The Production Incentive (PI) Overview
The Department of Trade, Industry and Competition implements the Production Incentive (PI) under the Clothing and Textile Competitiveness Programme (CTCP).
The programme drives sector development across clothing, textiles, footwear, leather, and leather goods industries through targeted, customised interventions.
Incentive Structure
The Production Incentive consists of two components: the Upgrade Grant Facility and the Interest Subsidy for Working Capital Facility.
The Upgrade Grant Facility strengthens competitiveness by funding improvements in production capacity, operational efficiency, and advanced technology adoption.
Meanwhile, the Interest Subsidy for Working Capital Facility reduces funding costs required to support both past and planned upgrading activities.
Eligible Participants
The programme supports a defined group of industry participants across the value chain.
These include clothing manufacturers, textile manufacturers, cut, make and trim operators, footwear manufacturers, leather goods manufacturers, and leather processors.
Additionally, leather processors must supply the leather goods and footwear sectors to qualify under the programme.
Design houses may also qualify, provided they partner with one or more cut, make and trim operators.
Exclusions
The incentive excludes goods produced for the automotive sector, as that sector qualifies under separate incentive programmes.
Funding Flexibility
Applicants retain full discretion over how they utilise the approved benefit.
They may allocate funding entirely to the Upgrade Grant Facility, the Interest Subsidy Facility, or a combination.
Upgrade Grant Facility
Scope of Support
The Upgrade Grant Facility supports several strategic business improvement activities.
It funds upgrades of existing plant and equipment to enhance operational performance.
It also supports the acquisition of new machinery to improve overall competitiveness.
Furthermore, it enables businesses to invest in skills development and workforce capability.
In addition, it supports improvements in manufacturing processes and production efficiencies.
The facility promotes optimisation of raw materials and resource utilisation.
Moreover, it assists with the development of new and innovative products.
It also supports market development initiatives aligned with clearly defined strategies.
Link to the Competitiveness Improvement Programme (CIP)
An Upgrade Grant can partly support participation in the Competitiveness Improvement Programme (CIP).
Companies that qualify may use the grant to fund their required contribution under the programme.
For cluster applications, companies must contribute 25% of qualifying expenditure.
For company-level applications, companies must contribute 35% of qualifying expenditure.
However, the Upgrade Grant may fund up to 100% of this contribution for small and medium enterprises.
For larger firms, it may fund up to 75% of the required contribution.
Funding Scenarios
An individual company approved for CIP funding must contribute 35% of qualifying expenditure from its own resources.
The Upgrade Grant Facility may fully fund this requirement, thereby reducing financial pressure on the company.
Similarly, an SME cluster must jointly contribute 25% of qualifying expenditure.
The Upgrade Grant Facility may fully fund this requirement, supporting collective participation within the cluster.
Alternatively, the grant may partially fund contributions based on approval conditions and funding structures.
For example, it may fund 26.25% of the required 35% for individual companies.
As a result, the company contributes only the remaining 8.75% from its own resources.
Likewise, for clusters, the grant may fund 18.75% of the required 25% contribution.
Consequently, the cluster contributes only the remaining 6.25% from its own funding sources.
Loan Settlement Benefit
Companies with existing loans for qualifying expenditure may also benefit from the Upgrade Grant Facility.
They may use the grant to settle or partially settle these loans, thereby improving cash flow and financial stability.
Interest Subsidy for Working Capital Facility
Purpose and Access
Commercial banks have reduced overdraft facilities for manufacturing companies since the economic downturn.
Therefore, this incentive reduces funding costs for companies that secure working capital from the Industrial Development Corporation or other institutions.
Companies must apply for these facilities independently, as they fall outside the Production Incentive application process.
Interest Subsidy Mechanism
The programme provides an interest subsidy equal to the prevailing prime lending rate.
Applicants pay only the difference between the institution’s standard pricing rate and the prime rate.
The Industrial Development Corporation conducts full due diligence to assess each application’s economic viability.
It also applies its standard fees and requires applicants to provide sufficient security.
