Why invest in Motheo

Excellent potential

In constituting the main economic driver for the Free State Province, the Motheo Region offers the following specific excellent investment potential:

• Five industrial areas in and around Bloemfontein, viz, Bloemdustria, Hilton, Hamilton, East End and Old Industrial, consisting of fully established infrastructures, with more than required power, water and sewerage supply lines, offer the following:
• Standard factories are available, ranging from 500mē to 4 000mē.
• Fully serviced sites are available for the development of new factory buildings.
• Factories can be constructed in any requested size at short notice, for confirmed relocations, according to specification.


In addition, industrialists are being assisted with advisory services ranging from market studies, viability studies, technical and general management advice.
• Ultra modern business amenities, such as
  rapidly expanding business districts in Bloemfontein,
  e.g. Westdene, Brandwag, Showgate, etc.



• Road and rail links: A modern, multi-million rand road network, connecting Johannesburg, Cape Town, Port Elizabeth, East London and Durban, has Bloemfontein at its hub. All the important railway connections between the industrial north and the south link up in Bloemfontein and a modern airport, as well as a civil airport, handles flights which link up with all parts of South Africa and beyond. 90% of transport trucks pass next to Bloemfontein en route to different centres in the country.



• Well-established accommodation and conferencing industries and facilities in terms of guesthouses (over 200 in Bloemfontein/Mangaung alone), conference centres and the variety of breakaway amenities.









• Water: The Motheo Municipal area is relatively close to the Gariep Dam on the Orange River, although this biggest single source of water in the country is not being used at all by the area. At the moment, the Welbedacth Dam on the Caledon River is the major source of water to the city. In short, the Motheo Region at its disposal has water resources sufficient to serve an industrial area much bigger than the entire PWV area.



• Labour in the Motheo Municipal area is stable, dependable and readily available and includes skilled, semi-skilled and unskilled workers.Lesotho has not even been mentioned yet. More than 50% of the millions pumped into Lesotho from overseas are spent in the Motheo Municipal area. Even the vegetables sold in Maseru come from the fresh produce market in Bloemfontein. Motheo thus in realty represents a market to millions of people.



• Electricity is available at rates ranging from R31 per kVA to R33 per kVA, depending on the needs of the customer. Bloemfontein also possesses its own power station with a generating capacity of 102 megawatts. An emergency system provides an uninterrupted flow of electricity in the event of a power failure.









• There is a vast potential in agro-industry for development around the meat, dairy and wool production.
  
  
  
  
  
  
• Depending on the area concerned, rental tariffs for industrial premises range from R3 to R19,50 per mē.

Investment incentives

The National Department of Trade and Industry has introduced a number of incentive schemes to assist foreign and local business to establish and expand effectively. Local governments have also developed comprehensive investment packages, which are mainly non-cash based.

The Local Government Incentives include:

• Providing inexpensive fully serviced industrial land.
• Connection of water and electricity at a minimal fee.
• Water and electricity can be subsidized up to cost price.
• Assistance with the erection of factories and warehouse, etc.

National government and parastatal entities administer the following incentives :

Small and Medium Enterprise Development Programme (SMEDP)

• An Investment Grant payable for the first two years on approval qualifying assets;
• An additional Investment Grant is payable in the third year based on the ratio of Human Resource remuneration expressed in terms of manufacturing costs must be a minimum of 30%;
• A Foreign Investment Grant, limited to US$ 150 000 per project (FIG) for qualifying investments in new machinery and equipment not exceeding R20 million investment (excluding commercial vehicles); and
• A Foreign Investment Grant, limited to US$ 50 000 per project (FIG) for qualifying investments in new machinery and equipment not exceeding R5 million investment (excluding commercial vehicles).

NB: The incentive period is limited to an overall maximum period of 36 consecutive months.

Investment grant calculation

Entities can qualify for a tax-free cash incentive on total investment in qualifying assets for 3 years on the following regressive scale:

• For the first R5 m investment - 10% p.a.
• For the next R10m investment (above R5m up to R15m) - 6%p.a.
• For the next R15m investment (above R15m up to R30m) - 4%p.a.
• For the next R20m investment (above R30m up to R50m) - 3%p.a.
• For the next R25m investment (above R50m up to R75m) - 2%p.a.
• For the next R25m investment (above R75m up to R100m) - 1%p.a.

