manufacturing competitiveness enhancement program
TRANSCRIPT
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MCEP
MANUFACTURING COMPETITIVENESS ENHANCEMENT PROGRAM
A brief overviewCompiled by DECTRA
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MCEP
WHAT IS IT ABOUT?
• Cash grants on investment cost
• Improve productivity & competitiveness and
retain jobs.
• Does not replace existing EIP/MIP grant program
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MCEP
WHO CAN BENEFIT?
• Manufacturers
• Engineering and conformity assessment
agents who service the manufacturing
industry
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MCEP
HOW MUCH?
A cash grant between 30% and 80% of inv. cost.On 5 different investment cost components– Upgrading and expansion of equipment and
buildings – Converting to Green technology & Energy saving– Improving competitiveness (soft issues)– Feasibility studies– Cluster initiatives
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MCEP
ALSO ON OFFER
• Pre- and post production working capital loans @ 6% p.a. from IDC
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MCEP
STRUCTURE AND REQUIREMENTS
• Program runs for 6 years until 2018
• Available to existing manufacturers (more than 12
months in production)
• Applicants may apply once every two years
• Apply 60 days before implementation date
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MCEP
STRUCTURE AND REQUIREMENTS (CONT.)
• Claim full subsidy in two claims
– First claim within 6 months from implementation - mandatory
– Final claim as soon as all items are implemented (expires after six
months)
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MCEP
REQUIREMENTS
• Only incorporated legal entities may apply
• Must maintain employment levels
• Strive towards BEE scorecard Level 4
• Only new equipment
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MCEP
CLASSIFICATION
Size of applicant according to
BALANCE SHEET + ACC. DEPR.
Grant % varies from
component to component
R0 – R5 million Highest % grant
R5 – 30 million
R30 – R200 million
> R200 million Lowest % grant
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MCEP
COST1: EXPAND & UPGRADEWHAT YOU GET
• Smaller companies receive a larger percentage
Percentage varies from 50% down to 30%.
• 10% Bonus grant for extra Jobs or for sourcing
local equipment.
• Limit 1: R50m Limit 2: MVA
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MCEP
• Percentage varies from 50% down to 30% (same as
component 1)
• Bonus 10%. For increasing Jobs or for local equipment.
• Limit 1: R50m
• Limit 2: MVA
• No minimum spend required.
• Second hand equipment not subsidised
COST2: RENEWABLE ENERGYWHAT YOU GET
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MCEP
COST 3“COMPETITIVENESS IMPROVEMENT”
Improve position by addressing soft issues
– Process improvement
– Product design & Product development
– Conformity assessment audits, certification
– Production efficiency
– Packaging design
– Quality management improvement
– Accreditation
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MCEP
• Logistic efficiencies, e.g. Logistics systems
• Acquisition & deployment of systems: accounts, HR, Sales, etc.
• Training (SAQA accredited courses)
• Training of ISO consultants, etc.
• Procurement systems
• Compile bid documents for technical tenders in state owned
enterprises (minimum R50m)
COST 3: “COMPETITIVENESS IMPROVEMENT”
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MCEP
COST 3: COMPETITIVENESS IMPROVEMENT
WHAT YOU GET
• 70% down to 50% of qualifying cost
• Limit 1: MVA limitation
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MCEP
COST 4: CLUSTERSWHAT YOU GET
• 70% to 50% of feasibility study costs
• Limit 1: R7,5m
• Limit 2: MVA limit.
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MCEP
MVA LIMITATION
This is an overall limitation on the first 4 cost types
• MVA = Manufactured sales less cost of materials used.
• MVA calculation poses complications
– Farm pack house packing own produce : no cost price
– Pool accounts: not a part of income statement; no cost
price.
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MCEP
MVA LIMITATION
Size of applicant according to
balance sheet + acc. depr.
Capping
R0 – R5million No limit
R5 – 30million 25% of MVA
R30 – R200million 20% of MVA
> R200 million 10% of MVA
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Example: MVA calculation
IncomeStatement
MVA Calculation
Sales of manufactured goods 1 000 000 1 000 000
Sales of other goods and services 788 000 n/a
Total sales 1 788 000 1 000 000
Raw materials & Packaging 600 000 600 000
Operating cost 231 000 n/a
Administrative cost 97 000 n/a
MVA 400 000
Limit according to size of applicant, e.g. R30m> <R5m= 25% R100 000
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MCEP
COST COMPONENT 5“CLUSTER INITIATIVES”
Collaborative projects relating to production and marketing that will enhance productivity and international competitiveness.– Market research
– Export promotion costs & international marketing, advertising and publicity
– Product development & process improvement
– Developing shared infrastructure
– Benchmarking
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MCEP
COST 5: CLUSTERSWHAT YOU GET
• 80% of qualifying cost
• Limit 1: R50m.
• No MVA limit
• Note: Cluster must consist of at least 5 members. They
do not all have to be manufacturers
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Size of applicant
Expand Green Soft Feas. study
Cluster MVA %
R % % % % % %
<5m 50 50 70 70 80 n/a
>5 <30m 40 40 60 70 80 25
>30m <200m 30 30 60 50 80 20
>200m 30 30 50 50 80 10
MVA limit? Yes Yes Yes Yes No
Summary of grant percentages
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MCEP
CONCLUSION
• More generous than any program before.
• Fewer entry level requirements and performance
requirements than any program before.
• The only exclusions are, no subsidies on 2nd hand assets, no
vehicles and no leased buildings