LATEST DEVELOPMENTS ON INCENTIVES - PowerPoint Presentation

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LATEST DEVELOPMENTS ON INCENTIVES

Mark

Alard

Director : Strategic Partnerships and Customer Care

17 February 2017Slide2

OUTLINE

Available Incentive Schemes

12i Tax Allowance

Black Industrialist Scheme (BIS)

MCEP Loan Facility

Amended Guidelines - ADEP

Amended Guidelines - Strategic Partnership Programme (formerly known as Incubation Support Programme)

THRIP Call

Contact DetailsSlide3

AVAILABLE INCENTIVE SCHEMES

INCENTIVE SCHEMES

12i Tax Allowance

Automotive Incentive Scheme

(AIS)

Aquaculture Development Incentive Programme (

ADEP)

Export Marketing & Investment Assistance

(EMIA)

Sector Specific Assistance

Scheme

(SSAS)

Capital Projects Feasibility Programme (

CPFP)

Film & Television Production

Business Process Services

(BPS)

Support Programme for Industrial Innovation

(

SPII)

Technology and Human Resources for Industry Programme

(THRIP)

Incubator Support Programme

(ISP)

Black Industrialist Scheme

(BIS)

Critical Infrastructure Programme

(CIP)

SEZ

Investment IncentiveSlide4

MANUFACTURING INVESTMENT CLUSTER

Incentive

Programme

Purpose

Target /

Eligibility Criteria

Incentive Offering

12I Tax Allowance - comes to an end in December 2017

To promote industrial upgrading and use of new technology in manufacturing.

Green and

Bownfield

investments

Tax allowances up to 55 % of the investment cost and Training Allowance Slide5

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 costsSlide6

INTRODUCTION AND BACKGROUND

04 Nov 2015:

Cabinet approved the Black Industrialist Policy which aligns with the National Development Plan and the Industrial Policy Action Plan (IPAP); which underpins development of the Manufacturing Sector, with an aim to raise the impact of interventions to support industrial development;

09 Nov 2015

: Launch by the Minister of Trade and Industry, as part of government’s broad industrial base and inject new entrepreneurial dynamism in the economy

The BIP Policy calls for bolder policy interventions on the part of the State to expand the industrial base of the country and grow the economy through dedicated support directly at black manufacturers; as highlighted in the latest IPAP;

Launch of Black Industrialist Scheme

(

BIS) – incentive

programme

of the Black Industrialist Policy, which aims to promote the participation of black industrialists as manufacturers in key sectors as identified in IPAP;

BIS – Outlines key measures aimed at supporting majority black-owned manufacturing companies such as access to finance, access to markets, skills development, standards, quality and productivity improvement.

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Accelerate the quantitative &

qualitative increase

and

participation of Black Industrialists in the national economy, selected industrial sectors &

value

chains.

Create

multiple &

diverse pathways

and

instruments for Black Industrialists

to enter strategic & targeted industrial sectors & value chains in the short to medium term.Utilise Black Industrialists for economic growth, economic transformation, employment creation and sustainability. OBJECTIVES OF THE BIS

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ELIGIBILITY CRITERIA

Have greater than fifty

percent

(>50%) shareholding and management control.

 Have a valid B-BBEE certificate of compliance.

Be

directly involved in the day-to-day running of

the

operation and must have requisite expertise in the sector.

 Have a project with a minimum investment of

(

R30m). Undertake a project which should result in securing or increasing direct employment.

Requisite skills, expertise and knowledge in operationSlide9

INCENTIVE OFFERINGS

Cost sharing grant ranging from

30% to 50%

to approved entities to a maximum of R50 million.

Q

uantum of

grant

depends on: level

of black

ownership,

management control and the project value.

The maximum grant of

R50 million

may be utilised for: 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 R500 000); and

Business Development Services (to the maximum of R2 million)Slide10

ECONOMIC BENEFIT CRITERIA

Criteria

Description

Points

A. Employment

Securing/retaining or increasing direct employment

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B. Market Share

New business/operations

: Securing market share for the entity;

or

1

Existing business/operations

: Increase market share for the entity

C. Quality Improvement

Reduction of relative prices and/or increasing the quality of products to consumers

1

D. Green Technology and Resource Efficiency Improvements

Savings or better

utilisation

of energy or materials and/or cleaner production improvement and/or waste management improvement and/or water usage improvement and/or use of renewable energy

1

E. Localisation

Increasing the localisation of production activities (diversification and exports) 1F. Regional SpreadProjects should be located in rural areas or areas with unemployment higher than twenty five percent (25%)1G. Personal RiskDemonstrate own financial and/or non-financial contribution to the business 1H. EmpowermentAchieve at least a level Four (4) B-BBEE contributor status as per revised B-BBEE codes of good practice published in October 2013 (as amended)1

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1]Slide11

QUALIFYING COSTS

Capital

Investment

Machinery

and Equipment

(owned or capitalised financial lease), tools, jigs and dyes and forklifts, at cost and will also include green technology, energy and resource efficiency equipment.

