Production Incentive Business Grant for Industry Enhancement

Production Incentive Business Grant Overview

The Production Incentive (PI) forms part of the overall Clothing and Textile Competitiveness Programme (CTCP) and flows from the implementation, by the Department of Trade and Industry (the dti), of customised sector programmes (CSPs) for the clothing, textiles, footwear, leather and leather goods industries. The PI Guidelines seek to enable companies to present their business cases to the CTCP Desk of the Industrial Development Corporation (IDC). They also provide a framework for the CTCP Desk to evaluate such cases. DTC can assist with the necessary developments for the Production Incentive Business Grant.

PIP focuses on rewarding capital investment, operational improvements and training costs.

The Production Incentive Business Grant

The Production Incentive Programme (PIP) helps the industry upgrade its processes, products, and workforce. Furthermore, the programme encourages companies to adopt more advanced and sustainable production practices.

As a result, the industry can move up the value chain instead of competing with low-cost labour or heavy subsidies. Consequently, the programme supports initiatives that strengthen competitiveness and long-term sustainability within the sector.

Upgrade Grant Facility and Working Capital Support

In addition, the PIP includes an Upgrade Grant Facility that improves competitiveness through operational and technological upgrades. Moreover, the programme offers an Interest Subsidy for Working Capital Facility. This support assists businesses in managing funding needs linked to upgrading activities.

Incentive Structure and Financial Benefits

Furthermore, the PIP operates as a market-neutral incentive programme for qualifying businesses. Specifically, companies receive an incentive benefit equal to 7.5 percent based on their Manufacturing Value Addition.

However, companies must calculate Manufacturing Value Addition using audited financial statements that are not older than fifteen months. Therefore, accurate and up-to-date financial reporting remains essential.

Industry Impact and Eligibility

Additionally, the programme provides a cash-based and tax-free incentive grant. Consequently, textile, footwear, CMT, and leather manufacturers can improve competitiveness and strengthen their industry position.

Benefits of the Production Incentive Business Grant

• Tax Free Cash Benefit;
• Benefit may be applied to qualifying historical and future expenditure;
• Calculated on the Manufacturing Value Addition (MVA); and
• Current incentive is 7.5% of calculated MVA.

Qualifying Entities for the Production Incentive Business Grant

SA and Foreign owned companies based in SA engaged in the manufacture of:

Clothing manufacturers;
Textile manufacturers;
Cut, Make and Trim (CMT) operators;
Footwear manufacturers;
Leather goods manufacturers;
Leather processors (Specifically for Leather Goods and Footwear industries); and
Design Houses (Provided the design house partners with one or more CMTs).

The PIP specifically excludes goods manufactured for the automotive sector which qualifies for any incentive programme offered for that sector.

Upgrade Grant Facility

An Upgrade Grant is available to provide financial support to the industry to assist it in attaining higher levels of competitiveness. It can be used for the following:

upgrading of existing plant and equipment;
acquisition of new plant and equipment which will have the effect of improving the overall competitiveness of the applicant;
developing people;
improving manufacturing processes;
optimising materials used;
developing new products; or
market development (excluding normal day to day marketing expenses such as advertising) as part of a clearly defined strategy.

Companies that have existing loans from any financial institution to fund expenditure for purposes that would have qualified under the Upgrade Grant Facility will be able to utilise their Upgrade Grant to settle or partially settle these loans. The Upgrade Grant, together with the Interest Subsidy, may not exceed the Benefit Ceiling.

Mandatory Conditions for the Production Incentive Business Grant

The applicant must be a registered legal entity in South Africa in terms of the
Companies Act, 1973 (as amended) or the Close Corporations Act, 1984 (as
amended). Section 21 companies or „not-for-profit-or-gain‟ organisations are
specifically excluded from applying.
The operations of the company applying must be classifiable as
manufacturing (SIC code 3) in terms of the „Standard Industrial Classification
of all Economic Activities‟. Design Houses are, however allowed to participate
in the programme.
The applicant must be a taxpayer in good standing and must, in this regard,
provide a valid tax clearance certificate.
The Applicant must, where applicable, be bargaining council compliant and
must, in this regard, provide evidence of compliance.
The applicant must comply with all relevant environmental regulations,
applicable to its operations and must, in this regard, provide evidence of
compliance.
Should the company have any pending litigation against it, the outcome of
which may have a material impact on the company‟s financial position, then
this needs to be brought to the attention of the CTCP Desk at the time of
application.
Should the company have any intentions or plans to retrench or downsize its
manufacturing processes, such intentions or plans must be brought to the
attention of the CTCP Desk.

Applicants are required to acquire relevant investments included in the original application and/or to implement those interventions approved by the IDC. Amendments in respect of qualifying expenditure will require a new redemption
application to be prepared and approved.

Non-qualifying Costs

• Normal operating costs;
• Staff costs;
• Vehicles; and
• Land and buildings.

At DTC we understand the complexities of the various funding agencies and the unique application criteria for each. We have assisted thousands of entrepreneurs through the application process to access funding for businesses, and we can assist you with the same.