Grants & IncentivesAgri-Processing

Grants & IncentivesAgri-Processing

5 March 20135 March 2013

Agenda

• Introduction to Innovative Finance

• Government Grant Objectives

• Grants in Agriculture

• Manufacturing Investment Programme (MIP)

• Manufacturing Competitiveness Enhancement Programme (MCEP)

Introduction to Innovative Finance

• Specialist Financial Services Company adding value to Manufacturers and Industrial Businesses

• Holistic Approach to procuring relevant finance products:

• Funding in the form of debt / government subsidies

• Private Equity and Venture Capital

Government Grant Objectives

• Industrial Policy Action Plan and NewGrowth Path

• Focus on:• Employment Creation

• Improving industrial capacity and output

• Stimulating investment and growth in industrial sector

• Broad Based Black Economic Empowerment

Grants in Agriculture

• Manufacturing in the Agricultural Industry?

• Secondary processes = value add processes

• Grants viewed as bonus payments from government and not financing

• Paid retrospectively and payment is subject to meeting monitoring criteria during contractual period

• Business sense is the first priority

Grants Application Process

Grants Claim Process

Manufacturing Investment Programme

• Released July 2008 for a six year term

• Available to Manufacturers (SIC Code 3)

• Companies, Closed Corporations and Co-Operatives legally registered in SA

• New start-ups or Expanding Businesses

• Application must be submitted 90 days in advance of first asset brought into operation

Manufacturing Investment Programme

• Tax Free, Paid in Cash

• < R 5 million – 30% of qualifying investment over a three year term

• > R 5 million but < R 30 million – between 15% and 30% of qualifying investment calculated according to a regressive sliding scale over two years

• > R 30 million – fixed 15% on qualifying investment over two years

• Qualifying Investment includes:

• Plant and Machinery

• Owned buildings / rented premises and leasehold improvements

• Commercial Vehicles used in production process

Manufacturing Investment Programme

MIP Qualifying Criteria

• Meet the required number of points according to the prescribed Economic Benefit Criteria Tables

• Expand in terms of revenue – 15% growth in year one and 25% growth in year two calculated respectively from base year

• Prove sustainability and business feasibility

• Prove the need for financial grant assistance

• No reduction in base year employment

• Growth in respect of historical asset base. DTI will not fund mere replacement.

Manufacturing Investment Programme

• Qualifying Criteria to remember:

• Are you making significant investment in Plant and Machinery or Starting a New Business/Division?

• Are you Creating Jobs?

If the answer is Yes... You stand a good chance of obtaining a grant if

the application is correctly structured

MCEP

• Cost Sharing Grant paying back between 30% and 70% of qualifying costs

• Encourages manufacturers to upgrade facilities in order to sustain employment and promote competitiveness

• Available to all existing manufacturers

• Applications must be submitted 60 days in advance of project commencement

MCEP: Key Elements

• Production Incentive:

• Capital Investment

• Green Technology and Resource Efficiency

• Enterprise Level Competitiveness Improvement

• Feasibility Studies

• Cluster Competitiveness

• Industrial Financing Loan Facilities (via IDC)

MCEP Benefit

• Maximum grant calculated as a percentage of the applicant’s average Manufacturing Value Add over two years according to audited financial statements.

• MVA = Gross Sales less Raw Material Input Costs

MCEP Maximum Benefit

Enterprise Size Maximum Percentage of MVA

< R 5 million Direct Cost Sharing Grant; MVA cap not applicable

100% Black Shareholding 25% of MVA

> R 5 million but < R 30 million 25% of MVA

> R 30 million but < R 200 million 20% of MVA

> R 200 million 10% of MVA

MCEP Eligibility Criteria

•Registered legal entity within South Africa

•Applicants with a historical asset base of < R 5 million should invest a minimum of R 500 000 in Plant & Machinery

•Applicants with historical asset base > R 5 million should expand by lower of:

• 20% of existing Plant and Machinery Cost

• R 2 million

•Manufacturing entity (SIC Code3) in operation for a minimum of one year

•No reduction in base year employment levels

•BBBEE Level Four or able to provide a plan as to how Level Four will be achieved within four year period

Innovative Finance Contact Details

•Tara Moffitt: tara@inovativefinance.co.za

•Rudi Scholtz: rudi@innovativefinance.co.za

•Telephone: 021 838 2726

Thank you / Questions