Within the coming three months, about one-quarter of the Manufacturing Circle’s 49 member firms are likely to make application to the Department of Trade and Industry (DTI) to access industrial financing available under the newly launched R5.75-billion Manufacturing Competitiveness Enhancement Programme (MCEP).
The MCEP, which was unveiled in the February Budget and formally launched by Trade and Industry Minister Rob Davies on May 15, will open for applications from June 4, when an online application system is due to be operational.
Manufacturing Circle member and Hulamin MD, Colin Little, reports that the organisation, whose members represented a broad swathe of manufacturing entities from food and beverage producers to metals fabricators and pharmaceutical companies, are “encouraged” by the simplicity of the incentive, as well as the way it has been targeted and structured.
“Most of our members have projects, and access to this competitiveness fund could just be the tipping point for them to take a chance [on those projects],” Little says, explaining that the scheme could help materially reduce the cost of capital.
The scheme has been designed to encourage South Africa’s embattled manufacturers to invest in competitiveness-raising equipment and processes. It is also open to all manufacturers not covered by sector-specific incentives, such as those available to companies in the automotive, clothing and textiles, and business process outsourcing industries.
Interventions have been clustered around a production incentive, which will be managed by the DTI, and a working capital facility, which will be managed by the Industrial Development Corporation.
Davies says the scheme is also a direct response to the reality that many domestic manufacturing entities have neglected to invest in competitiveness in light of difficult domestic and global trading conditions.
“We recognise the difficulty that the current uncertainty in the growth prospects of both the global and domestic economy places on manufacturers that may be considering investing in modernising their factories. The MCEP is, thus, aimed at encouraging our firms to make investments in competitiveness, now rather than later.”
Little says he expects 25% of Manufacturing Circle members (companies with yearly revenues of between R300-million and R10-billion) to make application for support “within the next three months”.
“That will be the stress test to see whether the money does indeed flow and how quickly it will flow,” Little says, adding that the process appears to be less bureaucratic than has been the case with previous incentives.
Manufacturing Circle executive director Coenraad Bezuidenhout says that the organisation intends using its “good bilateral relations” with the DTI to ensure that the scheme works as intended.
“We will work on a case-by-case basis. If there is a problem accessing the incentive . . . then there will be a structured interaction with the DTI to solve the problems,” Bezuidenhout says.