Tag Archive | incentives

DTI Manufacturing Competitiveness Programme scrutinised

 pics ack bdlive

Plan not easy to work, says October…..

lionel octoberLionel October, acting DG, department of trade and industry (DTI) admitted to Parliament the Manufacturing Competitiveness Enhancement Programme (MCEP) had been a difficult programme to run.   Over eight hundred applications with a grant value of R5.1bn had been agreed upon but only R1.5bn disbursed.

However by  2018, he said, DTI would have allocated all R7.4 billion and the amount granted One of the major problems faced, October said, was brought about by the confusion in the minds of many on the nature of the MCEP.  A good number of applicants had tried to apply as if their applications were for a social grant, which was certainly not the case.

MCEP was a short term stimulating package designed for already successful manufacturing companies to assist them during current global and difficult times. Addressing Joan Fubbs of the trade and industry portfolio committee, DG October told parliamentarians that national treasury had been approached for funds in 2012 to revive the manufacturing sector for a period of six years.    R7.4bn in the end was provided.

One year later, trade and industry minister Dr Rob Davies reported that R3bn MCEP approvals had beenRob_Davies made, which would support industrial investments by 436 applicants  and this would a sustain more than 116 000 manufacturing jobs.

The MCEP was conceptualised as a result of the one-million jobs shed during the 2009 recession, he said, and which had badly hurt the nation’s finances. Minister Davies described at the time how the MCEP incentive programme was a critical element of DTI’s Industrial Policy Action Plan (IPAP) designed to stem the sudden loss of the manufacturing sector’s contribution to GDP.

The MCEP was not designed to assist new companies but support existing ones with the potential either of recovering from an earlier troubling status or developing new markets, Davies insisted.

susan mangole Ms Susan Mangole, COO at DTI,  explained to parliamentarians at the recent meeting that the department maintained a “pay-out system” where, after initial approval, the incentive money was only paid once the agreed plan was up and running and jobs had been retained. There was accordingly a time lag between approving a grant and receiving the funds in reward. The time lag could be up two years before fruition of the project was apparent.

The programme, she told parliamentarians was now two and a half years old and, after a slow start, the applications “became a flood”.  Currently, DTI had already committed well over half of the total package. DTI focused on two components with MCEP, Ms Mangole said.   Firstly, through production incentives as described and then with industrial financing loan facilities through Industrial Development Corporation, who had been given R1bn from the fund by DTI.

Any company could only qualify if it had level 4 B-BBEE status or could achieve the status within twomanufacturing years. Lionel October concluded that DTI had been instructed (presumably by treasury) that by the end 2016 it should entertain no more applications and only deal with those already filed.   By 2018, he said, DTI would have allocated all R7.4 billion and the amount granted had now been rationalised to a maximum of R30m, although it had started at R50m.

Some DA opposition members complained that it was absurd to exclude companies because of their current B-BBEE status when the idea was to create more jobs.   DG October stated that this was a “must” in applying, since it was a fact that all companies had to comply with BEE and labour laws. But, he said, most larger companies did in fact comply and the focus of DTI remained revitalising such sectors as agro-processing sector, where most imports of machinery occurred.

“So the problem is not on the supply side but on the demand side”, he said and added that the agro-processing industry in South Africa was experiencing a massive turnaround with exports probably reach double digits of a percentage towards GDP.

He commented, “Then this industry could then pay its workers decent wages.”

The DA complained about poor communication between DTI and applicants saying that a year couldparliamentary committee elapse without even hearing an acknowledgment of an application. There was, the member said, without any doubt an enormous backlog of applications and delays in correspondence on those that were in process.

He complained that DTI was very inefficient in its customer/client care relationships. G Hill-Lewis (DA) agreed and said that it was nearly impossible to “get anybody on the ‘phone at DTI, let alone the person dealing with MCEP issues”.

Ms Mangole confirmed that DTI was working towards improving its response system but that DTI had informed its clients and stakeholders that there would be delays because the system was under strain and that it would be difficult to honour the claims within reasonable times. In subsequent presentations DTI showed a shortage of 271 posts of qualified persons.

lionel october 3On the subject of which industries were getting the most grants, Lionel October said those businesses, such as in the automotive and textile industries that had access to other schemes, were excluded by default. He thought now that the DTI might move to strategic sectors but in any case, in the final play out, it was the manufacturers who succeeded with good proposals who would determine where the market for incentives was.

He stressed that the programme was aimed at retaining and sustaining jobs but not creating jobs. He admitted that as DTI did not make labour law, compliance in this respect was of low priority in considering factors for approval of an application.

Acting DG Lionel October agreed to some extent with opposition members that the issue of complying with labour laws was indeed a matter for labour inspectors. Meanwhile, he said the main focus was on revitalising the companies involved.

Other articles in this category or as background

DTI earns ire of Parliament on BEE – ParlyReportSA

DTI gives warning on investment climate – ParlyReport

SA Manufacturing Competitiveness Enhancement cash grants from DTI

DTI claims new SEZ investment incentives are better

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Small business gets R1bn incentive scheme

Tax relief and business incentives

The new small business development department (SBDD) has transferred from the department of trade and industry (DTI) the R1bn fund which covers both corporate incentives to develop small business and the Small  Enterprise Finance Agency (SEFA).

