Incentives - Investment Support

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• 1. Enterprise Investment Programme (EIP)

  Following the July 2008 launch of the Enterprise Investment Programme (EIP) by the Minister of Trade and Industry, prospective applicants can now access the Programme Guidelines and Application Forms for the Tourism and Manufacturing sectors. The Minister of Trade and Industry, Dr Rob Davies (MP), has approved the revised guidelines pertaining to the Enterprise Investment Programme (EIP) and its sub-programmes, the Manufacturing Investment Programme (MIP) and Tourism Support Programme (TSP).
  The revised guidelines will become effective and be implemented as of 5 October 2009. This is to allow the Department of Trade and Industry (the dti) sufficient time to make the necessary adaptations to its online application system. Hence, all applications submitted to and received by the dti before 5 October 2009, should comply with the original guidelines published in the Government Gazette, Vol. 517, No. 31226, dated 4 July 2008.

  • Manufacturing Investment Programme (MIP)
  The objective of the MIP is to stimulate investment within the manufacturing industry. Qualifying investment costs would comprise machinery, equipment, land and buildings, and commercial vehicles.

  • Tourism Support Programme (TSP)
  The objective of the TSP is to stimulate employment, broaden and expand the geographic spread of the services on offer for tourism investment.

  • Qualifying Marginalised Areas Advancing Spatial Economic Activity (MIP and TSP Incentives)
  The Manufacturing and Tourism incentive programmes (MIP and TSP) currently stimulate industrial and tourism investment throughout the nine provinces of South Africa.

• 2. Black Business Supplier Development Programme (BBSDP)

  The BBSDP is a 90:10 cost-sharing grant, which offers support to black-owned enterprises in South Africa, whereby the dti contributes 90% of the cost of a project and the approved applicant 10%. The scheme provides such companies with access to business development services that assist them to improve their core competencies upgrade managerial capabilities and restructure their processes to become more competitive.

  Objectives of the incentive scheme 

  • To fast track existing SMMEs that exhibit good potential for growth into the mainstream economy; 
  • To grow black-owned enterprises by fostering linkages between black SMMEs and the corporate and public sector enterprises; 
  • To complement current affirmative procurement and outsourcing initiatives of corporate and public sector enterprises; 
  • To enhance the capacity of grant recipient enterprises to successfully compete for corporate and public sector tenders and outsourcing opportunities.

  Qualifying criteria of the incentive scheme

  • Enterprises that are majority black owned (fifty plus one share) and have a significant representation of black managers on their management team;
  • Enterprises with a maximum annual turnover of R12 million per annum;
  • A key criterion for eligibility is that the enterprise must have a minimum trading history of one year;
  • If the enterprise is registered for less than a year, but has been operating previously, the following proof must be submitted: (registration with local municipality and VAT registration) or invoices to confirm trade activity;
  • Enterprises accessing the scheme must also comply with commercial regulatory requirements applicable to their areas of business, e.g. registration with CIPRO and SARS.

  Projects to be incentivised

  • Projects aimed at improving the effectiveness of the management system of an enterprise, e.g. scoping and implementation of production planning and control systems; implementation of quality management systems, such as ISO 9000 and ISO 14000; development of business plans for raising finance (marketing plans and marketing strategies should be part of the business plan). Limited cost-sharing grant support will be made available for the procurement of software and the printing of manuals that support the implementation of “best practice” management systems;
  • Projects aimed at assisting the entry of enterprises into targeted markets, e.g. market research where (a new product is developed); design and development of marketing materials, website design, etc. Limited cost-sharing grant support will be available for the printing of marketing materials. Payment towards the design of marketing material is limited to R18 000 and printing R12 500;
  • Projects that aim to impart specialised, enterprise-specific skills to employees e.g. specialised technical courses, such as computer maintenance and repair courses / jewellery making;
  • Projects aimed at upgrading the capability of the management team of an enterprise through generic training programmes, e.g. executive management development programmes, financial management programmes, seminars on preparation of bids for public and corporate sector tenders, R7 000 per individual and group training is prefered;
  • Payment towards skills training is limited to R15 000 (excluding VAT) per individual and group training is preferred;
  • Payment towards executive management training is limited to R10 000 (excluding VAT) per enterprise and the cost of the training programme should compare favourably with similar programmes;
  • Service providers should be SAQA or SETA accredited.
  • The length of training should not exceed 5 (five) weeks or hundred and sixty notional hours (160);
  • Preference will be given to training that enhances the capacity development of an enterprise;
  • Long-term formal training (e.g. MBA) at accredited institutions like universities will not be incentivised.

