Londiwe Buthelezi
The restructuring of the country’s industrial development zones (IDZs) into special economic zones (SEZs) could provide a solution to the mismatch between available skills and available jobs, but the government would have to do more with tax incentives, investment experts said yesterday.
The Department of Trade and Industry (dti) said last month that it was looking to restructure the IDZs and create holistic SEZs instead. The department has gazetted the SEZ Bill, which is open for public comment until March 22.
The dti said IDZs would be expanded to enable development of diverse types of economic development zones.
South Africa established the IDZ programme in 2000. But the main limitation was that zones were focused on exports and could only be designated close to harbours or international airports, excluding large swathes of the country.
The dti said SEZs, on the other hand, would be more inclusive facilities, covering diverse regional development needs and improve on the design deficiencies of IDZs.
Different categories of SEZs include free ports, free trade zones, industrial parks, science and technology parks, sector development zones, partial development corridors and IDZs.
Between 2001 and 2010, four IDZs were designated, namely Coega, OR Tambo International Airport, East London and Richards Bay. Only three are operational even though all four were offered IDZ operator permits between 2007 and 2010.
According to the dti, more than R118 billion in investments has been made by 40 investors, and 33 000 jobs have been created in these IDZs. However, the dti said this was below expectations.
Mike Schüssler, a senior economist at Economists.co.za, said the biggest factor determining whether SEZs would attract investments that IDZs did not would be tax reductions.
He said incentives should go beyond tax to include electricity and trade incentives and the easing of some labour laws.
“Most countries we compete with give incentives to many sectors. We need more work on giving incentives. I’d like to see us doing more than pass half measures but implement full measures.”
Schüssler said new areas the country could incentivise included agri-processing, which could create 300 000 jobs, more than what the highly incentivised automotive sector had created.
Tatenda Zingoni, an analyst at Frost & Sullivan, said since the establishment of SEZs was mainly geared toward manufacturing, it should resolve the mismatch between skills and available jobs in the country.
He said the SEZ approach promised to be an effective path for regional economic development. “IDZs were created with an export-orientated approach to economic development… SEZs on the other hand can be used for regional development purposes with firms not having to be… geared toward exports.”
The review of the country’s IDZs began in 2007 because of their modest performance compared with zones in other countries, and to reposition them for the changed economic policies.
The dti said the SEZ Bill would provide a clear policy framework to support the implementation of the Industrial Policy Action Plan and the New Growth Path among others.
The department proposed that a fund be established to develop SEZs because these would be expensive to develop and required significant resources. It also said provision might be made for development finance institutions to fund projects and the infrastructure of SEZs.