Go truck yourself
ADT market turns nasty
BELL EQUIPMENT, which earns more than half its turnover in foreign currencies through exporting materials handling equipment, has accepted its recent exclusion from the rebate benefits of the motor industry development programme ( MIDP). But the decision must irk Bell, especially as it seems amendments to the Customs and Excise Act were influenced by a complaint lodged by an international competitor.
Articulated dump trucks ( ADTs), one of Bell’s most successful products, are at the heart of the matter. Earlier this month the SA Revenue Service published amendments to schedules of the Act specifically ruling out ADTs for MIDP rebates.
“ It’s irritating, but it’s history now,” says Howard Buttery, chairman of Bell. “ The programme helped us build Bell up to the global business it is today. But we accept the decision and Bell will survive – now we look forward to the outcome of the recently implemented new tax dispensation on research and development.”
MIDP rebates were substantial for Bell, worth more than R40m before tax in some financial years. “ We did everything we believe the MIDP stood for – created jobs, employed local labour, and exported. But I don’t want to dwell on it – we must look ahead to the research and development tax deductions,” says Buttery.
A formal complaint was lodged by Caterpillar, which also makes ADTs, about Bell using the MIDP. It’s believed the complaint came from Caterpillar in Europe where it has been losing market share to Bell’s exported ADTs.
Barloworld markets and distributes Caterpillar machines and engines in South Africa and other regions of the world, though Buttery is quick to point out he does not believe the complaint is connected to Barloworld.
He says Bell is well positioned in world markets and can shift manufacturing activities between Richards Bay, where the company is based, and its facilities in Germany and the US to try and minimise the effect of the MIDP exclusion. “ The world’s construction and mining heavy equipment market is worth US$ 120bn ( R854bn) – and only 2% of that is in Africa. Bell has to play in the global arena.”
Buttery believes Bell will be able to benefit from the new research and development ( R& D) tax rules. “At any given time we are spending R300m on R& D and have more than 100 people working on the R& D programme.”
Finer details of the new tax rules, passed through the Income Tax Act effective November 2006, still need to be interpreted. The system proposes tax deductions on R& D expenses and an enhanced capital appreciation allowance for plant and machinery used for R& D.
The aim is to encourage scientific and technical research in South Africa by raising R& D spending. About 0,9% of GDP is spent on R& D in South Africa, compared to more than 3% in some other countries.