Archives For Special Economic Zones

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Forget increasing the number of Free Trade Zones at and around UK ports, real thought should be given to whether Britain could become a nationwide FTZ, a panel discussion at Multimodal heard today.

The discussion, organised by the Chartered Institute of Logistics and Transport, weighed the advantages and disadvantages of setting up more FTZs as Britain’s starts its exit journey from the European Union.

While Geoff Lippitt, business development director at PD Ports, said that there was no “desperation for the traditional type of FTZ”, he conceded that as UK ports enter a new post-EU member era, any method that could improve the competitiveness of the nation’s exports should be considered.

Tony Shally, managing director of Espace Europe, added that FTZs would give the UK a great opportunity to bring manufacturing back to the country.

Bibby International Logistics’ managing director Neil Gould went a step further, calling for the creation of a ‘UK FTZ’, to facilitate a joined up environment in which it is easier to move trade. “We need to think how we work together as an industry and how we join everything up to make the UK more competitive,” he said.

However, Barbara Buczek, director of corporate development at Port of Dover, sounded a word of caution, warning that FTZs could actually be detrimental for ro-ros, an important cargo mode for the south UK port. “It’s a great concept, but we also have to be mindful of the guys on the other side who we have to ‘play’ with,” she said, adding that she is “a bit sceptical” about how an FTZ plan could pan out. Originally published by Port strategy.com

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Harrismith, Free State, South AfricaThe South African Cabinet has ratified a decision by the Department of Trade and Industry (DTI) to designate the Maluti-A-Phofung (MAP) logistics hub, in Harrismith, in the Free State, an industrial development zone (IDZ), further approving the granting of operator permit for this zone to the Free State Development Corporation.

The designation would result in the establishment of a logistics-orientated platform 10 km outside of Harrismith, primarily to service the automotive, light manufacturing, agro-processing, distribution and logistics sectors.

The Harrismith hub had become part of a key nodal point of the Durban–Free State–Gauteng Corridor, which was identified in the 2005 National Freight Logistics Strategy approved by Cabinet. According to the DTI, the MAP IDZ would become a multi-sector processing, manufacturing, engineering, logistics services, transport and logistics complex, serving the needs of the upstream value-adding, beneficiation, processing and production service companies operating across sectors and geographical areas in Southern Africa.

The zone would further look to provide efficient IDZ and customs-controlled area operations and processes that would facilitate timeous and cost-effective operations for international and domestic investors.

sez.jpgThe Special Economic Zones (SEZ) Bill 2013, according to the government will support a broader-based industrialisation growth part and be a significant milestone in pursuit of the aspirations of the National Development Plan (NDP).

Rob Davies, Department of Trade and Industry Minister says, “The bill aims to support a balanced regional industrial growth path, along with the development of more competitive and productive regional economies.”

SEZs are defined as geographically designated areas of a country set aside for specifically targeted economic activities, supported through special arrangements and systems that are often different from those that apply to the rest of the country.

Says Davies, “The aim of the SEZ Bill seeks to boost private investment (domestic and foreign) to labour-intensive areas to increase job creation, competitiveness, skills and technology transfer along with exports of beneficiated products.”

The Bill introduces a variation of SEZ’s to cater for the various spheres of government at local, provincial and national level.

It also provides for the designation of the following types of SEZs:

  • Free Ports: duty-free areas adjacent to a port of entry where imported goods may be unloaded for value-adding activities, repackaging, storage and subsequent re-export, subject to special customs procedures.
  • Free Trade Zones: a duty-free area offering storage and distribution facilities for value adding activities within the SEZ.
  • Industrial Development Zone: a purpose-built industrial estate that leverages domestic and foreign fixed direct investment in value-added and export-oriented manufacturing industries and services. (To date there are five Industrial Development Zones (IDZs) – Coega, East London, Richards Bay, OR Tambo and Saldanha Bay).
  • Sector Development / Specialised Zones: a zone focused on the development of a specific sector or industry through the facilitation of general or specific industrial infrastructure, incentives, technical and business services primarily for the export market.

Source: Transport World Africa

SEZ and Regional Integration in AfricaOne of the most prominent features of the global trading landscape in recent years has been the worldwide proliferation of bilateral and regional trade agreements. Africa is no exception to this pattern. Another prominent development in Africa over the last couple of decades has been the increasing use by many countries in the region of various types of special economic zones (SEZ). These zones are more and more being viewed in the region as important mechanisms for attracting foreign investment, creating jobs, boosting manufacturing production and manufactured exports and contributing to much-needed industrial and economic development.

