Latest Developments on Incentives and Available Schemes
The latest developments in incentives including available schemes like 12i Tax Allowance, BIS, and more. Learn about incentive programs promoting industrial upgrading and broadening participation.
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LATEST DEVELOPMENTS ON INCENTIVES LATEST DEVELOPMENTS ON INCENTIVES Mark Mark Alard Alard Director : Strategic Partnerships Director : Strategic Partnerships and Customer Care and Customer Care 17 February 2017 17 February 2017
OUTLINE 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 Details
AVAILABLE INCENTIVE SCHEMES 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 Incentive
MANUFACTURING INVESTMENT CLUSTER MANUFACTURING INVESTMENT CLUSTER Incentive Programme Purpose Target / Eligibility Criteria Incentive Offering Green and Bownfield investments Tax allowances up to 55 % of the investment cost and Training Allowance 12I Tax Allowance - comes to an end in December 2017 To promote industrial upgrading and use of new technology in manufacturing.
BROADENING PARTICIPATION CLUSTER BROADENING PARTICIPATION CLUSTER Incentive Programme Purpose Target / Eligibility Criteria Incentive Offering Must be at least 51% Black owned Black Industrialist Scheme (BIS) Partner with Black owned and managed companies on their expansion and green field investments Cost sharing grant of up to R50 million based on qualifying costs
INTRODUCTION AND BACKGROUND 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. 6
OBJECTIVES OF THE BIS OBJECTIVES OF THE BIS 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. 7
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 operation
INCENTIVE OFFERINGS Cost sharing grant ranging from 30% to 50% to approved entities to a maximum of R50 million. Quantum of grant depends on: level of black ownership, management control and the project value. The maximum grant of R50 million may be utilised for: 1. Capital investment costs; 2. Feasibility studies towards a bankable business plan (to the maximum of 3% of projected investment project cost); 3. Post-investment support (to the maximum of R500 000); and 4. Business Development Services (to the maximum of R2 million)
ECONOMIC BENEFIT CRITERIA Criteria A. Employment Description Securing/retaining or increasing direct employment Points 1 B. Market Share New business/operations: Securing market share for the entity; or 1 Existing business/operations: Increase market share for the entity [1] C. Quality Improvement Reduction of relative prices and/or increasing the quality of products to 1 consumers D. Green Technology and Savings or better utilisation of energy or materials and/or cleaner 1 Resource Efficiency production improvement and/or waste management improvement and/or Improvements water usage improvement and/or use of renewable energy E. Localisation Increasing the localisation of production activities (diversification and 1 exports) Projects should be located in rural areas or areas with unemployment F. Regional Spread 1 higher than twenty five percent (25%) G. Personal Risk Demonstrate own financial and/or non-financial contribution to the 1 business Achieve at least a level Four (4) B-BBEE contributor status as per revised H. Empowerment 1 B-BBEE codes of good practice published in October 2013 (as amended)
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.
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 s Mentorship guidance will include financial management, operations and production planning, human resource development, administration, marketing and business continuity services.
QUALIFYING COSTS (BDS) QUALIFYING COSTS (BDS) Focus areas Categories Consulting fees and expenses Product Product design Pattern-making, prototyping, grading, sizing and counter-sampling Development Product development Introducing product ranges and product adaptations for new markets Conformity assessment of products e.g. Costs for conformity assessment of products testing, inspection, certification Consumer acceptability studies Marketing new products to focus groups before product launch to market Consultancy and design costs - Cost of Installing or improving quality management systems; Packaging design Quality management improvement, Conformity assessment Environmental management - Costs for preparations for certification and pre/initial assessment certification improvement, process capability costs improvement and Product quality improvement Accreditation Costs for preparations for accreditation and pre-/initial assessment Information technology systems Procurement process improvement Patents Costs Acquisition and deployment of systems Acquisition software for integrated production management information systems Cost of introducing new procurement processes Introducing improved and efficient procurement processes Registration of Patents Registration costs
GRANT CALCULATION Quantum of grant Depends on level of black ownership and points achieved on the economic benefit criteria Points on Percentage Black ownership Economic Benefit Criteria 50% to 75% > 75% to 90% > 90% to 100% 4 to 6 Points 30% 35% 40% 7 Points 40% 45% 50%
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 finance 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
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
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
Manufacturing Competitiveness Enhancement Manufacturing Competitiveness Enhancement Programme Programme Loan Facility Loan Facility 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 18
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
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 Industrialist
DEFINITION OF BLACK INDUSTRIALISTS DEFINITION OF BLACK INDUSTRIALISTS 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. 21
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 facilities
Incentive Programme Purpose Target / Eligibility Criteria Incentive Offering .To stimulate investment in the Aquaculture with the specific intention to 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 Secondary Post-harvesting handling, eviscerating, packing & quick freezing Filleting, portioning and packaging Value adding: curing, brining & smoking Waste stream handling Ancillary Feed manufacturing, R&D projects Privately owned aquaculture veterinary services Reimbursable cost-sharing grant of up to a max of R30 (40 million )million for qualifying costs Aquaculture Development and Enhancement Programme (ADEP) Increase production Sustain and create jobs Encourage geographical spread Broaden participation Score based using an Economic Benefit crireria Emerging Black Farmers
BROADENING PARTICIPATION CLUSTER BROADENING PARTICIPATION CLUSTER Incentive Programme Purpose Target / Eligibility Criteria Incentive Offering 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 Incubation Support Programme (ISP) Encourage partnering with big private sector to develop suppliers and improve their score cards 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.
BROADENING PARTICIPATION CLUSTER BROADENING PARTICIPATION CLUSTER Incentive Programme Purpose Target / Eligibility Criteria Incentive Offering South African registered legal entities with a minimum turnover of R100 million for two consecutive years as per the audited financial statements 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 50:50 cost-sharing support for large private sector investors. Cap = max R15m per financial year over 3 years subject to the availability of funds At least 60% of the entities being incubated must be at least 51 percent Black owned
BROADENING PARTICIPATION CLUSTER BROADENING PARTICIPATION CLUSTER Incentive Programme Purpose Target / Eligibility Criteria Incentive Offering 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. 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 technology Technology and Human Resources for Industry Programme (THRIP) Call for applications Registered higher education or further education institution in partnership with private sector. Licensed and/or registered science councils in partnership with private sector
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)
