MANUFACTURING INCENTIVES. Small Business and Transformation Workshop 18 January 2017

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1 MANUFACTURING INCENTIVES Small Business and Transformation Workshop 18 January 2017

2 OUTLINE the dti: Mandate Background Support Programmes Available Incentives Incentive Performance Application Process Contact Details

3 MANDATE The dti: To steer the development of South Africa s economy to achieve sustainable inclusive growth thereby alleviating poverty and inequality Incentive Development and Administration Division:

4 SA Manufacturing Sector Poor global market demand BACKGROUND High input costs ( electricity & transportation) Cheap imports from low cost manufacturing countries Ageing production facilities and obsolete technology : decline over past few decades loss of key manufacturing capacities & capabilities, critical shortage of skills Partnership with other stakeholders: NT, DFIs, Industry Bodies, Export Councils etc

5 OPPORTUNITIES AT the dti At a time when SA is experiencing low growth, high unemployment and a range of social challenges; government has been trying very hard to stimulate key industries; Incentives (cash grants / tax rebates) important tools for this; Departmental budget bulk allocated to incentives, with total expenditure of R5.6 bn in 2014/15 increased to R5.8 bn in 2015/16 as disbursement to private companies; Billions of Rands in public funds investment through grants and tax rebates; Evidence that incentives are working.

6 AVAILABLE INCENTIVE SCHEMES

7 MANUFACTURING INVESTMENT CLUSTER Incentive Programme Purpose Target / Eligibility Criteria Incentive Offering 12I Tax Allowance To promote industrial upgrading and use of new technology in manufacturing. Greenfield (new) (Min investment R50m) Tax allowance up to 55 % of the investment cost and Training Allowance Brownfield (expansion) (Min investment R30m Tax allowance up to 30% of the investment cost and Training Allowance Additional benefit for locating in an SEZ

8 12I TAX INCENTIVE SECTOR C National Ceramic Industries South Africa (Pty) Ltd Province: Gauteng, Vereeniging Grant amount: R190.7 million The company produces both pressed and extruded ceramic floor tiles. The business investment is R million. Ceramic Industries has recently expanded and completed its latest factory (called Gryphon), a Section 12I supported project. This high technology factory which offers employment and good quality jobs in Sebokeng. The company was approved for an incentive amount of R ,000 million of which the project created 125 permanent employment opportunities. The value of estimated training to be provided over six years is R540,300 thousand. The value of estimated procurement from SMME s over three years is R ,950 million. Other Key Factors: Contributor to regional employment creation which is sourced from Sebokeng Training & development spend over 6 years - R540,300 SMME Procurement spend R ,950 million

9 Incentive Programme Automotive Investment Scheme (AIS) Purpose Target / Eligibility MANUFACTURING INVESTMENT CLUSTER To grow and develop the automotive sector Criteria Light motor vehicle manufacturers Component manufacturers Incentive Offering Non taxable cash grant of up to 30% for qualifying investments

10 AUTOMOTIVE INVESTMENT INCENTIVE (AIS) SECTOR H Vacuform (Pty) Ltd Province: Gauteng, Rosslyn Grant amount: R2.093,735 million The company is based in Rosslyn, Gauteng Province, received a total grant of R2.093,735 million by July 2015, which supported the sustained employment of 137 employees and the creation of additional jobs. This was due to contracts that were awarded to supply various components to FORD SA & BMWSA. 59% of the raw material used in the production process was sourced locally (indirectly from Sasol) and very little percentage was imported. Other Key Factors: Contributor to global economic value chain (Supplier to BMW & FORD SA) 59% OF LOCAL spend procurement Supports IPAP sectoral focus area - automotives

11 COMPETITIVENESS CLUSTER Incentive Programme Purpose Incentive Offering Export Marketing Investment Assistance (EMIA) Aims to support exporters to explore new export markets Individual Exhibition Participation Primary Market Research & Foreign Direct Investment Return airfare Subsistence allowance Transportation of samples Exhibition costs Return airfare Subsistence allowance Transportation of samples Patents Production of marketing material Individual Inward Missions Return airfare Subsistence allowance Car rental Group Missions & National Pavillions Selected Trade Fairs & Exhibitions / Export Councils, Industry Associations & Provincial Trade Promotion Agencies Return airfare Subsistence allowance Transportation of samples Exhibition costs

12 EMIA NATIONAL APPROVALS North West 2014/ /16 17 Approvals 11 approvals R1.7m R1.1m (1.3%) (2%) Free State 2014/ /16 5 Approvals 1 Approvals R R (0.3%) (0.2%) Gauteng 2014/ / Approvals 275 Approvals R82m R25.4m (63.4%) (45.7%) Limpopo 2014/ /16 11 Approvals 9 approvals R R (0.7%) (1.5%) Northern Cape Mpumalanga 2014/ /16 2 Approvals 2 Approvals R R (0.1%) (0.2%) 2014/ /16 66 Approvals 4 Approvals R7m R (5.4%) (0.7%) Western Cape KwaZulu-Natal 2014/ /16 94 Approvals 68 Approvals R6.7m R5.3m (5.2%) (9.5%) 2014/ / Approvals 263 Approvals R27.2m R21.6m (21%) (38.8%) Eastern Cape 2014/ /16 26 Approvals 8 Approvals R2.2m R (1.7%) (1.4%) 12

