Special Economic Zones to boost growth

17 January 2012

A new Bill gazetted on Monday aims to boost job creation and industrialisation in South Africa’s outlying areas through the licensing of Special Economic Zones (SEZs).

Briefing the media in Pretoria on the gazetting of the Special Economic Zones (SEZ) Bill for public comment, Trade and Industry Minister Rob Davies said special economic zones would expand on the work already done by the country’s Industrial Development Zones (IDZs) and attract more foreign investment.

In particular, SEZs would help stimulate industrialisation outside of the country’s main urban areas of Cape Town, Gauteng, Durban-Pietermaritzburg, East London and Port Elizabeth.

Focus on innovation

Davies said Industrial Development Zones would not be scrapped, but would continue to exist as SEZs under the new Bill.

He said that while the focus of the IDZs – based near ports and airports – had been mainly on export industries, the SEZs would expanded on this, and include a focus on innovation and regional development in areas such as science parks, industrial parks and sector development zones.

The department is working with various provinces, including Limpopo, Free State and the North West, and potential SEZs have been identified in areas such as light-manufacturing, agro-processing and platinum beneficiation.

The department’s IDZ programme was initiated in 2000, and four zones had been designated, with three currently operational – namely Coega near Port Elizabeth, the East London IDZ, and Richards Bay.

A fourth IDZ at OR Tambo International Airport in Johannesburg has yet to come into operation, but the department is this year hunting for an international operator to run the IDZ.

Davies said the IDZs had so far involved 40 investors, that had invested a total of R11.8-billion and created 33 000 jobs through the construction of these zones and direct employment in firms based there.

IDZ review identifies faults

The new Bill also proposes bolstering the governance and funding of SEZs following the department’s review of the IDZs, which began in 2007.

Davies said the department had found that IDZs tended to favour only a few regions, with a narrow focus on supporting infrastructure, and that planning was done on an ad hoc basis, with inadequate co-ordination among key government agencies and stakeholders.

Added to this, financing arrangements made it impossible to do long-term planning, while targeting of investments had been poor.

To remedy this, the new Bill provided for the setting up of a SEZ fund, as well as a special economic zone board to regulate policy, issue operator permits for SEZs and advise the minister on the zones.

The fund is not only intended for feasibility studies, but for incentives as well. The SEZ board would do the advisory work on where incentives would be directed, said Davies.

He said investors in these zones would be able to access the department’s 12i incentive, adding that the National Treasury had recently gazetted increased tax benefits that companies could access through the incentive.

Saldanha IDZ mooted

Meanwhile, Davies said a feasibility study had been conducted on whether to set up an IDZ in Saldanha in the Western Cape, and pointed out that the results had been “quite positive”.

The department’s director-General, Lionel October, said the IDZ plan for Saldanha was at a quite advanced stage and that it was hoped that the feasibility study would be completed by June this year. An application would then be submitted to the minister for approval of the IDZ.

October said long-term viability – at least 20 years – was a key factor that the department would consider before designating SEZs, including the proposed IDZ at Saldanha.

He said renewable energy manufacturing was one of the areas the department’s team was looking at in Saldanha. The department was also considering aquaculture, mineral sands, gas and oil as other sectors that could benefit from the proposed IDZ.

Davies explained that a period of public consultation of the Bill and engagement with provinces to identify SEZs and to carry out feasibility studies would start as of this week, adding that the department intended to table the Bill and have it passed in Parliament this year.

The Bill will be available shortly through www.dti.gov.za

Source: BuaNews