Equity requirements

Minimum equity is determined by the maximum approved incentive level on the total project (including expansions):

• 10% for projects with qualifying fixed assets up to R5 million;
• 25% for projects with qualifying fixed assets between R5 million and R15 million; and
• 35% for projects with qualifying fixed assets above R15 million up to R100 million.


Incorporated legal entities who can apply for assistance are companies (private and public), close corporations (CCs), co-operatives (co-ops) and partnerships.

Non-qualifying entities

This constitutes an entity formed by the same members or owners (connected person) to engage in more than one independent project in the same industrial area to manufacture generically the same product. Projects may not qualify for both the Strategic Projects programme and the SMEDP. Once approval has been granted for a specific programme, entities will not be allowed to randomly convert their incentive approval. Trusts, profit centers, branches and divisions are explicitly excluded from participating in this programme.

Circumvention

Where an existing qualifying legal entity forms a new legal entity (Connected person within the same industrial area) to participate in the SMEDP and the project is constructed or created in such a manner so as circumvent to the R10 million limit, such application will be considered as a circumvention of the R100 million maximum limit (e.g. two connected projects producing generically the same products within the same industrial area.) This new legal entity will then be a non-qualifying entity for this programme.

The splitting up of an integrated production process into different manufacturing entities will also qualify as circumvention.

Qualifying activities

• Manufacturing
• High value agricultural projects & agro-processing
• Aqua-culture
• Bio-technology
• Tourism
• Information & communication technology
• Recycling
• Culture industry
• Business services

Qualifying projects

• New projects or an expansion of existing projects
• Entities with a level of investment in total qualifying assets as per start balance sheet not exceeding R100 million. No support will be considered for an expansion if the R100 million limit has already been attained in the initial investment in qualifying assets prior to the investment in the expansion.
• Qualifying projects must have investments in qualifying assets.
• Projects with qualifying fixed assets valued at more than R5 million must commit themselves to achieve the required ISO or equivalent quality and environmental standards and must submit a Department of Labour - approved training programme.
• Projects may not qualify for both the Strategic Projects programme and the SMEDP. Once approval has been granted for a specific programme, entities will not be allowed to randomly convert their status.
• Projects may not qualify for both the Productive Assets Allowance (PAA) under the Motor Industry Development Programme (MIDP) and the SMEDP.

Quality assets

Qualifying assets constitute the following:

• Owned land and buildings at costs - 100%
• Leased land and buildings capitalized at (15%) - 100%
• Owned machinery and equipment at cost - 100%)
• Leased machinery and equipment (as capitalized in the balance sheet) - 100%
• Commercial vehicles (owned and/or used) - 100%

Research and development capital costs (as accepted by the Receiver of Revenue)

Export Marketing and Investment Assistance Scheme (EMIA)

To qualify, the individual/business must be registered as an exporter with the national Department of Trade and Industry and the Commissioner of Customs and Excise.

The scheme consists of the following:

• Primary Export Market Research
• Outward Selling Missions
• Inward Buying Trade Missions
• Exhibition Assistance
• Assistance to Industry Specific Sectors
• Outward Investment Recruitment Missions
• Inward Investment Mission

Support Programme for Industrial Innovation (SPII)

The government designed SPII promotes technology development in manufacturing industries in South Africa through innovation of competitive products and/or processes.
Technology and Human Resources for Industry Programme (THRIP)

• Contribute to the increase in the number and quality of people with appropriate technological skills for industry;
• Stimulate industry to increase its investment in research, technology development and innovation promotion; and
• Promote increased interaction and financial support of researchers and technology managers in the industry.

Conclusion

In the final analysis, the infrastructure on which to base virtually any kind of enterprise, already exists in the Motheo Municipal Area - thus an excellent launching pad. Together with its virtually untapped water and labor resources, it is the only place in South Africa where new industrial development on a grand scale could occur. Add all the other factors and it is quite clear why any far-sighted industrialist or investor should regard Motheo as his or her first and final choice.