Owned

and leased (capitalised lease)

factory buildings

, at cost. The investment in qualifying buildings must either constitute newly acquired buildings or the acquisition of an existing building at cost.

Commercial

vehicles

(owned or capitalised financial lease) are only eligible if such vehicles are to be used for commercial purposes linked to the production process. This includes vehicles such as for collection, delivery and distribution of goods. Slide12

QUALIFYING COSTS

Investment

Support

Feasibility Studies

The

objective of this component is to offer support for

project feasibility studies

and related assessments that have a positive impact on the developmental aspects including job creation, skills development, as well as black business empowerment.

The

feasibility studies will include licences, quality assurance, conformity assessments and standards.

The

appointed service provider(s) for the feasibility studies must be sourced from the DFI’s list of accredited service providers following due procurement processes and procedures.

Post Investment Support

Specialised technical training will be supported in selected areas identified by the BI with the assistance of the DFI’sMentorship

guidance

will include financial management, operations and production planning, human resource development, administration, marketing and business continuity services. Slide13

QUALIFYING COSTS (BDS)

Focus areas

Categories

Consulting fees and expenses

Product Development

Product design

Pattern-making, prototyping, grading, sizing and counter-sampling

Product development

Introducing product ranges and product adaptations for new markets

Conformity assessment of products e.g. testing, inspection, certification

Costs for conformity assessment of products

Consumer acceptability studies

Marketing new products to focus groups before product launch to market

Packaging design

Consultancy and design costs

Conformity assessment certification

Quality management improvement, Environmental management improvement, process capability improvement and Product quality improvement

- Cost of Installing or improving quality management systems;

- Costs for preparations for certification and pre/initial assessment costs

Accreditation

Costs for preparations for accreditation and pre-/initial assessmentInformation technology systemsAcquisition and deployment of systems Acquisition software for integrated production management information systems Procurement process improvementIntroducing improved and efficient procurement processesCost of introducing new procurement processesPatents Costs Registration of Patents

Registration costsSlide14

GRANT CALCULATION

Quantum of grant

– Depends on level of black ownership and

points achieved on the economic benefit criteria

Points on Economic Benefit Criteria

Percentage Black ownership

50% to 75%

> 75% to 90%

> 90% to 100%

4 to 6 Points

30%

35%

40%

7 Points

40%

45%

50%Slide15

NON QUALIFYING COSTS

Assets

purchased from a connected party and Business

Development

Services

including Feasibility studies and Post-investment support

sourced from a connected party will be excluded from qualifying costs

.

Salaries and Wages

Passenger Vehicles (non-commercial vehicles) such as sedans, luxury 4 X 4s, SUVs and People Carrier Minibuses

VAT and

f

inance charges on assets

Rates and Taxes

Training that is not related to the manufacturing operations of the entity

Staff wages & salaries and staff related costs incurred in implementing any of the above projects

Costs incurred before approval

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CHECKLIST AND PROCESS

Fully completed and signed Application Form

Valid BB-BEE certificate

Valid Tax Clearance Certificate

Incorporation Certificate

Latest Audited Financial Statements or

Mgt

Accounts

Financial Projections for three years (New and Expansion Projects )

Completed Business Plan

Project Executive Plan / Summary

Board Resolution

Certified Copies of the Identity Documents of Shareholders and Shareholder Certificates

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CHECKLIST AND PROCESS

Proof that the Market has been secured (off take agreements / or letters of intent)

Pre-Feasibility Research document

(if applying for feasibility component )

Fully completed and signed declaration form (arms length relationship)

Assurance letters / agreements from the co-funders of the project

Quotations of assets

Economic Benefits (Page3 of 9) to be fully completed

All potential applicants will be required to engage with the Department

Upon completion of all documentation as per the checklist, an enquiry number will be issued and submission of application to the

biapplications@thedti.gov.za

All further communication will be directly between applicant and

programme

administration upon submission of application online Slide18

This facility has been launched in September 2016 with the Department of Trade and Industry and the Industrial Development Corporation (IDC)

The facility is administered by the IDC

Purpose of the facility is to make South African manufacturing companies more competitive.

