The DTI’s Agro-Processing Support Scheme (APSS) aims to stimulate investment in South African agro-processing/beneficiation (agri-business) enterprises, with up to R20 million in matched grant funding available.
This agro-processing incentive covers value adding of any agricultural product and is not exclusive to food and beverage production, extending to fertilizer production, value addition in timber (including furniture) and textile manufacturing among others.
The investment should demonstrate that it will achieve the following results: increased capacity, employment creation, modernised machinery and equipment, competitiveness and productivity improvement and broadening participation.
From the applications we have done, we’ve observed two significant hurdles:-
1. Seasonality and project timelines
If your application is in food processing or other season-sensitive sectors, such as cotton, you really need to plan for the available incentives well in advance. Taking both DTI’s timelines and seasonality into account and planning this into the application and submission process is a vital element in being able to access the funding and implement the project smoothly.
In addition, most businesses underestimate how much work is required to prepare for an application. Compliance, business planning and quotation gathering are among the activities which typically delay a submission.
Lastly, the DTI currently accepts applications for the APSS within windows, with the next window closing at the end of September 2018.
2. 30% input supply from black suppliers
Whilst an applicant only requires a B-BBEE level 4 certification to be eligible, which may mean minimal black shareholding, there’s a requirement to procure inputs (raw material input which is being value added) from black suppliers or growers.
This is in an effort to incentivise transformation of supply chains. The APSS applicant must provide off-takes (supply contracts) to empowered black suppliers or growers.
This means that applicants must have a close relationship with their value chain and be able to demonstrate their ability to make good on their commitment to procure at least 30% of their inputs from black business.
Applicants are expected to submit a plan to demonstrate how this will be achieved over a 2 year period.
This can be challenging but not impossible. There are a host of industry associations and stakeholders who specialise in supporting the transformation of primary agriculture on the back of these off-takes, providing farmers with business and technical support.
Whilst these hurdles can be significant, planning for them is the first step to success and up to R20 million in grant capital toward your finance requirements.