Go truck your­self

ADT mar­ket turns nasty

Finweek English Edition - - Companies & markets - SHAUN HAR­RIS

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.

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