Investment and Export Incentives

1.2Investment and Export Incentives

• 
  Investment in manufacturing assets, to improve the productivity of the South African manufacturing sector;
  
• 
  Training of personnel, to improve labour productivity and the skills profile of the labour force.
  

The incentive offers:

• 
  R900 million in the case of any Greenfield project with a preferred status;
  
• 
  R550 million in the case of any other Greenfield project;
  
• 
  R550 million in the case of any Brownfield project with a preferred status;
  
• 
  R350 million in the case of any other Brownfield project;
  
• 
  An additional training allowance of R36 000 per employee may be deducted from taxable income; and
  
• 
  A maximum total additional training allowance per project, amounting to R20 million, in the case of a qualifying project, and R30 million in the case of a preferred project.
  

• 
  Greenfield project (new project);
  
• 
  Brownfield project (expansion or upgrade); or
  
• 
  Classified under 'Major Division 3: Manufacturing'.
  

The project should:

• 
  Upgrade an industry within South Africa (via an innovative process, cleaner production technology or improved energy efficiency);
  
• 
  Provide general business linkages within South Africa;
  
• 
  Acquire goods and services from small, medium and micro-sized enterprises (SMMEs);
  
• 
  Create direct employment within South Africa;
  
• 
  Provide skills development in South Africa; and
  
• 
  In the case of a Greenfield project, be located within an Industrial Development Zone (IDZ).
  

1. 
   Investment projects of R5m (€500,000) and below may qualify for investment grants equal to 30% of their qualifying investment costs, payable over a three year period.
   
2. 
   Investment projects of above R5m may qualify for an investment grant of between 15% and 30% of their qualifying investment costs, calculated on a regressive scale, and payable over a period of two years. This investment grant cannot exceed R30m.
   

In all cases, grant payment is subject to the approved project achieving the stipulated performance requirements of employment creation, B-BBEE, location and investment.

The TSP is offered in conjunction with other instruments already available through the provisions of the Income Tax Act, which the government has implemented to stimulate investment, including the graduated tax rates applicable to small enterprises, and the Tourism Enterprise Partnership http://www.tep.co.za/

at the Department of Tourism.

The approved guidelines for the Automotive Investment Scheme (AIS) were issued in May 2010. The AIS is a vital part of the Automotive Production and Development Programme (APDP), which was to replace the Motor Industry Development Programme (MIDP) in 2012. Both of these incentive programmes encouraged investment in the local automotive sector. The AIS was to replace the MIDP's Productive Assets Allowance (PAA), which lapsed in December 2009, ahead of the launch of the APDP. The introduction of the AIS was delayed, as government and the local automotive industry negotiated on details. In the meantime, DTI provided guarantees to a number of companies announcing investment plans including BMW South Africa. A budget allocation of R2.69 billion (about €277m) is to be made available for the next three financial years, starting in 2010/11 and ending in 2012/13.

1. 
   A manufacturer of specified light motor vehicles that is registered with the International Trade Administration Commission (ITAC), in terms of Note 1 to Chapter 98 of the Customs and Excise Act. An existing light motor vehicle manufacturer must have achieved, or demonstrate that it will achieve, within three years, a minimum of 50,000 annual units of production per plant, or a new light motor vehicle manufacturer must demonstrate that it will achieve within three years a minimum of 50,000 annual units of production per plant.
   
2. 
   A component manufacturer or a deemed component manufacturer must be part of the original equipment manufacturer (light motor vehicle manufacturer) supply chain. The component manufacturer must prove that (i) a contract is in place and / or a contract has been awarded and /or a letter of intent has been received for the manufacture of components to supply into the light motor vehicle manufacturer supply chain locally and / or internationally, or (ii) after this investment it will achieve at least 25% of total entity turnover or R10m annually by the end of the first full year of commercial production, as part of a light motor vehicle manufacturer supply chain locally and/or internationally.
   

Productive assets and investment costs that may qualify for AIS assistance include owned buildings and / or improvements to owned buildings, or new, Second-hand, refurbished and upgraded plant, machinery, equipment and tooling that satisfy specified criteria and conditions.