Manufacturing Competitiveness Enhancement Program

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Manufacturing Competitiveness Enhancement Program

  1. 1. MCEP MANUFACTURING COMPETITIVENESS ENHANCEMENT PROGRAM A brief overview Compiled by DECTRA
  2. 2. MCEP WHAT IS IT ABOUT? • Cash grants on investment cost • Improve productivity & competitiveness and retain jobs. • Does not replace existing EIP/MIP grant program
  3. 3. MCEP WHO CAN BENEFIT? • Manufacturers • Engineering and conformity assessment agents who service the manufacturing industry
  4. 4. 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
  5. 5. MCEP ALSO ON OFFER • Pre- and post production working capital loans @ 6% p.a. from IDC
  6. 6. 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
  7. 7. 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)
  8. 8. MCEP REQUIREMENTS • Only incorporated legal entities may apply • Must maintain employment levels • Strive towards BEE scorecard Level 4 • Only new equipment
  9. 9. 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
  10. 10. MCEP COST1: EXPAND & UPGRADE WHAT 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
  11. 11. 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 ENERGY WHAT YOU GET
  12. 12. 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
  13. 13. 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”
  14. 14. MCEP COST 3: COMPETITIVENESS IMPROVEMENT WHAT YOU GET • 70% down to 50% of qualifying cost • Limit 1: MVA limitation
  15. 15. MCEP COST 4: CLUSTERS WHAT YOU GET • 70% to 50% of feasibility study costs • Limit 1: R7,5m • Limit 2: MVA limit.
  16. 16. 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.
  17. 17. 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
  18. 18. Example: MVA calculation Income Statement 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
  19. 19. 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
  20. 20. MCEP COST 5: CLUSTERS WHAT 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
  21. 21. 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
  22. 22. 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

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