whether Pechiney's withdrawal was likely to prompt them to consider new investments.
"We undertake investments if they are commercially viable even before we apply for the SIP incentives. At the moment, we don't have any new investments in the pipeline," said Graham Hayward, an investor relations manager at Nampak.
Nampak got a R34 million tax benefit on two projects costing R200 million.
Johann van Rheede, a spokesperson for Sasol said: "Sasol rates the SIP incentive scheme as progressive and it will most definitely stimulate investment.
"The SIP plays an important part in our investment decisions at Sasol."
