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TRADE & INVESTMENT:

A wide range of
incentives available

Through   the  Department  of  Trade  and  Industry  (DTI) and various other  supporting bodies, the South African government offers a  comprehensive  range  o  incentives  to both domestic and foreign investors.

In   this   regard, the   accees    its   primary   role   as being   to facilitate  access to sustainable economic activity, with the key objectives of promoting the development of Small, Medium and Miro    Entetprises    (SMMEs),    increasing    Black    Economic Empowerment    (BEE),    reducing    inequality    and    poverty, developing   the  SADC:  region,  servicing  the economic citizen and   strengthening   the  intentational  competitiveness  of  SA business. Within this framework,  incentives also aim to  attract higher  levels  of  domestic  and  foreign  investtnent,  increase market   access  to   foreign   investment  and   achieve  a  fair, efficient and competinve marketplace for domestic  and  foreign businesses  and  consumers. All  in  all,  there  are  37  different types   of   incentive   schemes,   ranging    from    depreciation allowances   to  financing,  loans  and  export  assistance.  The incentives on offer can be broadly classified  into  the  following ten categories:

 - development firance
 - empowerment
 - export facilitation
 - tuman resources and skills development
 - investment incentives
 - matching grants
 - sectoral
 - SMMEs
 - technolog (research and development)
 - tourism

To encourage investment in manufacturing and expansion of existing plants, the government allows for accelerated depreciation on the cost of plant or machin ery, implements, utensils and other articles used by taxpayers for the purposes of their trade. Plant and machinery can be depreciated over a period of three years, and land and buildings over a period of ten years. Small and medium concerns are catered for by schemes such as the DTI's Small/Medium Enterprise Development Programme (SMEDP). It is available to firms investing not more than R100m in land, buildings, plant and equipment for new projects or the expansion of existing projects. The incentive package provides for a two-year investment grant on qualifying assets of up to 26%, depending on the amount invested. The incentives are tax exempted and an additional investment is payable in the third year if certain conditions are met. There are several sector-specific schemes such as the Motor Industry Development Programme (MIDP), Finance for Expansion of Manufacturing, the Duty Credit Certificate Scheme (DCCS) for exporters of textiles and clothing, and a tourism promotion scheme called Tourism Development Finance. The Agro-Industries Development Fund has been established to develop the agricultural, food, beverage and marine sectors. Entrepreneurial Mining and Beneficiation Finance aims to develop SMMEs in the mining and beneficiation sector, and jewellery manufacture. The Sector Partnership Fund aims to promote collaborative projects enhancing the productivity and competitiveness of the manufacturing and agro-processing companies. Techno-industries are supported tltrough the IDC's Techno-industries Development Finance. SMMEs are assisted through a number of incentives, in addition to the DTI's unique Business. Referral and Information Network (BRAIN), which provides resources, information and referral services to SMMEs on the Internet. Specific schemes include the Competitiveness Fund (CF), which encourages smaller local firms to be competitive (funding is supplemented by free consulting seivices). The Bumble Bee Programme is a sub-component of the CF, which provides a free consulting service to micro-mamifactures. The Danida Business-to-business Programme aims to develop and strengthen business opportunities and create jobs for eligible entrepreneurs from previously disadvantaged communities by covedng expenses connected with the transfer of management, business skills and technology from Danish firms to South African ones. To further assist skills transfer, the IDC has introduced the Skills Support Programme. Technology transfer is aided through Khula's Technology Transfer Guarantee Fund. The Standard Ciedit Guarantee Scheme (provided by Khula Enterprise Finance Ltd)  increases access to finance for SMMEs through their hanks and is available for companies with less than R2m assets. Khula has also introduced the Emerging Entrepreneur Scheme, increasiug access to finance available for SMMEs through banks, the Equity Fund and Khula Start, promoting greater access to micro-credit in rural areas, while tlle Industrial Development Corporation assists emering entrepreneurs acquire a stake in formal business through Empowerment Finance. The SMME market has also been stimulated by schemes offering funds to Retail Finance Intermediaries (RFI), with the purpose of making those funds available to the small entetprises. Export incentives are offered through a number of nutianves. The Export Marketing and Investment Assistance (EMIA) schemes aim to assist exporters with primary export market research through trade missions and exhibitions. This is soon to be extended to outward and inward investment missions. The incentives are available to all exporters, with special terms for SMMEs. Other export-oriented schemes include the Short-term Export Finance Guaranteed Facility (SEFG), which is offered through the Credit Guarantee Insurance Corporation of Africa (CGIC), and the Life Scheme. The SEFG helps SMMEs to accelerate their export development by reducing financial risk. The Life Scheme offers low interest finance to large industrialists for the purposes of investment promotion. The Industrial Development Corporation also offers assistance through their Export Finance scheme. Importers, on the other hand, are assisted through the IDC's Import Finance scheme. Foreign investment is encouraged through the Foreign Investment Grant, which is available to overseas countries imesting in new machinery and equipment to establish projects in SA. SA's competitiveness is enhanced through projects such as the Industrial Development Zones, which provide improved infrastructure, expedited customs procedures and duty-free operating environments, as well as the DTI's Workplace Challenge, which aims to create more employment. The DTI's Technology and Human Resources for Industry Programme aims to enhance competitivenes through the development of appropriately skilled people and technology. The IDC offers a Support Programme for Industrial Innovation, which is available to projects chat represent a significant technological advance and hale commercial advantages oper existing products. Other initiatives include the Critical Infrastructure Programme, supplementing infrastructure provided by exlsting public and private sector companies by funding a top-up grant, the Bridging Finance Scheme which addresses the short-term needs of emerging entrepreneurs who have secured firm contracts with government and the private sector and the IDC's Wholesale Finance, available to intermediaries for onlending to individual entrepreneurs. SA has also benefited from the African Growth and Opportunities Act, introduced in 2000, which offers African countries incentives to open their economies and build free markets  by  providing  liberal     access to the US market.

Trade & Investment South Africa                                        E-mail       isa@isa.org.za                                                          Website           www.isa.org.za

Department of Trade and Idustry                                Website           www.dti.gov.za

 

 

 

 

 

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