Overview of South African investment incentives
South Africa wishes to diversify its economy and incentives are an important part of the strategy to attract investors to the country.
The Department of Trade and Industry (the dti) is the lead agency in the incentives programme, which aims to encourage local and foreign investment into targeted economic sectors, but the Industrial Development Corporation (IDC) is the most influential funder of projects across South Africa.
There a variety of incentives available and these incentives can broadly be categorised according to the stage of project development:
- Conceptualisation of the project – including feasibility studies and research and development (grants for R&D and feasibility studies, THRIP, Stp, etc.)
- Capital expenditure – involving the creation or expansion of the productive capacity
of businesses (MCEP, EIP, CIP, FIG, etc.)
- Competitiveness enhancement – involving the introduction of efficiencies and whetting the competitive edge of established companies and commercial or industrial sectors (BBSDP, EMIA, CTCIP, etc.)
- Some of the incentives are sector-specific, for example: the Aquaculture Development and Enhancement Programme (ADEP), Clothing and Textile Competitiveness Improvement Programme (CTCIP) and the Tourism Support Programme (TSP).
Key components of the incentive programme are the Manufacturing Incentive Programme (MIP) and the Manufacturing Competitiveness Enhancement Programme (MCEP).
The initial MCEP, launched in 2012, was so successful that it was oversubscribed with almost 890 businesses receiving funding. A second phase of the programme was scheduled for launch in 2016. The grants are not handouts as the funding covers a maximum of 50% of the cost of the investment, with the remainder to be sourced elsewhere.
The Enterprise Investment Programme (EIP) makes targeted grants to stimulate and promote investment, BEE and employment creation in the manufacturing and tourism sectors. Aimed at smaller companies the maximum grant is R30-million. Specific tax deductions are permissible for larger companies investing in the manufacturing sector under Section 12i of the Income Tax Act.
Other incentives available to investors and existing businesses in more than one sector include the:
- Technology and Human Resources for Industry Programme (THRIP)
- Support Programme for Industrial Innovation (SPII)
- Black Business Supplier Development Programme (BBSDP), which is a cost-sharing grant offered to black-owned small enterprises
- Critical Infrastructure Programme (CIP) that covers between 10% and 30% of the total development costs of qualifying infrastructure
- Co-operative Incentive Scheme, which is a 90:10 matching cash grant for registered primary co-operatives
- Sector Specific Assistance Scheme, which is a reimbursable 80:20 cost-sharing grant that can be applied for by export councils, joint action groups and industry associations.
Incentives for SMMEs
A lot of emphasis is placed on the potential role of small, medium and micro enterprises in job creation and a number of incentives are designed to promote the growth of these businesses. These include:
- Small Medium Enterprise Development Programme (SMEDP)
- Isivande Women’s Fund
- Seda Technology Programme (Stp).
Seda is the Small Enterprise Development Agency, an agency of the Department of Small Business Development that exists to promote SMMEs.
The Export Marketing and Investment Assistance (EMIA) Scheme includes support for local businesses that wish to market their businesses internationally to potential importers and investors. The scheme offers financial assistance to South Africans travelling or exhibiting abroad as well as for inbound potential buyers of South African goods.
Reasons to invest in the Free State
The Free State offers an abundance of opportunities for local and international investors and traders, through the Free State Development Corporation.
About the Free State
Situated in the heart of South Africa, the Free State is the country’s third-largest province and borders Lesotho as well as six of the eight other provinces, including the country’s economic centre, Gauteng.
The Free State is an ideal trading partner within South Africa, the rest of Africa and other international markets. The province has excellent infrastructure and transport links, and provides easy access to the main ports of Durban, East London and Port Elizabeth.
Factors that favour investment in the Free State
Factors positioning the province as a favourable business and investment destination include:
- Centrally located with easy access to markets within South Africa and Africa
- Availability of a large and affordable labour pool
- Excellent infrastructure (roads,rail, airports, offices, education, banking and medical facilities)
- Competitive land and building costs
- Low factory rentals
- Abundance of natural resources
- Recreational and lifestyle facilities
- Most developed telecommunications network in Africa
- Open to business, trade and foreign investment
- Availability of required skills pool
- Attractive investment regime
To discuss opportunities to do business or invest in the Free State Province, it is recommended that your first point of contact be the Free State Development Corporation (FDC).