1. MCEP
MANUFACTURING COMPETITIVENESS
ENHANCEMENT PROGRAM
A brief overview
Compiled by DECTRA

2. MCEP
WHAT IS IT ABOUT?
• Cash grants on investment cost
• Improve productivity & competitiveness and retain
jobs.
• Does not replace existing EIP/MIP grant program

3. MCEP
WHO CAN BENEFIT?
• Manufacturers
• Engineering and conformity assessment
agents who service the manufacturing
industry

4. MCEP
HOW MUCH?
A cash grant between 30% and 80% of inv. cost.
On 5 different investment cost components
– Upgrading and expansion of equipment and
buildings
– Converting to Green technology & Energy saving
– Improving competitiveness (soft issues)
– Feasibility studies
– Cluster initiatives

5. MCEP
ALSO ON OFFER
• Pre- and post production working capital loans
@ 6% p.a. from IDC

6. MCEP
STRUCTURE AND
REQUIREMENTS
• Program runs for 6 years until 2018
• Available to existing manufacturers (more than 12
months in production)
• Applicants may apply once every two years
• Apply 60 days before implementation date

7. MCEP
STRUCTURE AND REQUIREMENTS
(CONT.)
• Claim full subsidy in two claims
– First claim within 6 months from implementation - mandatory
– Final claim as soon as all items are implemented (expires after six
months)

8. MCEP
REQUIREMENTS
• Only incorporated legal entities may apply
• Must maintain employment levels
• Strive towards BEE scorecard Level 4
• Only new equipment

9. MCEP
CLASSIFICATION
Size of applicant according to
BALANCE SHEET + ACC. DEPR.
Grant % varies from
component to component
R0 – R5 million Highest % grant
R5 – 30 million
R30 – R200 million
> R200 million Lowest % grant

10. MCEP
COST1: EXPAND & UPGRADE
WHAT YOU GET
• Smaller companies receive a larger percentage
Percentage varies from 50% down to 30%.
• 10% Bonus grant for extra Jobs or for sourcing
local equipment.
• Limit 1: R50m Limit 2: MVA

11. MCEP
• Percentage varies from 50% down to 30% (same as
component 1)
• Bonus 10%. For increasing Jobs or for local equipment.
• Limit 1: R50m
• Limit 2: MVA
• No minimum spend required.
• Second hand equipment not subsidised
COST2: RENEWABLE ENERGY
WHAT YOU GET

12. MCEP
COST 3
“COMPETITIVENESS IMPROVEMENT”
Improve position by addressing soft issues
– Process improvement
– Product design & Product development
– Conformity assessment audits, certification
– Production efficiency
– Packaging design
– Quality management improvement
– Accreditation

13. MCEP
• Logistic efficiencies, e.g. Logistics systems
• Acquisition & deployment of systems: accounts, HR, Sales, etc.
• Training (SAQA accredited courses)
• Training of ISO consultants, etc.
• Procurement systems
• Compile bid documents for technical tenders in state owned
enterprises (minimum R50m)
COST 3:
“COMPETITIVENESS IMPROVEMENT”

14. MCEP
COST 3:
COMPETITIVENESS IMPROVEMENT
WHAT YOU GET
• 70% down to 50% of qualifying cost
• Limit 1: MVA limitation

15. MCEP
COST 4: CLUSTERS
WHAT YOU GET
• 70% to 50% of feasibility study costs
• Limit 1: R7,5m
• Limit 2: MVA limit.

16. MCEP
MVA LIMITATION
This is an overall limitation on the first 4 cost types
• MVA = Manufactured sales less cost of materials used.
• MVA calculation poses complications
– Farm pack house packing own produce : no cost price
– Pool accounts: not a part of income statement; no cost
price.

17. MCEP
MVA LIMITATION
Size of applicant according to
balance sheet + acc. depr.
Capping
R0 – R5million No limit
R5 – 30million 25% of MVA
R30 – R200million 20% of MVA
> R200 million 10% of MVA

18. Example: MVA calculation
Income
Statement
MVA
Calculation
Sales of manufactured goods 1 000 000 1 000 000
Sales of other goods and services 788 000 n/a
Total sales 1 788 000 1 000 000
Raw materials & Packaging 600 000 600 000
Operating cost 231 000 n/a
Administrative cost 97 000 n/a
MVA 400 000
Limit according to size of applicant, e.g.
R30m> <R5m= 25% R100 000

19. MCEP
COST COMPONENT 5
“CLUSTER INITIATIVES”
Collaborative projects relating to production and
marketing that will enhance productivity and
international competitiveness.
– Market research
– Export promotion costs & international marketing,
advertising and publicity
– Product development & process improvement
– Developing shared infrastructure
– Benchmarking

20. MCEP
COST 5: CLUSTERS
WHAT YOU GET
• 80% of qualifying cost
• Limit 1: R50m.
• No MVA limit
• Note: Cluster must consist of at least 5 members. They
do not all have to be manufacturers

21. Size of
applicant
Expand Green Soft Feas.
study
Cluster MVA
%
R % % % % % %
<5m 50 50 70 70 80 n/a
>5 <30m 40 40 60 70 80 25
>30m <200m 30 30 60 50 80 20
>200m 30 30 50 50 80 10
MVA limit? Yes Yes Yes Yes No
Summary of grant percentages

22. MCEP
CONCLUSION
• More generous than any program before.
• Fewer entry level requirements and performance
requirements than any program before.
• The only exclusions are, no subsidies on 2nd hand
assets, no vehicles and no leased buildings