  Benefits of the incentive scheme

  • The maximum grant amount that a single enterprise can qualify for is limited to R100 000 (one hundred thousand rands);
  • The requested amount should not exceed 25% of the entity's previous year's turnover;
  • Enterprises will exercise their own choice in selecting service providers, subject to the constraint that at least three competitive bids are obtained in the selection process. Enterprises do not necessarily have to select the lowest cost service providers. The profile(s) of the service providers must also be submitted;
  • In a case where a higher quote is chosen, a good motivation letter from the grant applicant must be provided.

  Applying for the BBSDP Grant. To apply for the BBSDP grant, enterprises submit a completed application form, with the following:

  • A detailed business plan (a suggested format is available);
  • Three (3) sets of comparable quotations for each activity applied for;
  • Submitted quotations must be authentic (i.e. must indicate a registration number, telephone number, fax number, be addressed to the grant applicant and must be signed);
  • If the dti is of the view that quotations are not market related / inflated, the dti reserves the right to obtain competitive quotations for the activities applied for;
  • The preferred service provider must provide samples of work done previously if activities applied for are marketing materials;
  • Motivation for preferred service provider;
  • Proof of registration of enterprises (CK1 or CK2);
  • Turnover projections for next 2 years;
  • Financial statements;
  • Valid tax clearance certificate.

  Payment for deliverables

  • No payment will be made for sub-standard / unacceptable deliverables from Service Providers.

   

• 3. The Critical Infrastructure Programme (CIP)

  The Critical Infrastructure Programme (CIP) is a non-refundable, cash grant that is available to the approved beneficiary upon the completion of the infrastructure project. The scheme covers between 10% and 30% of the total development costs of the qualifying infrastructure.
  
  For the purpose of adjudication, consideration is given to the following main issues:

  • Mandatory requirements;    
  • Achieving minimum performance requirements (on which point scoring is applied);
  • The extent to which the project is deemed a critical infrastructure.

  In terms of the CIP, the infrastructure for which funds are required is deemed to be 'critical' if the investment would not take place:

  • Without the CIP funding contribution;
  • If the infrastructure projects would be executed without the CIP contribution;
  • It can be proven that it would be of a smaller scale, or
  • Lower quality, or
  • Would be established at a later stage than the period than when it was intended.

  Without the CIP funding contribution;

  The CIP supports only the construction of the infrastructure that enables the investment project or the expansion of existing fixed investment.
  Under no circumstances will the CIP fund the investment itself unless the infrastructure is itself the investment.
  
  Aims of the incentive scheme
  The CIP is an incentive for projects that support infrastructure necessary for the establishment investment projects. The key objectives of the programme are to:

  • Support the competitiveness of South African industries by lowering business costs and risks;
  • Provide targeted financial support for physical infrastructure that will leverage strategic investment with a positive impact on the economy;
  • Stimulate upstream and downstream linkages, taking into account government priorities such as growth and employment, BEE, Integrated Rural Development, Urban Renewal Strategies and Spatial Development.

  Eligible Entities
  Entities that could qualify for the CIP grant are:

  • Private sector enterprises that are legal entities, incorporated and registered in terms of the Companies Act (Act No. 69 of 1984, as amended), and any external legal entity registered in terms of Chapter XIII of the Companies Act (Act No. 61 of 1973, as amended);
  • Public sector enterprises (i.e. public entities);
  • Private/public partnerships (PPP) comprising a:
    o local government and a private legal entity;
    o local government and a public enterprise; or
    o public enterprise and a private legal entity;
    o combination of any of the above.
    CIP will fund Private Public Partnerships only if they meet the criteria as set down by the National Treasury.

  Qualifying infrastructure for the incentive scheme
  It is intended that:

  • The component of the infrastructure installed or constructed beyond the point of supply i.e. inside the private property/yard/fence of the client company for the sole use by a specific investment project will not be funded under this programme;
  • A project application that is submitted to the Secretariat after the construction of the infrastructure project has commenced shall not be considered;
  • The infrastructure installed or constructed should be accessible to the general public and other investors.

  The infrastructure contemplated to qualify under this programme:
  Qualifying infrastructure may be the structural foundations or permanent network facilities via which enterprises and society in general receive or supply basic services such as transport, electricity and water, sanitation, telecommunications etc. Examples of infrastructure include roads and bridges, electricity transmission lines, water pipelines, sewers, and telephone lines, as well as their associated generation, storage, purification and other facilities that supply, protect or in anyway facilitate the networks and systems.
  
