In an attempt to place the metals and engineering sector on sounder footing and assist qualifying enterprises in the downstream steel sectors to improve their competitiveness, the government has set up a “Downstream Steel Industry Competitiveness Fund”.
Over the last few years, the country’s downstream industries in the metals and engineering sectors have been under tremendous pressure due to various structural factors such as a lack of fixed investment in modern plants and equipment, as well as under-investment in skills, research and development.
According to the Steel and Engineering Industries Federation of Southern Africa, the sector lost 25 000 jobs in the last year, due to the closure of almost 500 small to medium companies. This represents a loss in employment of more than 6% in a sector which employed 400 000 people.
The government has implemented a number of initiatives to address these problems, including the National Tooling Initiative, the National Foundry Technology Network, the designation of inputs into state procurement and the Black Industrialist Scheme. Building on these, it has now set up a targeted downstream steel fund.
The Industrial Development Corporation (IDC) will receive R95 million from the Economic Development Department in the form of grant funding, of which R30 million will be allocated to the 2017/2018 financial year, R30 million to the 2018/19 year and R35 million to the 2019/20 year. The total amount will be leveraged to create a substantial R1,5 billion fund in the form of an interest rate subsidy to normal IDC risk pricing.
The fund will selectively target manufacturing firms in the steel-intensive downstream sectors of the IDC’s Metals Value Chain Division, which includes foundry industries, fabrication sectors, parts and component manufacturers of steel-intensive products, valve and pump manufacturers, machining plants, capital equipment industries and other steel-intensive business.
It will focus on very small, small and medium enterprises, as defined in the National Small Amendment Bill. However, large enterprises up to a maximum annual turnover of R450 million will be considered, depending on developmental returns.
The monies are intended to finance initiatives which directly address competitiveness issues, specifically:
• Modernisation of plant machinery and equipment.
• Upgrade of plant machinery and equipment to meet quality assurance requirements.
• Capacity expansion of existing plants.
• Process improvements for cost efficiencies and productivity, and plant optimisation.
• Working capital requirements or revolving facility.
• Appropriate industry quality certification and standards, including environmental standards.
• Establishment of start-up enterprises.
• Development and testing of prototypes, as well as the testing and certification of new products.
Start-up enterprises and early stage technologies and prototypes will be considered on a case-by-case basis, provided there is a clear demonstration of developmental returns.
For more information on the qualifying criteria, investment process and guidelines on the requirements of a business plan, please visit www.idc.co.za.
Tel: 0860 693 888