Tag Archive | Manufacturing Competitiveness Enhancement Programme

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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Manufacturing Competitiveness Enhancement cash grants from DTI

Minister Rob Davies, department of trade and industry (DTI), has announced yet a further set of incentives to bolster manufacturing and general engineering industries against the current downturn in economic conditions, intended also to counter dismal local market conditions and the effects of recession in some of South Africa’s top export destinations.

Known as the Manufacturing Competitiveness Enhancement Programme (MCEP), DTI’s programme is aimed at tempting manufacturers to upgrade their production facilities, the incentives being greater as more labour sustainability appears in the returns and value is added by expansion to the processes involved and markets are built.

Said Davies, “The MCEP will also aim to address the general ability of the South African manufacturing industry to compete against imports and to also to compete globally against its counterparts in other export markets.” His statement followed his budget vote speech in the National Assembly on this point.

“It is proposed”, he said, “that the MCEP incentive will be available not only to entities engaged in manufacturing, but also to engineering services and other agencies servicing and supporting the manufacturing industry.”

The grants in general will be managed by the DTI and in the case of capital grants “cost sharing” will be between 30 and 50% of the investment, with smaller firms receiving a larger percentage of their investment. This incentive has been opened to all manufacturing enterprises not covered by sector-specific incentives, such as those available to companies in the automotive, clothing and textiles and business process outsourcing industries, Minister Davies said.

Launching the R5.8-billion programme, Minister Davies added that a number of types of grant were involved – namely a straight forward capital investment, as already mentioned, involving upgrading capital equipment and expansion of productive capacity.

Then there was a “green technology” grant for an existing production process that becomes “greener” as a result of capital injection, resulting in cleaner production and improved energy efficiency. This would have the same cost sharing arrangement at between 30 and 50% of the investment, with smaller firms again receiving a larger percentage of their investment.

There are also to be enterprise-level grants, where investment in the adoption of world-class manufacturing practices were involved, ranging from lean production technology to gaining an ISO mark and where cost sharing would be as high as 50 -70%.  Similar cost sharing arrangements would be offered for feasibility studies grant, resulting from a programme where “a bankable feasibility study for new manufacturing projects” was found to be acceptable.

Finally, there would be cluster initiatives grants towards support for cluster initiatives to improve competitiveness, innovation and access to new markets and where technology development centres, market research, international advertising and publicity costs were deployed to gain new markets. Dr Rob Davies said that it was important for DTI to ensure that the MCEP grant programme was “flexible” in its application and he said that the working capital portion of the grant which will be managed by the Industrial Development Corporation. Manufacturers and organisations can begin applying from June 4, which is when DTI will open its Internet online application system, the Minister said, implying this would be on the DTI website.

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