1. Manufacturing Competitiveness Enhancement Programme (MCEP) Manufacturing Competitiveness Enhancement Programme (MCEP) Trade & Industry Portfolio Committee 25 February 2015 Mr Lionel October

2. MANUFACTURING COMPETITIVENESS ENHANCEMENT PROGRAMME (MCEP) MCEP is a key programme of IPAP which is aimed at growing the manufacturing sector and sustain jobs

3. MCEP: Background MCEP was launched in 2012 by the Minister of Trade & Industry Dr Rob Davies as a response for manufacturing support for the ongoing global crisis and pervasive market and institutional failures such as:  Structural Challenges A persistently overvalued exchange rate Rapid increase in electricity and other administered prices. Low absolute and relative levels of profitability, low investment in productivity enhancement Inadequate provision of suitable financial instruments by private financial sector (loan tenure and cost of capital)  Cyclical and Short term Challenges Weak and uncertain global demand due to weak export demand and tougher competition Reduced profitability due to weak domestic demand and low investment

4. MCEP: Background cont. The objective of MCEP is to promote and enhance entities’ competitiveness and job retention.  MCEP consists of the following programme components o Production Incentive (administered by the dti)  Capital Investment – capped at R30 million  Green Technology – capped at R20 million  Enterprise Competitiveness Improvement – capped at R10 million  Feasibility Studies – capped at R8 million  Cluster Competitiveness Improvement – capped at R50 million o Industrial Financing Loan Facilities (administered by IDC)  Pre and post dispatch Working Capital  Industrial Policy Niche Project Funding

5. MCEP ELIGIBILITY CRITERIA  Eligibility Criteria  Entity should be at least a Level 4 B-BBEE contributor status in terms of B-BBEE codes. If not, entity must submit a plan showing how it will achieve L4 within 2 years. BEE plans will be accepted until 31 May 2015 (no plans will be accepted from 01 June 2015).  B-BBEE Act: Section 10 (1) (e) - Determine criteria for awarding incentives, grants and investment schemes in support of broad-based black economic empowerment  Entity should be a in possession of a valid tax clearance certificate.  Investment projects may not result in reduction of base-year employment figures  Be an existing entity that undertakes an investment project for either upgrading or expanding its operations to produce generically the same products, or investing in competitiveness enhancing activities of existing operations  Eligible Applicants  Registered manufacturing entities (under SIC 3).  Engineering services that support the manufacturing sector.  Conformity assessment bodies that support the manufacturing sector.  Automotives manufacturer with <25% of base-year turnover earned as part of the supply chain locally and/or internationally may be considered for eligibility.

6. MCEP: MARKETING  MCEP LAUNCHED AND MARKETED NATIONALLY  MCEP was publicly launched by the Minister of Trade & Industry in June 2012  Provincial Roadshows which were well attended by representatives of small, medium and large enterprises  Good media coverage (print and electronic) and MCEP has its own website page (www.investmentincentives.co.za/mcep)  Continuous stakeholder workshops and engagements in all sectors

7. MCEP Application Process Application Submission Application Processing Application Approval 7 Applicant submits complete application form Including supporting documents Assess Application Conduct Site Visit to confirm existence Application Adjudicated the dti issues approval letter Claim Submission Claim Processing Claim Payment Claimant submits claim form Submits all relevant supporting documents Pre-screening of the claim Verify all supporting documents i.e. Tax Clearance Certificate etc. Site inspection of milestones/deliverables Claim Paid Monitoring site visits bi-annually

8. MCEP FUND COMMITMENTS VS DISBURSEMENT 31 JANUARY 2015 The table below demonstrates that investors were receptive of the MCEP scheme based on the comparison between the MCEP allocated budget versus the MCEP commitments. PeriodMCEP Allocated Budget MCEP Commitments MCEP PaymentsValue of claims to be processed 2012/13R 914 mR 1 009 bnR 64 m 2013/14R 991 mR 2 994 bnR 841 m 2014/15R 1 094 bnR 1 174 bnR 658 mR 307 m 2015/16R 1 386 bn--- 2016/17R 1 535 bn--- 2017/18R 1 489 bn--- TotalR 7 410 bnR 5 177 bnR 1 563 bnR 307 m 848 applications to the grant value of R5.1 billion were approved since inception of which R1.5 billion has been disbursed so far. On average 6 % of the approved applications were cancelled due to investment decisions by applicants

9. MCEP Applications Progress until 23 Feb 2015 9 StatusNo. of Applications % Applications received2 033 Incomplete applications41820 % Evaluation52126% Rejected1578 % Ready for Adjudication (28 Feb)894 % Approved84842 % Implementation Plan – the average number of applications to be adjudicated per adjudication meeting is 90 applications. 2 adjudication meetings per month are to be held. 521 applications will be adjudicated within 3 months commencing 01 March 2015. MCEP receives an average of 70 applications per month of which 20 % of these applications are incomplete and non-eligible

10. MCEP Applications Status 10 Since inception MCEP received a total of 2033 applications, of which 848 applications with the incentive value of R5.1 billion was approved

11. MCEP Approvals per Sector 11

12. MCEP Investment per Sector 12

13. MCEP Jobs Sustained per Sector 13

14. 14 2012/13 R4.2 billion: Projected Value of investment 33 372: Jobs to be sustained 2012/13 R4.2 billion: Projected Value of investment 33 372: Jobs to be sustained 2013/14 R11.7 billion: Projected Value of Investment 106 539: Jobs to be sustained 2013/14 R11.7 billion: Projected Value of Investment 106 539: Jobs to be sustained MCEP Approvals per financial year 2014/15 R3.8 billion: Projected Value of Investment 28 717: Jobs to be sustained 2014/15 R3.8 billion: Projected Value of Investment 28 717: Jobs to be sustained 2012/13 197 Approvals R983 million 2012/13 197 Approvals R983 million 2013/14 365 Approvals R2. 8 billion 2014/15 286 Approvals R1.1 billion

15. MCEP Approvals per Province 15

16. MCEP Approved Projects Projected Investment R 40 m Projected Jobs 358 Projected Investment R 72 m Projected Jobs 297 16 Projected Investment R 17 m Projected Investment R 70 m Projected Jobs 5 Projected Jobs 314 Projected Investment R 910 k Projected Jobs 13Projected Investment R 78 m Projected Jobs 599

17. MCEP Approved Projects Projected Investment R 475 m Projected Jobs 6 137 Projected Investment R 299 m Projected Jobs 8 186 17 Projected Investment R 965 m Projected Investment R 549 m Projected Investment R 715 m Projected Jobs 6 506 Projected Jobs 2 886Projected Jobs 8 512 Projected Investment R 829 m Projected Jobs 5 539Projected Investment R 342 m Projected Jobs 3 603

18. MCEP Approved Projects Projected Investment R 264 m Projected Jobs 1 785 Projected Investment R 125 m Projected Jobs 1 040 18 Projected Investment R 100 m Projected Investment R 149 m Projected Jobs 414 Projected Jobs 451 Projected Investment R 109 m Projected Jobs 598Projected Investment R 117 m Projected Jobs 2 569

19. Challenges 19 ChallengesProposed Solutions Manual processing of applications and claims Automation of key processes to improve the turnaround times and response times to clients Incomplete applications submitted to the dti, resulted in processing delays More engagement with potential applicants on MCEP eligibility and procedures Non complaint to B-BBEE requirements and clients submitting plans that are not adequate More engagement with potential applicants Quicker responses to non compliant applicants

20. 20 THANK YOU