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Incentive aimed at medium-size manufacturers

The Department of Trade and Industry has aimed its new R5,75bn manufacturing incentive scheme at developing medium-sized and downstream enterprises rather than at the giants of the economy.
(Image: GCIS)
Firms that charge import parity pricing, which in the department's estimation includes ArcelorMittal SA, Sasol, Sappi and Mondi, are excluded from the scheme. Upstream manufacturers would have to have extremely good, employment- creating projects to qualify. Trade and Industry Minister Rob Davies outlined the details of the scheme yesterday. It was first announced in the budget in February.

Davies said the rationale for the scheme lay in the importance of reviving the manufacturing sector for the benefit of the overall economy. "SA's problem with stagnant growth can largely be explained by our performance in manufacturing. The scheme is aimed at encouraging firms to make competitiveness raising decisions now," he said.

Six dimensions

The manufacturing competitiveness enhancement programme has six dimensions which will allow firms to choose solutions that address their biggest problems. They are:

• Cost-sharing grant for new investment of between 30% and 50%, up to a maximum of R50m;
• Cost-sharing grant for investment in green technology of between 30% and 50%, up to a maximum of R50m;
• Cost-sharing grant of up to 70% of the cost of programmes to improve enterprise competitiveness;
• Cost-sharing grant of up to 70% to conduct a feasibility study for a new enterprise;
• Cost-sharing grant of up to 80% for "cluster activities" among firms, such as collaborative marketing;

• Working capital loan at a fixed rate of 6% to fund firms in the period of pre-dispatch and post-dispatch of goods until payment.

Smaller firms will qualify for proportionally larger grants.

Specific sectors not targeted as beneficiaries, but...

Trade and industry deputy director-general Tumelo Chipfupa said the scheme was open to all manufacturers except for those that already benefit from sector-specific schemes - the automobile and components sector and clothing and textiles - and basic steel, chemicals and paper and pulp manufacturers.

The scheme is partly modelled on the success of the department's competitiveness programme for clothing and textiles manufacturers.

While specific sectors were not targeted as beneficiaries, Chipfupa said the department hoped the agro-processing, downstream metals and plastics manufacturers and transport and machinery equipment sectors would be the biggest beneficiaries. Taken together these sectors accounted for 45% of manufacturing employment and 33% of manufacturing value-added.

Stewart Jennings, chairman of manufacturers lobby group the Manufacturing Circle, said although the incentive was "relatively small" it was nonetheless important. "It is a step in the right direction. Most important, though, is government's recognition of the importance of manufacturing." It was also significant, he said, that while government incentive programmes had in the past "picked winners" by being sector specific, this one was generic and would enable manufacturers that wanted to succeed to participate.

The scheme marks a departure from the department's approach in the past, which has favoured large, capital-intensive investments.

Source: Business Day via I-Net Bridge


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