IDZs to be replaced with SEZs

January 19, 2012 — 2 Comments

Department of Trade and Industry (South Africa)Heard this before? In line with the Industrial Policy Action Plan and the New Growth Path, the Department of Trade and Industry (the dti) aims to continue fostering its efforts to create employment and economic growth by establishing a strong industrial base in South Africa. The new initiative aims to improve on the concept of industrial development zones (IDZs) which have enjoyed mixed success since being introduced in December 2000 through the Manufacturing Development Act. 

An IDZ is a purpose-built industrial estate linked to an international airport or seaport which is tailored for the manufacturing and storage of goods. It offers investors certain rights within the zone, in addition to incentives such as customs duty and VAT relief. One important priority of the IDZs is to boost job creation and skills in underdeveloped regions. The IDZ programme led to the establishment of five zones – Mafikeng, OR Tambo International Airport, Richards Bay, East London and Coega. The Richard’s Bay IDZ only commenced its first phase of development in September last year while OR Tambo International Airport is not yet fully operational.  The Industrial Policy Action Plan, issued by the Department of Trade and Industry in February 2011, has also identified, as a key milestone, the establishment of an additional IDZ at Saldanha Bay. 

The Special Economic Zones (SEZs) programme is one of the most critical instruments that can be used to advance government’s strategic objectives of industrialisation, regional development and job creation. Moreover, the programme can assist in improving the attractiveness of South Africa as a destination for foreign direct investment.

In order to ensure that the SEZ programme is an effective instrument for industrial development, the dti has developed the SEZ Policy and Bill. Through the Bill there will be a dedicated legislative framework for special economic zones.

The main objectives of the SEZ Bill are to provide for the designation, development, promotion, operation and management of Special Economic Zones; to provide for the establishment of the Special Economic Zones Board; to regulate the application and issuing of Special Economic Zones operator permits; to provide for the establishment of the Special Economic Zones Fund; and to provide for matters incidental thereto.

Furthermore, the SEZ Bill will enable government to move towards a broader Special Economic Zones Programme, through which a variety of special economic zones can be designated in order to address the economic development challenges of each region and address spatial development inequalities.

Although national laws may be suspended inside industrial zones, government is currently not offering regulatory incentives to derogate from labour rules, a concession which is seen by some as crucial to stimulate investment in special zones. It is however unlikely that a relaxation of labour laws will be considered under the SEZ initiative. Benefits are rather expected to come in the form of enhanced incentives for labour intensive projects and additional tax relief for investors. A further question arises – just how flexible an inventive will the customs and VAT requirements be allowed to be?

The key provisions include the establishment of a Special Economic Zones Board to advise the Minister of Trade and Industry on the policy, strategy and other related matters; establishment of the Special Economic Zones Fund to provide for a more coherent and predictable funding framework that enables long-term planning; strengthening of governance arrangements including clarification of roles and responsibilities of key stakeholders. Source: Department of Trade and Industry.

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2 responses to IDZs to be replaced with SEZs

  1. 
    Brian Kalshoven January 20, 2012 at 8:57 am

    Has an IDZ, (now SEZ), ever been mooted for Beitbridge? If not, why not?

    • 

      Hi Brian,
      The Department of Trade and Industry has the role of identifying economic opportunities to further the lot of South Africa. Typically this would look at manufacturing, or raw material beneficiaton opportunities in order to attract foreign direct investment. The aim would be to establish industries which can offer job opportunities for locals as well as as consequential knowledge transfer. Logistics plays a large role in linking industry to the international market hence the reason for which Customs would need to provide expedited processing and release options to facilitate this. As to why Beit Bridge has not been considered is possibly because there is no major international port or airport in close proximity to warrant consideration. While the borderpost concerned plays a significant and important role in providing transit opportunities north of our borders, it is quite possible that the locality of Messina is too far remote from support industries to have warranted any consideration by the DTI. You may well wish to raise this matter with the DTI directly as SARS/Customs has no say in the identification of such facilities. Regards, Mike.

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