The programme focuses on providing working capital loans to manufacturing companies who qualify as per the qualifying criteria. Plant and Equipment loans will be provided only to manufacturing companies that are owned by Black Industrialists only

Both loans are priced at a preferential rate fixed at 4% per annum

Manufacturing Competitiveness Enhancement

Programme

Loan Facility

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Qualifying Criteria for Working Capital Loan

Facility is available for working capital

Not applicable to start ups

Capped at R50 million per application

Only applicable to manufacturing companies under SIC code 3

Max repayment term is 48 months

First draw down must be within 6 months from the date of approval

Applicant must not lay off staff during the term of the facility

Should be BB-BEE level 4 or achieve that status within two years of approval

Fees (for

eg

. Raising fees) not applicable Slide20

Qualifying Criteria for Plant and Equipment Loan

Facility is only available for Black Industrialists (BI)

Start up businesses may also apply

Capped at R50 million per application

Only applicable to manufacturing companies under SIC code 3

Max repayment term is 84 months

Pre and post business development support will be capped at R3 million per application

NB : Must qualify with

the

dti

definition of Black IndustrialistSlide21

A Black industrialist is

a

juristic

person that includes co-operatives, incorporated in terms of the Companies Act

2008 (as amended) owned

by Black South Africans as defined by the B-BBEE

Act,

who creates and owns value-adding industrial capacity and provides long-term strategic and operational leadership to a business.

Characterized

by:

Provision of strategic and operational leadership;

has a high level of ownership (>50%) and/or exercises control over the business;

Entrepreneurial driven; takes personal risk in the business; does business in the manufacturing sector ( IPAP), long term commitment to the business and is a medium to long term investor.While there is a desire to support entities with significant and dominant Black ownership and control, it is accepted that there may be a need to include other shareholders to attract relevant skills, finance and opportunities.DEFINITION OF BLACK INDUSTRIALISTS21Slide22

HOW TO APPLY

Visit the IDC website

www.idc.co.za

Click on apply for finance and follow the instructions

Note that the institutional arrangements and due processes of the IDC need to be adhered to when making an application for either of these facilitiesSlide23

Incentive

Programme

Purpose

Target /

Eligibility Criteria

Incentive Offering

Aquaculture

Development and Enhancement

Programme

(ADEP)

.To stimulate investment in the Aquaculture with the specific intention to

Increase production

Sustain and create jobs

Encourage geographical spread

Broaden participation

South African Registered Entities engaged in the following operations:

Primary

Brood Stock

Seed Production

Juvenile (spat, fry, fingerling) operations including hatchery and nursery facilities

On-growing operations

SecondaryPost-harvesting handling, eviscerating, packing & quick freezingFilleting, portioning and packagingValue adding: curing, brining & smokingWaste stream handlingAncillaryFeed manufacturing,R&D projectsPrivately owned aquaculture veterinary servicesEmerging Black Farmers Reimbursable cost-sharing grant of up to a max of R30 (40 million )million for qualifying costsScore based using an Economic Benefit crireria Slide24

BROADENING PARTICIPATION CLUSTER

Incentive Programme

Purpose

Target /

Eligibility Criteria

Incentive Offering

Incubation Support

Programme

(ISP)

Encourage partnering with big private sector to develop suppliers and improve their score cards

South African registered legal entities.

Registered higher education or further education institution in partnership with private sector.

Licensed and/or registered science councils in partnership with private sector

50:50 cost-sharing support for large private sector investors.

60:40 cost-sharing support for SMMEs.

Cap = max R10m per financial year over 3 years.Slide25

BROADENING PARTICIPATION CLUSTER

Incentive Programme

Purpose

Target /

Eligibility Criteria

Incentive Offering

Strategic Partnership

Programme

(SPP)

Encourage partnering with big private sector to develop suppliers capability and capacity thus providing linkages to the strategic partners supply chain

South African registered legal entities with a minimum turnover of R100 million for two consecutive years as per the audited financial statements

At least 60% of the entities being incubated must be at least 51

percent

Black owned

50:50 cost-sharing support for large private sector investors.

Cap = max R15m per financial year over 3 years subject to the availability of fundsSlide26

BROADENING PARTICIPATION CLUSTER

Incentive Programme

Purpose

Target /

Eligibility Criteria

Incentive Offering

Technology

and Human Resources for Industry

Programme

(THRIP) – Call for applications

To increase the number of people with appropriate skills in the development and management of research-based technology for industry.

South African registered legal entities.

Registered higher education or further education institution in partnership with private sector.

Licensed and/or registered science councils in partnership with private sector

THRIP is a cost-sharing grant of up to R8m  per annum for a period (3) years for approved project engaged in applied research and development in science, engineering and technologySlide27

CONTACT DETAILS

Incentive Development and Administration Division (IDAD)

E-mail:

incentives@thedti.gov.za

Telephone:

012 394 1255

Customer Contact Centre:

0861 843 384

website:

www.thedti.gov.za

(Financial Assistance)

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