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Davies said the incentive, known as the 12i Tax incentive, was "part of an effort to place our economy on a more labour absorbing path".
The incentive also aims to encourage businesses to be more environmentally friendly as well as boost skills development.
Companies increasing their investment in environmentally friendly manufacturing or greenfields manufacturing will receive an allowance of between 35% and 55% against their taxable income, up to a maximum of R900m.
There are also incentives for so-called brownfields industries that reduce their use of energy.
The incentive replaces the Strategic Investment Programme, which Davies said had generated 6 600 direct jobs and R13bn in direct investment.
"However, clearly more needs to be done," he said.
The 12i tax incentive will run until the end of 2015.
It also allows participating businesses to gain a tax deductible allowance of up to R30m for skills development.
Davies said a big problem of the economic boom before the recession was that little of the credit extended by banks went into industrial development.
He said that the department of trade and industry was looking at a future possible restructuring of the Industrial Development Corporation, and that he would like to see it operate more along the lines of the Brazilian Development Bank.
Davies also said that a "global solution" was needed to address strong currencies in emerging markets.
"We all know that it (strong currencies) is a big challenge particularly for productive sectors," Davies said.
"Our currency is overvalued," he said.
Finance Minister Pravin Gordhan on Friday said he was disappointed with American authorities for introducing a second wave of quantitative easing, adding that developing countries would bear the brunt of the US Federal Reserve decision.
Near-zero interest rates in developed markets and continuing quantitative easing are causing a rush to emerging markets by investors looking for higher yields, in turn making the currencies of those countries stronger.
The strong rand continues to be viewed as a doubled-edged sword for South Africa.
While it poses a problem for local exports, it has helped finance the deficit on the current account and has helped bring down the price of imports of heavy machinery and other equipment.
Davies said that most developing countries were now looking to the Group of 20 rich and developing nations leaders meeting in Seoul this week to come up with a solution.
"We'll see what happens at the G20 and if nothing happens there, we'll have to see what other measures we take," Davies said.
The Treasury and the SA Reserve Bank have increased their accumulation of international reserves, but this has not been enough to cool the rand's gains.
Authorities have also avoided introducing a Tobin tax on capital inflows.
