Production Incentive Business Grant for Industry Enhancement

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 PIP aims to help the industry upgrade its processes, products and people. This is expected to move the industry up the value chain to activities that are far more sustainable than competing against “sweatshop” labour practices and pervasive government subsidisation in other developing countries. The PIP is meant to encourage and support upgrading and competitiveness improvement programmes in the sector.

The PIP consists of an Upgrade Grant Facility, which is meant to focus on competitiveness improvement and an Interest Subsidy for Working Capital Facility which is meant to support working capital requirements resulting from past and future upgrading interventions The PIP is a market-neutral incentive resulting in an incentive benefit equal to 7.5% for the year based on a company’s Manufacturing Value Addition (MVA). The MVA calculation must be based on audited financial statements not older than 15 months.

It is a cash based, tax free incentive grant, focused on textile / footwear / CMT and leather manufacturers to improve overall competitiveness in these industries.

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.