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Limpopo Business 2020/21 edition

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FOCUS modern “Marshal

FOCUS modern “Marshal Plan” for the new economic recovery plan is now. Post the 2009 global economic meltdown, the South African economy contracted by 1.8%. Countries need to recharge and embark on a new trajectory of normalising life and rebuilding their economies. The pandemic disrupted many industries yet created a window of opportunity for innovation and alternative strategies. A country such as Saudi Arabia will undoubtedly begin to think about economic development beyond oil. Similarly, tourism-based economies will be forced to think outside the box. Countries endowed with natural resources such as South Africa should consider strongly accelerating the pace of industrialisation through the production of value-added products for export. Artistic impression. Credit: MMSEZ Industrial activity through fiscal and regulatory incentives Among a plethora of potential economic recovery strategies and a paucity of realistic interventions is the phenomenon of Special Economic Zones (SEZs). SEZs are geographically delimited areas wherein governments facilitate industrial activity through fiscal and regulatory incentives and infrastructure support. SEZs can make important contributions to growth and development by attracting investment, creating jobs and boosting exports. They can build forward and backward linkages and support global value chain participation, industrial upgrading and diversification (UNCTAD, 2019). Globally, there is a boom of SEZs with over 5 400 operational in 147 countries and over 500 in the pipeline. According to Bernard Hoekman, Director International Trade Department World Bank, China’s astonishing economic growth can be attributed to the use of Special Economic Zones. One of the striking examples is the transformation of Shenzhen, a former small fishing village in the 1970s, into today’s city of over nine-million people, an illustration of the effectiveness of the SEZ model within the Chinese context. Hoekman asserts that SEZs offer a potentially valuable tool to overcome some of the existing constraints to attracting investment and growing exports for many African countries. Accelerating the pace of industrialisation The South African Industrial Policy Action Plan (IPAP) recognises the SEZ programme as one of the critical tools for accelerating industrialisation. As a result, eight Special Economic Zones were designated in six provinces as follows: Saldanha Bay (Western Cape), Dube TradePort (KwaZulu-Natal), OR Tambo (Gauteng), Coega (Eastern Cape), East London (Eastern Cape), Richards Bay (KwaZulu-Natal), Musina-Makhado (Limpopo) and Maluti-a-Phofung (Free State). By 2019, the number of operational investors in designated SEZs in the country increased from 72 to 85, with a total investment value of over R9-billion. The number of direct jobs created currently stands at 13 561, but this is expected to increase substantially as the new investments come on-stream (dtic, 2019). Growing industrial capacity has become a priority for the South African government to grow the economy. It is evident that the top four provinces (Gauteng, KwaZulu-Natal, Western Cape and Eastern Cape) enjoy the highest rate of industrial activities while the others experience relatively low manufacturing capacity (Stats SA). This is in contrast with the other five provinces having a plentiful endowment of primary resources such as minerals and agricultural produce, which are supposed to be the bedrock upon which industrialisation rests. Limpopo’s Musina-Makhado SEZ Limpopo province has a competitive advantage in mining, agriculture and tourism as the strategic pillars. Among its rich mineral deposits are platinum group metals (PGMs), iron ore, chrome, coal, diamonds, antimony, phosphate, copper, black granite, corundum, etc. LIMPOPO BUSINESS 2020/21 20

FOCUS The bulk of these resources are extracted and exported to foreign markets as primary resources which deprives the province of an important opportunity to industrialise and develop. This is indeed a lost opportunity to build local industrial capacity, create much-needed employment opportunities and grow the SMME sector. Another lost opportunity has been within the agricultural sector. Limpopo is well endowed with agricultural resources, making it one of the key regions to produce fruits, nuts, vegetables, cereals and tea. Statistics from the Agricultural Business Chamber South Africa indicate that Limpopo accounts for approximately 19% of South Africa’s potatoes, 75% of mangoes, 65% of papayas, 36% of tea, 25% of citrus, 60% of litchis, 60% of avocados and 60% of its tomato production per annum. This abundance of agricultural products provides a great opportunity for agro-processing and production of value-added products for export markets. The designation of the Musina Makhado Special Economic Zone (MMSEZ) in 2016 heralded a window of opportunity to turn the province’s fortunes around. The SADC Industrialisation Strategy (2015- 2063) emphasises the pursuit of targeted and selected industrial policies to create conditions for higher rates of investment, especially in valueadding manufacturing. The Strategy and Roadmap for implementation focuses on three potential growth paths for SADC economies namely, agroprocessing, minerals beneficiation and downstream processing; and enhanced and upgraded participation in regional and global value chains. The recently signed Africa Continental Free Trade Agreement (AfCFTA), promises to redefine trade relations among African states and beyond. It is envisioned that it will create a single market for goods and services across 55 countries. The Musina-Makhado SEZ is well-positioned to play a regional integration role in SADC and to take up opportunities that are presented by the AfCFTA. A vision for a futuristic Smart City The MMSEZ as an economic development tool aims to promote national economic growth and exports by using support measures to attract targeted foreign and domestic investments, research and development and technology transfer. With an anchor of investment pledges of about R150-billion, the Musina- Makhado SEZ will result in the establishment of an energy and metallurgical complex, a logistics hub, agroprocessing centre, light-to-medium manufacturing industries, SMME Incubation Centre, retail centres, hotels, residential and community facilities. All these investment opportunities will lay a solid foundation for the envisioned futuristic Smart City utilising the Internet of Things (IoT) anchored on a comprehensive ICT infrastructure for the realisation of a smart economy, smart governance, smart environment, smart mobility, smart living and smart people principles. The location of this flagship programme has been carefully chosen to meet the basic requirements of a successful SEZ initiative. Conclusion The envisaged job-creation opportunities, skills development, technology transfer, SMME empowerment and the socio-economic infrastructure development triggered by the MMSEZ will make a significant impact on the improvement of the quality of lives of many people and contribute to the provincial and national GDP. In the midst of this unprecedented global lockdown, we must afford ourselves an opportunity to reimagine the future and wake up from the dream. In the fullness of time, the morning after the night before shall be upon us and we dare not be found wanting. The time to concurrently reinterpret the world and change it has come and such a task cannot be left to philosophers alone. Article by Lehlogonolo Masoga, Chief Executive Officer of Musina- Makhado Special Economic Zone. 21 LIMPOPO BUSINESS 2020/21

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