Special Economic Zone South Africa

In line with the Industrial Policy Action Plan and the New Growth Path, the Department of Trade and Industry (the dti) aims to continue fostering its efforts to create employment and economic growth by establishing a strong industrial base in South Africa.

The Special Economic Zones (SEZs) programme is one of the most critical instruments that can be used to advance government's strategic objectives of industrialisation, regional development and job creation.  Moreover, the programme can assist in improving the attractiveness of South Africa as a destination for foreign direct investment.

With the introduction of a much broader SEZ programme, more areas of strategic economic potential can be leveraged to attract foreign direct investment. The most pertinent outcome envisaged by the SEZ programme is the expansion of the manufacturing sector and the creation of additional industrial hubs to regionally diversify
the national industrial base.

We are confident that the new SEZ Policy will be of benefit to industrialisation and significant to government for achieving its programmes' goals of economic growth, development and employment creation. I wish to thank all those, whose hard work has contributed to the challenging task of ensuring and securing the progress registered over time particularly for the development of the SEZ policy. Most importantly, I encourage all concerned to redouble their efforts and continue to work together until the realisation of the country's industrial development agenda.

Executive Summary

A Special Economic Zone (SEZ) is defined as "a geographically designated areas of a country set aside for specifically targeted economic activities, which are then supported through special arrangements (which may include laws) and support systems to promote industrial development". The SEZ programme is a tool that is used by many economies to promote trade, economic growth and industrialisation.

In an effort to reposition itself in the world economy, the South African government established the Industrial Development Zone Programme (IDZ) in 2000. The programme's main focus was to attract foreign direct investment and export of valueadded commodities. The main limitation of the programme was that the IDZs could only be designated adjacent to a sea port or international airport, and that excluded other regions in the country which had industrial potential but did not meet the IDZ criteria. This limitation has provided the rationale for a more inclusive industrial facilitation model in the form of the Special Economic Zone programme which will utilise a wide range of instruments.

Rationale for the Review of the Industrial Development Zone Programme

The review of the IDZ programme, that began in 2007, was brought about by the developments in national economic policies and strategies such as the Industrial Policy Framework and the New Growth Path; as well as developments in the global economic environment such as the formation of BRICS. The achievements of the existing IDZs are acknowledged, however, the government has felt that more could be achieved if the
challenges identified within the existing IDZs could effectively be addressed. Challenges such as, lack of coordinated planning arrangements; insufficient guidance related to governance arrangements; dependence on government funding; lack of targeted investment promotion measures; and inadequate coordination across government agencies have been identified as the key constraints to the success of the programme.

Importance of Special Economic Zones in South Africa

The SEZ Policy is being introduced to provide a clear policy framework with respect to the development, operations and management of SEZs including addressing challenges of the current IDZ programme. The purpose of the SEZ programme therefore is to:

• expand the strategic focus to cover diverse regional development needs and contexts, and improve the design deficiencies of the IDZ Programme

• provide a clear predictable and systemic planning framework for the development of a wider array of SEZs to support industrial policy objectives and the New Growth Path (NGP)

• clarify and strengthen governance arrangements; expand the range and quality of support measures beyond provision of infrastructure; provide a framework for a predictable financing framework to enable long-term planning; and

• provide for predictable financing arrangements that enable long-term planning.

Implementation of the SEZ Programme

The implementation of the SEZ programme will be in conjunction with other relevant departments and agencies in order to develop and implement a wide-ranging SEZ Programme. The SEZ programme aims to provide comprehensive and coherent marketing, capacity development and skills development strategies, sustainable infrastructure development, integrated logistics systems, technology, research and developmental measures that promote sustainable technological innovation and improved quality and productive programmes. SEZs are therefore strategic and effective instruments for the achievement of national and regional industrial development policy objectives. As such they will require coherent and coordinated cooperation from various stakeholders.

SECTION 1: Introduction
1.1 Background
1.1.1 About Special Economic Zones

(i) Special Economic Zones (SEZs) are geographically designated areas of a country set aside for specifically targeted economic activities, which are then supported through special arrangements (which may include laws) and support systems that are often different from those that apply in the rest of the country. Furthermore, an SEZ is an economic development tool to promote rapid economic growth by using incentive packages to attract targeted investments and technology. The zones act as a magnet for investment in desirable activities
in specially designated areas by providing quality infrastructure complemented by an attractive incentives package, business support services, cluster development and minimal red tape.

(ii) Although these zones evolved out of the era of export oriented industrialisation strategies of the 1960s, SEZs are now used for various purposes that range from export promotion, enterprise development, urban renewal, rural development, and domestic or regional production.

(iii) SEZs require the development and application of special economic systems, policies and support measures that are responsive to the strategic intents and needs of the host region, investors, and other key stakeholders.

(iv) There are many categories of SEZs, and often different countries and regions use different names or terminology to refer to the same thing. However, the strategic policy intentions are more important than the terminology used in the design and implementation of SEZ programmes. The categories include the following:

• A free port is an area adjacent to a port of entry (seaport and/or airport) where imported goods may be unloaded for immediate transhipment or stored, repacked, sorted or processed without being subject to customs import procedures. Movements of these imported goods from the free port to a non free trade area in the country are subject to import duties.

• Free trade zones mean part of the territory of a state where any goods introduced are generally regarded, insofar as import duty and taxes are concerned, as being outside the customs territory and are not subject to the usual customs control.

• Industrial parks are facilities (buildings) that are set aside for production and business services to attract new businesses by providing integrated infrastructure in one location and providing localised environmental controls
that are specific to the needs of an industrial area.

• Science and technology parks consist of infrastructure for the establishment and development of knowledge-based companies based in a location formally linked (and usually physically close) to a centre of
technological excellence, usually a university. It normally incorporates business management and other services, and a technology link to the centre of technological excellence.

• Sector development zones focus on the development of specific sectors or industries such as agriculture, ICT, BPO, etc; through the facilitation of general or specific industrial infrastructure, technical workforce and business support services.

• Spatial development corridors connect two or more economic nodes through transportation networks, and accommodate various economic activities along the corridors.

• Industrial development zone is a purpose-built industrial estate linked to an airport or sea port that leverages domestic and foreign ·fixed direct investments in value-added and export-oriented manufacturing industries and services.

1.1.2 Post-1994 history of Special Economic Zones in South Africa

(i) One of the economic development challenges that confronted the democratic government immediately after 1994 was to raise the levels of domestic and foreign direct investments in order to accelerate growth, employment and inclusion. Towards this end, the government introduced the Industrial
Development Zones (IDZ) programme in 2000.

(ii) The purpose of the IDZ programme was to contribute to the acceleration of economic growth and employment generation through the promotion of export oriented manufacturing and services industries. The key performance areas of the programme were, therefore, increased investments, exports and employment
in the targeted industries and products.

(iii) Between 2001 and 2010 only four IDZs were designated, namely Coega (2001 ), OR Tambo International Airport (2002), East London (2002) and Richards Bay (2002). Only three are operational and all are located along the eastern coastal belt, while the OR Tambo International Airport is the only inland IDZ and is not yet operational. Accordingly, all four operators were issued with IDZ Operator Permits by the dti as follows: East London I DZ Company (2007), Coega Development Corporation (2007), Richards Bay IDZ Company (2009) and OR Tambo IDZ (2010).

(iv) From 2002 to 2010, a total of 40 investors were attracted into the IDZs with more than R11.8 billion investments generated and more than 33 thousand jobs created. This is below expectations; however jobs created through backward and foONard linkages which might he h11ge were not estimated in this report

Enter Email For Free Breaking News