However, it will leave with DTI all matters relating to B-BBEE insofar as regulations are concerned.  Both the new minister, Lindiwe Zulu, and deputy minister, Elizabeth Thabethe, were present for a short departmental briefing by SBDD given to the new small business portfolio committee chaired by Ruth Bengu, who in the last parliamentary period served as chair of the transport committee.

Revised thinking

In an earlier portfolio committee meeting of trade and industry, a few days before under their chair, experienced ANC member Joan Fubbs, DTI had called for a rethink on small business policy.

They said they wanted to see a clearer policy on the SMME support role by national government with provincial and local government and to establish a programme for rolling out more small business “incubators”- something that opposition parties had been calling for over a long period of time.

Also DTI supported the call to review the small claims court system so that access to affordable justice was more affordable. They wanted this to be a further target of the new department.

Such recommendations came amidst a foray of criticism by commentators that the new department could become a diversion for unsolvable small business issues or alternatively the new department could become merely a point for start-up small business without any real muscle.

Less red tape

The new department in addressing MPs confirmed to them that its mandate was to focus on “enhanced business support” and they emphasised their support for women, people with disabilities and to provide mechanisms to access finance, business skills development.  They also said they were there to ease regulatory conditions; to help regulate better the SMME environment and to give leverage on public procurement.

It was important to recognise, SBDD said, that it was also there to encourage the development of cooperative entities, in which instance shareholders themselves were the members and entrepreneurs. Finally, the process of creating market access was an important task, they added. Nothing was new here.

But opposition ears pricked up when they said tax relief grants to corporates that invested in small business development were to be considered and incubation programmes and technology upliftment were priorities.  The immediate future, however, was all about configuring the new department; the “migration” of responsibilities from DTI; and transferring allocations for the establishment of support institutions.

Chair of the committee, Ruth Bhengu – previously chair of the parliamentary transport committee – then called for response from opposition members which mainly came from Toby Chance of the DA, whose questions were answered by both by the new minister and deputy minister.

Jobs or not

Chance said that whilst applauding the formation of this department, he wanted to know whether or not any success was to be measured in terms of jobs created,  which to him was the bottom line, he said. Also he wanted a clearer definition of what government actually meant by the term “small business”.

He said there were plenty of “gleaming new supermarkets in our townships but very little industrial developments, in fact some industrial parks were in a state of decay.” Chance said the DA was also worried that the impact of new labour legislation and labour regulations was immobilising small business and the amount of red tape currently being experienced was becoming “out of hand”.

Chance said he hoped the new department recognised the fact that that corporates and industry should focus on the development of small businesses to create the job growth called for by the NDP.   Partnerships with small business were the best way of achieving this, he noted.  He concluded that all “tax incentives should be re-visited” and that more emphasis should be laid on small manufacturing businesses.

In reply, minister Lindiwe Zulu agreed on the issue of red tape as a hindrance to small business and said her objective was to become like Rwanda where direct contact with national bodies that supported initiatives was far easier.

Compliance for all

However, she said that business had to understand that it had a role to play and a “culture of compliance” had to be encouraged in both small and large business and manufacturers or there would be anarchy.   Also large businesses and the state will have pay small business invoices on thirty days or risk penalties.

The minister said on the subject of labour regulations, dept of labour had its own targets and own agenda on decent work conditions and that was a separate issue. “The job of small business development was to work inside current conditions and for business to respect that.”

Chance replied that the governing party seemed to have “developed a track record of “attacking business persons when they criticised ANC economic policies or asked tough questions”, which statement prompted vehement denials from the minister and deputy minister.

Other articles in this category or as background
http://parlyreportsa.co.za//trade-industry/licensing-of-businesses-bill-re-emerges/
http://parlyreportsa.co.za//bee/minister-davies-gets-cooperatives-bill-approved/
http://parlyreportsa.co.za//parlyreport-contacts/cabinet-ministers/ministry-small-business-development/

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New taxation regimes before Parliament

Introducing DTI’s SEZs….

A Taxation Laws Amendment Bill, with its tandem enabling Bill, the Tax Administration Laws Amendment Bill, are both before the standing committee on finance giving effect to most of the tax proposals announced in the 2013 budget review.

Probably the most important for economic growth is the proposed beneficial tax regime for companies that decide to take advantage of the new Special Economic Zones Bill introduced by minister of trade and industry, Dr. Rob Davies, and now almost finalised by Parliament.

Export incentives

Other tax proposals are to back up the cabinet wish to revitalise South Africa’s maritime sector with an attractive tax regime to encourage exports, mainly using Africa coastal routes.

Minister of finance Gordhan Pravin’s tax proposals also include moves to discourage profit-shifting through excessive interest deduction and the use of artificial debt and the payment of certain dividends which gain tax deductions.

Provident funds

Retirement fund deductions are affected as from next year, as will be certain matters regarding provident funds. Most important are the easing of conditions under which low-income employees are acquire houses at below market value without tax being payable under the current fringe benefit system

Foreign e-commerce suppliers are to register for VAT.

There are a number of changes affecting the completion of tax forms  and there are new regulations for tax practitioners, mostly involving the principle of “accountability”.

Treasury has promised specific legislation on the employment tax incentive and waste discharge incentive charges later this year and comments on both Bills will be close early in August in order for the money Bills in question to be processed by September.
Refer previous articles in this category
http://parlyreportsa.co.za//finance-economic/dividends-withholding-tax-arrives-on-time/
http://parlyreportsa.co.za//cabinetpresidential/pravin-gordhan-best-budget-vote-speech-of-the-year/

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