Incentive woos investors with state grant

JULY 21 saw the launch of the new enterprise investment programme (EIP), and promises a government grant to encourage investment in SA both by foreign and local investors, according to Andrè Erasmus, senior manager of consultants, Deloitte. Like the small/medium enterprise development programme (SMEDP), which it replaces, the new EIP will be a grant-based investment incentive programme supporting new, and expansion, projects – with an investment in qualifying assets of up to R200-million, he told FTW. According to information released to FTW by Riaan de Lange of Tariff & Trade Intelligence, grant support will be calculated at a percentage of the investment in qualifying assets – and the EIP grant will be exempt from normal corporate income tax. It will be in place for a period of six years from last Monday. The manufacturing investment programme (MIP) focuses on investments in the manufacturing sector – SIC code 3 activities. A department of trade and industry (DTI) release said that grant support levels would range from 15% to 30% of the investment in qualifying productive assets (as defined) on a regressive scale. Grant payments will be made over a period of two or three years depending on the project. “It is important to note that in order for projects to qualify for support,” said De Lange, “applications need to be made and EIP approval obtained before any qualifying assets are acquired or ordered. This also applies to turnkey projects and EIP approval must be obtained before applicants enter into any turnkey agreements.” Erasmus also pointed to the EIP giving preference to the capital/transport equipment, metals fabrication, chemicals, plastics fabrication, pharmaceuticals, furniture and automotive sectors. Application criteria are quite extensive, the DTI told FTW. It also stressed that projects located in areas with unemployment rates that exceed the national average will attract a higher score in the adjudication process. The department spokesman also said that a key focus of the EIP would be to bridge any “funding gap” projects may experience, and aims to serve as a catalyst, allowing qualifying projects to go ahead. “For the first time,” FTW was told, “the DTI will encourage and support investors seeking funding from financial institutions with approved EIP grant support as backing.”