Northern Cape Business 2017-18 edition

SPECIAL FEATURE

SPECIAL FEATURE Manufacturing clusters drive economic development A boost for Northern Cape manufacturing. Special Economic Zones are intended to attract new investments and promote economic development. Special Economic Zones (SEZs) are created in terms of the Special Economic Zones Act of 2014 (Act 16 of 2014). The act defines an SEZ as “geographically designated areas of the country that are set aside for specifically targeted economic activities, and supported through special arrangements and systems that are often different from those that apply to the rest of the country”. Lower corporate tax rates and duty-free imports are among the advantages that accrue to investors. South Africa is targeting a variety of sectors in SEZs around the country, but there is an emphasis on NORTHERN CAPE BUSINESS 2017/18 12

SPECIAL FEATURE beneficiation, mainly of minerals but also of agricultural products. Policy-makers want South Africa to do much more with the product of its soils—using manganese to convert iron into steel or creating fruit juices out of apples and pears. The Northern Cape is rich in all of these products. These interventions form part of broader trade and investment plans such as National Development Plan (NDP) and the Industrial Policy Action Plan (IPAP). The NDP is a broad-strokes plan that seeks to coordinate development in a range of sectors, and promotes ambitious infrastructural projects. In the context of the burgeoning renewable energy sector, the state (through the Department of Trade and Industry, dti) can pass legislation that requires developers to increase the level of local content on the solar panels or wind turbines that are used. In this way, a totally new local industry can be created; and an SEZ would be the place to do it. Attracting foreign direct investment (FDI) and boosting employment are other objectives, together with skills transfer. Key goals behind the establishment of SEZs are to: • encourage industries to develop in clusters to create economies of scale, skills-sharing and easy access by suppliers • create industrial infrastructure to promote investment • promote cooperation between the public and private sectors • use the zones as a launching pad for further development. Various incentives are available to investors in SEZs. These include tax breaks from the South African Revenue Service (SARS), subsidised interest rates from the Industrial Development Corporation (IDC), subsidies for employees earning below a certain level and subsidies for the training of the workforce, incentives and grants from the dti, and incentives available from national electricity utility Eskom. Other benefits might include a building allowance, employment incentives and the fact that an SEZ is a customs-controlled area. Specific incentives relating to energy savings and reductions in environmental impact are available, both from Eskom and the dti. Within the dti’s Manufacturing Competitiveness Enhancement Programme, there is a Green Energy Efficiency Fund, all of which are designed to make (the right kind of) investment more attractive. Upington SEZ The 400ha site of the Upington SEZ in the Northern Cape Province is close to the Upington International Airport and is well served by access roads. One of the goals is to capitalise on the already existing (and fast-growing) solar power industry by promoting special investment packages to investors in that field, and encouraging the development of skills and services to support that sector within the SEZ. The Khara Hais Municipality has agreed to transfer the necessary land to the SEZ, and has approved the infrastructure plan that has been put forward. Airports Company South Africa (ACSA) is a partner in the project. A one-stop shop to help investors deal with paperwork will be established in the SEZ. Feasibility plans are being done by Eskom on building a massive solar park that will generate an eighth of the county’s electricity needs – 5 000MW – near Upington. Sixteen square kilometres of land has been identified and Eskom is looking for private partners. The park, which will cost more than R150- billion, will generate 1 000MW in its first phase. Over 40 renewable projects have already been approved in the Northern Cape with the majority of projects using the solar photovoltaic method with seven using the concentrated solar power (CSP) technology. The Northern Cape is also home to five approved wind farms and one small (10MW) hydro-electric project on the Orange River. Heavy, medium and light industry and manufacturing are expected to find homes in the Upington SEZ. The following sectors are currently being promoted by the Northern Cape Economic Development, Trade and Investment Agency (NCEDA): • solar component manufacturing and maintenance • solar park • aeronautical 13 NORTHERN CAPE BUSINESS 2017/18