  Mandatory requirements of the incentive scheme
  For an application to be considered by the Adjudication Board, the following documents should be submitted with every application:
  Applicant's State of Financial Affairs

  • A guaranteed source of additional funding to complete the infrastructure project is required. (Example: a letter of intent from a financial institution etc);
  • Written undertakings by the source(s) mentioned above stating that a matching grant of at least 70% as additional funding would be provided;
  • Historical audited financial statements for the past three financial years;
  • Projected financial statements for the next three years or over the lifespan of the proposed project.

  Commitment to establish investment projects
  A written undertaking by the investor that the infrastructure project to be funded will:

  • Service new investment project(s) in South Africa that will contribute to the growth of the economy, which investment project(s) will create direct and indirect employment opportunities as well as the retention of existing employment;
  • Service the expansion(s) of existing investment project(s) in South Africa that contribute to the growth of the economy, which investment project(s) will sustain or retain current jobs and will create additional direct and indirect employment opportunities.

  Long-Term commercial viability
  Summary information that demonstrates long-term commercial viability of the intended investment project should be attached.
  
  Applicant's state of tax affairs
  A valid Tax Clearance Certificate associated with the applicant, obtained from the South African Revenue Services (SARS).
  
  Compliance with all other statutory regulations

  • Environmental permits;
  • Permits or authorisation regarding land use;
  • Technical drawings, and designs (or at least preliminary designs), including details of capacity and technical specifications of the infrastructure;
  • Health and safety permits;
  • Other permits that may be applicable to the specific project;
  • If in the process of acquiring the necessary permits, proof of considerations by the relevant authorities must be submitted.

  Project budget plans
  Project plan(s) for the infrastructure project and the expected investment. The project plans should contain the following details:

  • The time-frame and key milestones associated with each main project activity;
  • Description of each of the main project activities and sub-activities associated with the infrastructure project;
  • The financial cost and budget associated with each major project activity. (Applicants are kindly advised that budgets based on “order of magnitude” estimation are not acceptable).

  Other relevant documents
  The dti reserves the right to request other documentation that may be relevant in its adjudication of the application.
  
  Funding requirements for the incentive scheme
  At the time of submitting an application for funding, applicants must satisfy all requirements as set out in the publication.
  
  Claiming process for the incentive scheme
  The approved beneficiary will be reimbursed in two phases upon receipt of such claims from the entity. The approved amount to be claimed in each of the phases will be determined by the beneficiary.

• 4. Business Process Outsourcing and Offshoring (BPO and O)

  The BPO and O Investment incentive comprises an investment grant ranging between R37 000 and R60 00 per seat and a training support grant towards costs of company specific training up to a maximum of R12 000 per agent. The incentive is offered to local and foreign investors establishing projects that aim primarily to serve offshore clients.
  The objective of the incentive is to attract BPO and O investment that creates employment opportunities. The BPO Investment incentive is effective from 06 December 2006 to 31 March 2011.
  
  Eligibility criteria
  Qualifying Applicant:

  • Registered legal entity in South Africa and taxpayer in good standing;
  • Accepted or approved the investment project to go ahead.
    

  Qualifying project:

  A qualifying investment project may involve starting a new operation or expanding an existing operation in order to perform business process outsourcing and off-shoring;

  • To qualify for BPO and O incentives the applicant must apply and be approved prior to the commencement date of commercial operations;
  • The project must establish an operation of at least a 100 seats and create employment for at least 200 agents (defined as full-time equivalent) by the end of its first year in operation;
  • The investment project must commence its commercial operations within one year from envisaged date of the BPO incentive grant approval;
  • The investment project can be a cost centre of an existing operation, a branch of an existing entity or a joint venture between entities. In a joint venture arrangement at least one of the parties must be registered in South Africa as a legal entity;
  • The investment project must operate activities classified as that of business process outsourcing and off-shoring and must generate at least 90% of its revenue from activities that service offshore clients. An exception to this requirement is however applicable to operations that have been in existence and operating in South Africa before March 2006, in this case 70% will be accepted.

  Non-qualifying projects
  

  • Projects expected to displace existing jobs within South Africa, for example by way of relocating an existing BPO and O facility, in full or part within South Africa; and /or transferring the capacity from a client, a competitor, or an associated operation in South Africa, will not qualify for the incentive;
  • Projects receiving or approved to receive industrial incentive benefits under the Small Medium Enterprise Development Programme (SMEDP) or its successors.

