[Article] R& D Tax Incentives

[Blurock]

I wonder how many companies are making use of the incentives available from government.

South Africans are great innovators as evidenced by the first heart transplant, ISCOR and SASOL, our previous uranium enrichment programs etc etc. The list is just too long. What is stopping us?

This type of tax break may just make it possible to invest more in R & D and still get a proper return on your investment. On the upside, the new innovation may give us a leading edge against our competitors or replace expensive imports.

Companies undertaking scientific and technological research and development (R&D) in South Africa can qualify for a 150% tax deduction for operational R&D expenditure in terms of section 11D of the Income Tax Act.This incentive is available to businesses of all sizes and in all sectors of the economy as long as they are registered in South Africa. To qualify for the deduction, the R&D activities against which the expenditure is incurred must be approved by the Minister of Science and Technology.

The incentive is aimed at encouraging businesses to invest in R&D in South Africa. The objective is to help companies build capabilities and innovations by creating new products, processes, devices and techniques, and/or significantly improving existing ones. This incentive is part of a package of measures that the government of South Africa has introduced to support R&D-led innovation, industrial development and employment creation.


Application process

To access the incentive, a company must complete an application form (www.dst.gov.za/r-d) and submit it to the Department of Science and Technology (DST), which is responsible for the administration of the process. DST officials can provide information and assistance regarding completing the application form.

It is important to submit the application before starting to conduct the R&D in question because only expenditure incurred on or after the date on which the DST receives the application will be considered for the incentive.


For more information, please contact Ms Dimakatso Mokone at +27 12 843 6560 /

012 843 6829 or e-mail dimakatso.mokone@dst.gov.za.

[desA]

At what point do the great leveler questions arise?

What is your BBBEE status? Are you predominantly black owned?

I saw this with Patent & Design Registration support for the formerly disadvantaged group. It presents major hurdles to minority developers, as Eskom's pilot attempts at Open Innovation showed. Rather like a slap in the face with an old wet fish.

[Justloadit]

When I last looked at this some years back, there were many strings attached, I wonder if they are still present.

[Greig Whitton]

What is your BBBEE status? Are you predominantly black owned?

I can't comment on the R&D tax incentives, but I know that many government grants and funding programs don't involve B-BBEE or black ownership application criteria.

[Justloadit]

Can you name one?

The last time I was at DTI, for a grant, approximately a year ago, it was the very first question asked, and was told that it would be very difficult for me to get it, not being being more than 50% BEE with a shrug of the shoulders.

[Greig Whitton]

Can you name one?

The Aquaculture Development and Enhancement Programme
The Automotive Investment Scheme
The Clothing and Textile Competitiveness Improvement Programme
The Foreign Film and Television Production and Post-Production Incentive
The Incubation Support Programme
The Manufacturing Competitiveness Enhancement Programme

Those are just some of the DTI grant programs that don't have mandatory B-BBEE or black ownership requirements (in fact, the only DTI grant with an explicit black ownership requirement that I can think of is the Black Business Supplier Development Programme).

Apart from the DTI's various grant programs, there are plenty of other government business financing programs that don't have mandatory B-BBEE or black ownership requirements (e.g. some of the financing services offered by the IDC and SEFA).

The last time I was at DTI, for a grant, approximately a year ago, it was the very first question asked, and was told that it would be very difficult for me to get it, not being being more than 50% BEE with a shrug of the shoulders.

Which grant were you trying to apply for?

[Blurock]

Can you name one?

The last time I was at DTI, for a grant, approximately a year ago, it was the very first question asked, and was told that it would be very difficult for me to get it, not being being more than 50% BEE with a shrug of the shoulders.

Never give up. Yes, there are racist people out there. I have experienced it first hand as two black entrepreneurs missed opportunities because funding would not be granted if white people were involved. The NEF is one of those organisations where a black man cannot even get assistance if there are white people involved in his business. Enablis is another organisation that will only grant loans to 100% black businesses.

The flipside is that there are other funds and and means to get assistance. Fortunately there are still people in government who realise that we need to stimulate growth in order to create jobs. When will we ever get past the racism and get on with business so that we as a country can move on?

There are many young people who are not black or white, but they are South Africans. They have great ideas which can move the world and make this a great country. Names such as Elon Musk, Mark Shuttleworth and others come to mind. Lets give everyone an equal chance and see this country grow! Never give up!

[Justloadit]

Which grant were you trying to apply for?

R & D

[desA]

The main thing is that generally, the BBEEE/racist exclusions are not in the printed blurb sheets, but enter as implied criteria.

Some others eg. R&D & IP support are blatantly racist. Shocked both me & my IP attorney when we explored various options.

Formerly advantaged folks really do need to see the writing on the wall, in this regard. The old wet fish slap is never far away, in the New SA. This is the way it is.

[Greig Whitton]

R & D

Can you recall the name of the specific grant program? (many of the DTI's grants can be used for R&D purposes, and there are a number of non-DTI R&D funding programs like the SARS R&D tax incentive)

[Greig Whitton]

The main thing is that generally, the BBEEE/racist exclusions are not in the printed blurb sheets, but enter as implied criteria.

Having personally worked on a number of financing applications (specifically, DTI grant applications), I don't entirely agree with this. Obviously some programs have explicit B-BBEE or ownership criteria, but those that don't may request the same information to track how government financing is being allocated (since economic empowerment is an obvious national priority). However, they won't disqualify applicants for failing to meet "hidden" criteria.

Some others eg. R&D & IP support are blatantly racist.

Which R&D and IP support programs are you referring to?

[roryf]

I looked at getting a manufacturing grant a few months back and it didn't pay me to take up the grant.I would have had to spend more money on getting a higher BEE score for the grant to happen,than I would have got back from the grant.

[Greig Whitton]

I looked at getting a manufacturing grant a few months back and it didn't pay me to take up the grant.I would have had to spend more money on getting a higher BEE score for the grant to happen,than I would have got back from the grant.

Which grant were you applying for? (I am aware of at least two: the Manufacturing Competitiveness Enhancement Programme and the Manufacturing Investment Programme - but neither of them have mandatory B-BBEE criteria).

[Justloadit]

Can you recall the name of the specific grant program? (many of the DTI's grants can be used for R&D purposes, and there are a number of non-DTI R&D funding programs like the SARS R&D tax incentive)

Can not recall, but we were looking for R5mil, and with the response, I simply decided to move on.

[roryf]

Which grant were you applying for? (I am aware of at least two: the Manufacturing Competitiveness Enhancement Programme and the Manufacturing Investment Programme - but neither of them have mandatory B-BBEE criteria).

MIP.I did have a long chat to the consultant from Bidvest and the outcome was that it would cost us more because of the BEE.In the end we financed the machinery ourselves.