SPECIAL ECONOMIC ZONES
SPECIAL ECONOMIC ZONES Special Economic Zones are driving investment in manufacturing From marine engineering and steel to agro-processing and renewable energy, the drive is on to attract investors. Oliver Tambo International Airport. Special Economic Zones (SEZs) have been introduced in many parts of the world in an attempt to stimulate growth in specific sectors. In recent years, SEZs have become an integral part of the planning process of the South African government. Broad plans such as the National Development Plan (NDP) and the Industrial Policy Action Plan (IPAP) are overarching visions into which spatial planning initiatives such as SEZs fit. Some of the zones are known as Industrial Development Zones (IDZs). At provincial level, ambitious programmes are underway to either create or revitalise industrial parks. The National Department of Trade, Industry and Competition (dtic) has invested R40-million in the Nkowankowa Industrial Park in Limpopo, an initiative which has helped to create 174 direct jobs, and the upgraded Thohoyandou Industrial Park has achieved a 91% occupancy rate. In the Free State, a similar initiative at the Botshabelo Industrial Park has attracted a R200-million steel smelter investment from Hangda Trading. The NDP is a broad-strokes plan that seeks to coordinate development in a range of sectors and promotes ambitious infrastructural projects. South Africa's most recent IPAP has a manufacturing focus, and this is also the area on which SEZs are concentrating. Key goals behind the establishment of SEZs are: • To encourage industries to develop in clusters, leading to economies of scale, skills-sharing and easier access by suppliers. • To create industrial infrastructure to promote investment. • To promote cooperation between the public and private sectors. • To use the zones as a launching pad for other plans to further development. Apart from attracting foreign direct investment (FDI) and boosting employment, SEZs can also play a role in helping to add new sectors or sub-sectors to an economy. An obvious candidate in that category is renewable energy which needs solar panels and wind turbine towers. Special Economic Zones 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. 26 | www.opportunityonline.co.za
SPECIAL ECONOMIC ZONES Incentives The beneficiation of available resources is encouraged through SEZs and a range of advantages to enterprises through incentives and services are offered by national, provincial and local governments. Incentives include tax breaks from the South African Revenue Service, subsidised interest rates from the Industrial Development Corporation (IDC), subsidies for employees earning below a certain level, training grants from the Department of Trade, Industry and Competition and discounts from national electricity utility Eskom. SEZs are also customcontrolled areas. The SEZs are located in a municipality and for the SEZ programme to succeed, municipalities must be part of the planning, design and implementation of these spatial development catalysts. The local government sector is, therefore, an important stakeholder in the drive to build sustainable and successful SEZs. To date, there are 11 approved SEZs in seven provinces; the latest one is Tshwane Automotive SEZ, launched by President Cyril Ramaphosa in 2019. Coega SEZ and Dube TradePort SEZ are at the forefront of attracting investment. The SEZ programme has attracted 234 investors with an estimated value of more than R61-billion. There are five additional proposals that the dtic is surveying in partnership with provinces. They include the Bojanala SEZ (North West Province), Namakwa SEZ (Northern Cape), Vaal SEZ (Gauteng), Tubatse SEZ (Limpopo) and Wild Coast SEZ (Eastern Cape). A research report by the Centre for Development and Enterprise (CDE) has proposed that the Coega SEZ be used as a pilot project to introduce more flexible labour laws in the SEZ context, arguing that none of South Africa’s zones are sufficiently “special” at the moment. Because goods would be produced for export, companies granted these concessions would not be competing with local companies and so, the CDE reasons, unions would be more amenable. OR TAMBO INTERNATIONAL AIRPORT IDZ (GAUTENG) The OR Tambo International Airport (ORTIA, pictured) IDZ officially opened in March 2019. It aims to develop land around the airport to stimulate economic development using the IDZ mechanism. ORTIA supports the beneficiation of precious metals and minerals sector, with a focus on light, high-margin, export-oriented manufacturing of South African precious and semi-precious metals. The multi-site development at ORTIA consists of several www.opportunityonline.co.za | 27