  Investment incentive calculation
  The investment grant ranges from R37 000 to R60 000 per seat depending on the level of qualifying investment expenditure and employment creation, as follows:

  Employment creation of full time equivalent of agents	Qualifying investment expenditure per seat	Grant per seat
  Between 200 and 499	At least R74 000	Between R37 000 and R44 600
  500 and above	Greater than R89 200	Between R44 601 and R60 000
  At least 200	But less than R74 000	Between R37 000 and R52 300 OR 50% of agents salary cost for first 2 years whichever is less

  • A project employing between 200-499 agents with Qualifying Investment Expenditure of more than R74 000 per seat is eligible for a grant between R37 000 and R44 600 per seat;
  • A project employing 500 or more agents with qualifying investment expenditure greater than R89 200 per seat is eligible for a grant between R44 601 and R60 000 per seat;
  • Should a project have qualifying investment expenditure of less than R74 000 per seat, but 200 or more agents, it will be eligible for a grant between R37 000 and R52 500 per seat. The approved grant may not exceed 50% of the salary costs of agents for the first 2 years of the project.

  Training and skills support incentive scheme
  The training and skills support grant provides support in respect of company specific training requirements. The same eligibility criteria apply as in the investment grant, except that the applicant must prove that he/she has incurred expenditure on qualifying training and skills development activities. A project has to qualify for a investment grant prior to accessing a training and skills support grant.
  
  Benefits of the incentive scheme
  The grant is to be calculated as 50% of qualifying training expenditure up to amaximum of R12 000 per agent.
  
  Qualifying training expenditure
  The qualifying training and skills development expenditure are for company / client specific skills requirements in the following areas:

  • Costs for company specific training e g products training language training, systems training;
  • Costs of in-house trainer development / skills development facilitators / in-house assessors training;
  • Costs for development of learning materials / programme;
  • Costs for trainer secondment to South Africa;
  • Costs of purchasing and installing training equipment and facilities.

  Non-qualifying expenditure
  Costs of generic training requirements such as the following items are not eligible: basic IT skills, financial, communication (verbal and written), customers service, entrepreneurship, and business acumen.
  
  Grant disbursement
  The grant will be disbursed upon completion of approved training and actual expenditure incurred as at the end of the first 6 months and first financial year, or later as per approval conditions.
  
  Submitting an application form

  • Project submit applications to the dti;
  • Applicant submits 2 copies of the application to the dti;
  • the dti assesses eligibility of the applicant and project against eligibility criteria;
  • Projects presented to adjudication committee for a decision;
  • Monthly adjudication committee decisions;
  • Decision to be communicated to applicant in writing (if applicable);
  • Signing of grant contract between the applicant and the dti;
  • Submit claims to the dti, according to the approved claim stages and in line with the performance requirements at each stage;
  • Site inspection to monitor and report progress on approved projects.

• 5. The Sector Specific Assistance Scheme (SSAS)

  • The Sector Specific Assistance Scheme is a reimbursable cost-sharing grant scheme whereby financial support is granted to nonprofit business organisations in sectors and sub-sectors of industries prioritised by the dti.
    The Sector Specific Assistance Scheme is a reimbursable cost-sharing grant scheme whereby financial support is granted to nonprofit business organisations in sectors and sub-sectors of industries prioritised by the dti.
    
    The sectors include:
    • Agro-processing
    • Chemical Allied Industries
    • Electronic Industries
    • Textile and Clothing
    • Metals and Allied Industries
    • Machinery, Allied and Electrical Industries
    • Motor Industry Components
    • Creative Industries
    • ICT
    
    Nature of projects
    
  • A project is a task with a pre-determined outcome, a defined or short-term time frame and measurable milestones. All projects under SSAS should aim to contribute to the project objectives outlined in the Rules and Guidelines;
  • The project must essentially be developmental in nature. Routine and administrative activities of the applicant's organisations are not considered as projects;
  • Any research/studies undertaken or databases obtained will become the property of the dti.

  The aims of the incentive scheme

  • Developing an industry sector as a whole;
  • Developing new export markets;
  • Broadening the export base;
  • Proposing solutions to factors inhibiting export growth;
  • Stimulating the participation of SMEs;
  • Promoting Black Economic Empowerment (BEE);
  • Promoting Women Empowerment (WE) in the export sector.

  Qualifying criteria for the incentive scheme
  The categories of qualifying applicants:
  Export councils

  • Established through application to the dti;
  • An Export Council is a Section 21 (non-profit) company that represents the developmental and promotional objectives of a particular industry/industries on a national level.

  Industry associations
  Representative of sectors or sub-sectors of industry prioritised for development and promotion by the dti, as determined by the relevant Sector Programme.
  
  Joint Action Groups (JAGS): Groups of three or more entities.