A minimum funding threshold of R1 million applies to all applications.
Design Houses
Definition and Structure
A design house operates as a product design and related services entity that outsources manufacturing to CMT operators.
These services may include sample making, production development, planning, sourcing, pattern making, quality control, packaging, and distribution.
The design house must operate as an independent legal entity.
CMT operators must comply with relevant bargaining council requirements.
Compliance and Value Addition
Auditors must calculate Manufacturing Value Addition (MVA) based on the design house’s audited financial statements.
CMT operators may participate in the PI independently and must submit separate claims.
Auditors must verify and sign off the integrated MVA calculations.
The design house must allocate at least 50% of its benefit to selected CMT operators.
It must also submit a business plan that motivates and measures the intervention.
The intervention must improve the competitiveness of the supported CMT operators.
Proof of Work
The design house must provide proof of outsourced work through audited reconciliations per CMT.
It must also provide evidence confirming bargaining council compliance for each CMT.
Mandatory Conditions of the Production Incentive (PI)
Applicants must register as legal entities in South Africa under the Companies Act or Close Corporations Act.
Non-profit entities, including Section 21 companies, do not qualify for this programme.
The applicant must operate within the manufacturing sector under SIC Code 3 classifications.
The applicant must also maintain good standing with tax authorities and provide a valid tax clearance certificate.
Where applicable, the applicant must comply with bargaining council requirements and provide supporting evidence.
The applicant must also comply with all relevant environmental regulations applicable to its operations.
Applicants must disclose any pending litigation that may materially affect their financial position.
They must also disclose any plans to retrench or downsize operations during the application process.
Disbursement of the Production Incentive (PI)
The Department of Trade, Industry and Competition administers the Production Incentive as part of the CTCP.
The programme supports sector development through targeted initiatives across qualifying industries.
The incentive includes the Upgrade Grant Facility and the Interest Subsidy Facility.
The Upgrade Grant Facility funds improvements in production, technology, and operational processes.
The Interest Subsidy Facility reduces the cost of working capital for upgrading activities.
Exclusions and Non-Qualifying Costs
The programme supports only costs directly linked to productivity and competitiveness improvements.
Applicants must justify all qualifying expenditures through a well-motivated business plan.
Non-qualifying costs include normal operating expenses and staff-related costs.
The programme also excludes vehicle upgrades, land acquisition, and building costs.
General Exclusions and Limitations
Applicants must declare any incentives received under CTCP or the Enterprise Investment Programme.
Projects may access multiple incentives, provided total funding does not exceed total project costs.
The CTCP Desk may reject or terminate projects that attempt to circumvent programme rules.
It may also reclaim funds if it identifies non-compliance after approval.
The programme excludes NGOs, trusts, co-operatives, partnerships, and foreign governments from participation.
Funding and disbursements will cease if the entity stops manufacturing or undergoes liquidation.
Additional Conditions
The CTCP Desk will reject applications that attempt to manipulate eligibility criteria.
Examples include restructuring entities, splitting operations, or creating artificial project segments.
It also prohibits duplication of similar businesses within the same area without valid commercial justification.
Furthermore, it disallows manipulation of inter-company transactions or production processes.
The CTCP Desk may classify any other actions as circumvention if they unfairly enable qualification.
Criminal, Misleading, and Irregular Activities
The CTCP Desk may suspend payments if it suspects fraudulent or irregular activities.
It will not accept liability for damages or interest during investigations or legal proceedings.
If investigations confirm misconduct, the CTCP Desk will terminate payments and recover disbursed funds with mora interest.
Furthermore, the CTCP Desk applies the principles set out in the Prevention and Combating of Corrupt Activities Act 12 of 2004 (PRECCA).
Accordingly, applicants should report any suspected fraud through the DTIC fraud hotline on 0800 701 701.
In addition, applicants and beneficiaries must fully disclose all material information that may affect applications or claims.
Consequently, failure to disclose such information will result in the termination, suspension, or cancellation of the application or claim.
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Contact us for more information on how you can access the Production Incentive (PI) for your business.