13 MANUFACTURING COMPETIVENESS ENHANCEMENT PROGRAMME - MCEP SECTOR B Continental China Province: Western Cape Grant amount: R million The company manufactures a wide range of ceramic tableware for the catering and hospitality industry. They received a grant amount of R16, million, the investment which has gone mostly towards machinery has retained 264 jobs. The grant incentive contributed towards improvement of skills development of its employees who were trained by German engineers to operate the new cup, plate and platter making machines. The grant incentive contributed to the enterprise size which increased by 25%, additionally, the investment of processing machinery enhanced the production process / competitiveness improvement whereby the cup production and plate output is 3 times the existing machines. The effect of the grant in terms of contributing towards operational efficiencies i.e. reduced waste, improved plant efficiency/throughput, resource/raw material, quality etc.- New machines use less electricity and LPgas. The output volume on new machines has tripled and the yield has improved by 10%. The grant incentive contributed towards sales growth and opening up of potential export market - Export sales have increased by 58%, with new markets in Russia, and potential new market in Mexico. The impact of the grant in terms of retaining or increasing the employment levels of the headcount has increased by 47 people to produce the new ranges for the export market Other Key Factors: Local industry supporter supplier to local hospitality and tourism sectors Export market development - increased export sales growth by 58%, with new markets to Russia, and Mexico Increase job creation to produce the new ranges for the export market export market Supports IPAP sectoral focus area - Manufacturing

14 BROADENING PARTICIPATION CLUSTER Incentive Programme Purpose Target / Eligibility Criteria Incentive Offering Strategic Partnership Programme (SPP) Encourage big private sector enterprises in partnership with government to support, nurture and develop SMEs within the partners supply chain/ sector in order to be manufacturers of goods and suppliers of services in a sustainable manner. South African registered legal entities (min turnover of R100m p.a.) Industry Associations with 5 or more legal entities An Association which can organise itself for this purpose & must in this regard provide letters of commitment from manufacturers that control and/ have a direct influence in the market/ manufacturing value chain to be developed. Cost-sharing support of 50:50 grant to a maximum of R15m towards the total qualifying costs, based on the number of suppliers to be supported - Machinery, Equipment & tools; - Infrastructure linked to the Strategic Partner s supplier development initiative - ICT - Operational costs - Commercial Vehicles - Business Development Services necessary to grow enterprises.

15 BROADENING PARTICIPATION CLUSTER Incentive Programme Purpose Target / Eligibility Criteria Incentive Offering Black Industrialist Scheme (BIS) Partner with Black owned and managed companies on their expansion and green field investments Must be at least 51% Black owned Cost sharing grant of up to R50 million based on qualifying costs

16 BLACK INDUSTRIALISTS SCHEME The Black Industrialists Scheme offers a cost sharing grant ranging from 30% to 50% to approved entities to a maximum of R50 million. The quantum of the grant will depend on the level of black ownership and management control, the economic benefit of the project and the project value. WHAT DOES THE R50 MILLION GRANT COVER Capital investment costs Feasibility studies towards a bankable business plan (to the maximum of 3% of projected investment project cost); Post-investment support (to the maximum of R ); and Business Development Services (to the maximum of R2 million)

17 INFRASTRUCTURE INVESTMENT CLUSTER Incentive Programme Purpose Target / Eligibility Criteria Incentive Offering Critical Infrastructure Programme (CIP) Co Sponsor investment in common infrastructure that is essential for competitiveness. Registered private entities and municipalities; A grant of between 10% and 30% of the development costs for qualifying infrastructure. Industrial Parks Security Infrastructure upgrade Fencing Street Lighting Critical Electricity/water requirements Upgrading of the roof

18 CRITICAL INFRASTRUCTURE PROGRAMME (CIP) SECTOR G Kalagadi Manganese (Pty) Ltd Province: Northern Cape Grant amount: R million Kalagadi Manganese is a female owned, new manganese mine and sinter plant located in the Northern Cape. The business is run mainly by women and supports the local community via various social responsibility schemes. the dti, through the Critical Infrastructure Programme (CIP), approved a project for Kalagadi to the value of R50 million, which is 25% of the total infrastructure development cost of R ,700. The grant will also assist in growing business capacity. The investment created 8857 jobs. Other Key Factors: The Company is Black woman owned 40% youth Employment The project donated 8 houses to the poor and elderly in the Northern Cape Provides skills development in areas such as boiler making, blasting, welding and mineral processing Supports IPAP sectoral focus area Minerals beneficiation

19 INFRASTRUCTURE INVESTMENT CLUSTER Incentive Programme Purpose Target / Eligibility Criteria Incentive Offering Special Economic Zone (SEZ) Attract investment in geographically designated areas that have been set aside for specifically targeted economic activities Bulk Infrastructure and top structures for companies Preferential taxes (including 12i Tax Allowance) Building Allowance Employment Incentive Customs Controlled Area

20 INCENTIVE PERFORMANCE ACROSS CLUSTERS April 2015 March 2016 R10.2 Billion Approved Projects R64.1 Billion Projected Investment Projected Jobs ISC R51.1m (0.5%) VALUE OF APPROVALS PER CLUSTER CIC R 2 bil (20.3%) BPIIC R20.8m (0.2%) PROJECTED INVESTMENT PER CLUSTER R17.4 bil R27.8 bil SIC R917m (9%) MIC R 7.1bil (70.1%) R9.4 bil R9.4 bil R149.7 m SIC MIC BPIIC ISC CIC 20

21 Application APPLICATION PROCESS Applicant obtains Programme application form and guidelines from the dti website ( under Financial Assistance tab The Applicant s the complete application to the dedicated address; Basic Evaluation The review of the documents is undertaken and should all documents be in place, the application is sent for further processing and prepared for adjudication; Adjudication Adjudication Committee convenes to assess the application Applications are approved, rejected or referred back for additional information. Letter confirming approval of the application and the claim form will be forwarded to the applicant within a specified timeframe. 21

22 CONTACT DETAILS Incentive Development and Administration Division (IDAD) Telephone: Customer Contact Centre: website: (Financial Assistance)

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