  • Seek to co-operate on a project in a particular sector or sub-sector of industry prioritised for development and promotion by the dti;
  • Project should benefit the sector as a whole in terms of the SSAS objectives;
  • Has no formal structure;
  • Must provide cession letters from other members where payment is made to one member .

  Qualifying criteria as an applicant of the scheme

  • The applicant is required to complete the SSAS Form A: Application for establishing an Export Council / Joint Action Group and submit the form to the Export Council at the dti;
  • Applications to form Export Councils will be considered only once a year, and must reach the Export Council at the dti by 31 January of each year;
  • Applications to form a Joint Action Group may be submitted throughout the year;
  • Existing registered Industry Associations do not need to go through a formal process of registration with the dti, but will be required to provide proof of registration;
  • The assistance offered by the SSAS does not necessarily apply equally to all the categories of applicants;
  • The application form SSAS Form A: Application for establishing an Export Council / Joint Action Group is available from the Export Council.

  Eligible projects

  • A project is a task with a pre-determined outcome, a defined short-term time-frame and measurable milestones. All projects under SSAS should aim to contribute to the objectives stated in the project description;
  • Projects must essentially be developmental or promotional in nature. Routine and administrative activities of applicants' organisations are not considered projects;
  • Any research/studies undertaken or databases obtained will become the property of the dti.

  Application procedure for the incentive scheme

  • Project applications should be submitted to the Export Council Secretariat / Programme;
  • The project application will be sent to the head of the relevant sector desk at the dti for evaluation;
  • The evaluated project is then proposed to the SSAS Adjudication Committee for final approval;
  • Applicants must supply with written assurance that they have implemented an efficient, effective and transparent financial management and internal control system. This assurance must be signed by the accountant or CEO and by the auditor in the case of incorporated companies.

• 6. The Co-Operative Incentive Scheme (CIS)

  The Co-operative Incentive Scheme is a 90:10 matching cash grant for registered co-operatives. The maximum grant that can be offered to one co-operative entity under the scheme is R300 000. The CIS is an incentive for cooperative enterprises in the emerging economy to acquire competitive business development services.
  
  The aim of the incentive scheme

  • Promote co-operatives through the provision of a matching grant;
  • Improve the viability and competitiveness of co-operative enterprises by lowering the cost of doing business;
  • Assist co-operatives to acquire their start up requirements;
  • Build an initial asset base for emerging co-operatives to enable them to leverage other support;
  • Provide an incentive that supports broad-based black economic empowerment.

  Eligible entities

  • Be incorporated and registered in South Africa in terms of the Co-operatives Act of 1991;
  • Be operating or will operate in the emerging sector;
  • Adhere to co-operative principles;
  • Be an emerging co-operative owned by historically disadvantaged individuals;
  • Be rural and semi-urban biased;
  • Be biased towards women, youth and people with disabilities.

  Qualifying criteria for the incentive scheme

  • Business development services;
  • Business profile development;
  • Feasibility studies / market research;
  • Production efficiency;
  • Technological improvement projects;
  • Plants and machinery;
  • Start-up requirements;
  • Working capital requirements.

  Applying for the co-operative incentive scheme
  1. Application form
  The application form should be completed in full, dully signed and submitted to the dti by the applying co-operative to indicate the intention to participate in the CIS.
  2. Proof of registration
  Applications must provide proof of incorporation in the form of a certificate of registration indicating the name of the cooperative, its registration number, information about the registered office and the names of directors.
  3. Proof of decision to apply for funding
  The applying co-operative must be able to provide a resolution for it to apply for the CIS. This could be by way of attaching the minutes of the co-operative Board on the session taking the decision to apply for the grant.
  4. Enterprise development plan / pre diagnostic report
  The report is for assessing the enterprise development needs of the co-operative. It may be compiled with the assistance of a field official.
  5. Co-operative business plan
  Applicants must attach a business plan. A template is included in the application forms.
  6. Quotation
  Should an application include the purchase of goods, three valid and comparable quotations should be attached to it.
  7. Tax clearance
  The applicant must submit a valid tax clearance certificate.
  8. Certified copies of IDs of directors
  The applicant must submit certified copies of the identity documents of the directors of the co-operative.
  9. Constitution
  The applicant must submit a certified copy of the constitution of the co-operative applying for the grant.

• 7. Film Production Incentives

  The new film and television production incentive comprises of the Foreign Film and Television Production Incentive, and the South African Film and Television Production and Co-Production Incentive. The incentive is intended to increase local content generation and improve location competitiveness for filming in South Africa.