MCEP

MANUFACTURING COMPETITIVENESS ENHANCEMENT PROGRAM

A brief overviewCompiled by DECTRA

MCEP

WHAT IS IT ABOUT?

• Cash grants on investment cost

• Improve productivity & competitiveness and

retain jobs.

• Does not replace existing EIP/MIP grant program

MCEP

WHO CAN BENEFIT?

• Manufacturers

• Engineering and conformity assessment

agents who service the manufacturing

industry

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

MCEP

ALSO ON OFFER

• Pre- and post production working capital loans @ 6% p.a. from IDC

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

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)

MCEP

REQUIREMENTS

• Only incorporated legal entities may apply

• Must maintain employment levels

• Strive towards BEE scorecard Level 4

• Only new equipment

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

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

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

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

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”

MCEP

COST 3: COMPETITIVENESS IMPROVEMENT

WHAT YOU GET

• 70% down to 50% of qualifying cost

• Limit 1: MVA limitation

MCEP

COST 4: CLUSTERSWHAT YOU GET

• 70% to 50% of feasibility study costs

• Limit 1: R7,5m

• Limit 2: MVA limit.

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.

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

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

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

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

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

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