DTI plants a few thorns in MCEP’s honeymoon bed.

April 2014

It had to happen: the MCEP subsidy was just too good to be true.

This program, which incentivises manufacturers wanting to expand or upgrade, has so far been very popular and also very valuable.

But now DTI has moved the goal posts.

On 1 April 2014, DTI published a set of revised MCEP rules. It is effective immediately and will also be applied to all applications not yet approved by DTI. That’s at least 500 that have been submitted since August last year.

The effect of these revisions can be summarised as follows.

  • Small firms are hardly affected at all. Their grant is still 50%, but there is now a capping of R5 million. They’ll also have to balance their spend between buildings and equipment.
  • Largish firms who struggle to achieve Level 4 BEE codes will be disqualified. In future a company that does not see its way clear to implement a strategic plan to reach level 4 in a period of two years, cannot participate. Moreover, as from 1 June 2015 a two-year plan will not be good enough. Applicants will have to be at BEE Level 4, or they’ll be disqualified.
  • Large companies with projects running into the hundreds of millions will be the worst affected. A company who spends as much as R150 million or more on equipment and building upgrades will now claim a maximum of R30 million, which is R20 million less than before. Their cappings on green energy and soft issues are even more severe. In addition, these big guys will also have to get past the BEE requirement mentioned above.
  • Cluster initiatives are not affected. They can still look forward to a 80% grant with a R50 million capping.

The goal posts have been moved, but the game is still on. Many manufacturers would still want to make use of it. If they can comply with the new requirements, the majority will receive the same grant as before.

If you would like DECTRA to evaluate or re-evaluate your chances of obtaining grant assistance from DTI, please do not hesitate to contact us. We have offices in Cape Town and Pretoria, and work countrywide.

Best Regards
Theo Meintjes & Izak du Toit

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