Let’s not beat around the bush- Key decisions made by the finance Minister Pravin Gordhan in the 2016 Budget speech will impact your business growth and survival in this tough economic climate. The Minister had his job cut out for him as he made tough decisions to ensure that companies can reach their projected turnover goals for the next financial year resulting in the growth of our economy.
If you want to expand and increase your turnover in the next financial year here are the developmental funding opportunities identified from the budget speech 2016 per industry:
- All Industries:
1.1 Government proposes increases that will raise the “maximum effective capital gains tax for companies from 18.6% to 22.4%”. The current tax mix suggests that there may be greater room to increase direct taxes, such as VAT,” the minister hinted in the budget review. We all know at the end of the day it’s the little things that increase our overheads so here are some of the new indirect taxes that will add to our cost of doing business:
- Personal income tax relief of R5.65 billion
- Capital gains tax inclusion rate for individuals, special trusts and insurers’ individual policyholder funds increases from 33.3% to 40%, and for other taxpayers from 66.6% to 80%
- Assets transferred through a loan to a trust are to be included in the estate of the founder at death and interest-free loans to trusts are to be treated as donations
- General fuel levy increases by 30 cents per liter on 6 April 2016
- Excise duties on alcoholic beverages increase by between 6.7% and 8.5%
- From 1 April 2016 the plastic bag levy is to increase from 6 cents to 8 cents per bag and the incandescent globe tax will Increase from R4 to R6 per globe
- A tyre levy at R2.30 per kilogram is to be introduced on 1 October 2016
- Tax on sugar-sweetened beverages on 1 April 2017
The Employment Tax Incentive Act, is a government bill to incentivise employers to create jobs for young workers. Employers can claim the incentive for any employee between the ages of 18 and 29 who receives a monthly salary lower than R6 000 per month. The Public expected this policy to change as it’s not producing the results desired in terms of unemployed youth statistics. Not much was said about the incentive in the budget speech. A good idea would be to really take advantage of this tax incentive and create job opportunities for the youth of South Africa this year - while creating the capacity to take your company forward.
Budget Reference: Government will spend R 26.4 Billion this year on agriculture, rural development and land reform. Funds have been reprioritised to respond to the impact of the drought on the farming sector and water-stressed communities.
This is a substantial amount and would result in incredible expansion of business in this sector. Development & Expansion funds are available from DFI’s (Development Funding Institutions) such as the NEF, IDC, DTI & The Land Bank to name a few. There are also other tailored developmental funding solutions available dependent on your project and how you are structured. The best course of action for tailored strategic funding solutions is to be assessed by a funding consultant to map out your road ahead.
Interestingly enough The Land Bank has set aside a concessionary loan facility to assist farmers in recovering from the impact of the current drought conditions. Over the next three years, R15 billion is allocated for land acquisition, farm improvements and expanding agro-processing opportunities.
Keep in mind that Government & DFIs have prioritized development in this sector, so focus on getting in your applications for Grow-E Fund (IDC), Grow-E Youth Fund (IDC), Critical Infrastructure Programmes (DTI) and Rural and Community Development (NEF) to name a few.
Budget Reference: “The Industrial Development Corporation continues to play a leading role in financing manufacturing and beneficiation. It plans to invest R100 billion over the next five years, including R23 billion set aside to support black industrialists.”
Manufacturing is a priority for government & DFIs. As mentioned in the extract above, there is a continuous excitement about the Black Industrialist Scheme (BIS) which is a policy that seeks to leverage the state’s capacity to unlock the industrial potential of black owned and managed businesses within South Africa through deliberate, targeted and well defined financial and non-financial interventions.
Other funds that have a proven track record of growth results in this sector is the Manufacturing Competitiveness Enhancement Programme (MCEP) - an incentive that provides enhanced manufacturing support aimed to encourage manufacturers to upgrade their production facilities in a manner that sustains employment and adds value). Another Incentive with impressive results is the Grow-E & Grow-E Youth Fund that enables growth from strategic high-impact projects (Industrial Infrastructure, High-Impact cross sectoral projects and logistics), Green Industries, Manufacturing Activities, Mining and many more.
- Automotive Industry:
Budget Reference: “Investments amounting to over R20 billion have recently been announced in the automotive sector”
A great deal of excitement was expressed about the Government’s investment in the automotive sector. We expect to see great results from the Automotive Investment Scheme (AIS) - an investment based taxable cash incentive designed to support growth of light Motor Vehicle Manufacturers (OEM’s) and Automotive Component Manufacturers this year.
Budget Reference: “while overall agricultural output has declined under severe drought conditions, there has been strong growth in several export products: including nuts and berries, grapes and both deciduous and citrus fruits. Overall export growth by volume was over 9 per cent last year, and will continue to benefit from the competitiveness of the Rand. South African exports to the rest of Africa now exceed R300 billion a year, up from about R230 billion just three years ago. Our major exports – platinum, gold, iron ore and coal – have seen substantial declines in global demand and in prices and the effects on our economy are widespread.”
The DTI partnered with Provincial Investment Promotion Agencies (PIPAs) to undertake investment & export promotion activities in targeted markets that are aligned to South Africa's international relations and co-operation agreements.
One thing you won’t regret this year is getting the ball rolling on your Export Marketing & Investment Assistance Scheme (EMIA) application; this scheme develops export markets for South African products and services to recruit new foreign direct investment into the country. We have found that the Capital Project’s Feasibility Program (CPFP) also adds incredible value in the development process. (CPFP is a cost-sharing grant that contributes to the cost of feasibility studies likely to lead to projects that will increase local exports and stimulate the market for South African capital goods and services.)
- Building and construction:
Budget Reference: “R62 billion is allocated for the housing subsidy programs, R34 billion for bulk infrastructure and residential services in metropolitan municipalities, R28 billion will be spent over the MTEF on improving health facilities and R54 billion on education infrastructure.”
The DTI, IDC and other DFIs support the government’s mandate in prioritising projects that will develop infrastructure. Good examples of incentives that support this mandate are the Critical Infrastructure Program (CIP - a cost sharing incentive that leverages investment by supporting infrastructure that is deemed critical), The Grow-E Fund and The Grow-E Youth fund.
If you would like to learn more about a specific fund/incentive or if you would like to determine if you’re eligible to access any of the funds that I have mentioned/not mentioned – email me at email@example.com and I’ll be glad to point you in the right direction