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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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