This paper – Click here for access – does not seek to provide an evaluation of the performance of the various special economic zone programmes established in Africa in recent years, but instead seeks to explore the various issues, challenges and opportunities that arise when countries – and especially developing countries – use special economic zones while simultaneously pursuing regional integration initiatives. This is a particularly important subject in the context of the COMESA-EAC-SADC T-FTA as a large number of the countries involved are actively using special economic zones or are currently in the process of establishing zone programmes. Source: Tralac

sezFree zones are often seen as a cure-all remedy to the problems developing economies encounter when trying to attract FDI. However, the reality is that such projects need careful planning and long-term support if they are to fulfil such wishes. A report published by fDI Magazine, and featured online – fdiintelligence.com – covers the topic quite comprehensively. While the article it is titled ‘Free Zones’ it’s not quite certain whether all developments sited follow the same business model. Nonetheless it provides some interesting insight to developments across the globe. Of particular interest for Africa are references to developments in Rwanda, Botswana, and the Gambia. In the case of the latter, the Gambian government’s decision to legally enable companies to operate as standalone zones, whereby businesses are permitted to enjoy the benefits of being a ‘free zone’ entity without having to establish in the country’s business park, could enable Gambia to attract investors who wish to have a greater degree of choice over the location of their premises.

Some of the key messages of the article come in the form of cautionary’s –

“the ‘build it and they will come’ assumption over SEZs will not guarantee investor interest”

“while governments are quick to launch them with great fanfare, a lack of on-going support afterwards hinders the zone from developing to a competitive and world-class standard…many projects remain just that – a project”

“while the idea of clustering several companies from a few specific sectors sounds promising on paper, in practice this can be detrimental to foreign enterprises”.

Read the full report here!

sez-figure-1The Minister of Trade and Industry, Dr Rob Davies says ten potential Special Economic Zones (SEZs) have been agreed upon with provinces. He told the Portfolio Committee on Trade and Industry in Parliament on Friday, that these potential SEZs must still go through a feasibility study to determine their viability. The Department of Trade and Industry was presenting the Special Economic Zones (SEZs) Bill to the Portfolio Committee.

The main objectives of the SEZ Bill, amongst others, are to provide for the designation, development, promotion, operation and management of Special Economic Zones; and to provide for the establishment of the Special Economic Zones Board. The SEZs are designed to promote socio-economic benefits and creation of decent work.

The purposes of the SEZs include facilitating creation of an industrial complex with strategic economic advantage for targeted investment and industries in manufacturing sector and tradable services. This will also focus on developing infrastructure to support development of targeted industrial activities and attracting foreign and domestic direct investment.

There are different categories of the SEZs that South Africa will make use of, namely:

  • A free port;
  • A free trade zone;
  • An industrial development zone; and
  • A sector development zone.

Hopefully Trade and Industry will clarify for both public and investors the differentiation between the four options. From a Customs and Tax perspective there could be divergent legal requirements, formalities and processes. The sooner that this can be finalised all the better for the various ‘zones’ to commence with their vigorous marketing campaigns.

Davies told the Committee that the Industrial Development Zones (IDZs) will continue to be one of the elements of the Special Economic Zones (SEZs). The IDZ programme was initiated in 2000 and four zones were designated, with three currently operational: Coega (Port Elizabeth), East London and Richards Bay. The IDZs including the current ones are types of the SEZs and once the new the Act is passed they will form part of the Special Economic Zone programme, according to the minister.

The existing industrial development zones (IDZs) were beginning to gain traction because of the way they were managed and promoted. He cited the example of the East London IDZ, which had a private sector investment of R600 million in 2009 compared to R4bn in 2012/2013.

Work under the current IDZ regulations include the Saldanha Bay which is about to be designated. The Saldanha Bay Feasibility Study published in October 2011, found that there was sufficient non-environmentally sensitive land upon which an IDZ development could take place. Total direct and indirect jobs are expected to amount to 4 492 in the first year, 8 094 in the second year, 7 274 in the third year, 10 132 in the fourth year and 14 922 in the fifth year. From the seventh year around 14 700 direct and indirect jobs would be sustained in the province as a result of the IDZ. Saldanha Bay is an ideal location for the development of an Oil & Gas and Marine Repair Cluster. The Port of Saldanha Bay is also competitively located between the oil and gas developments on the West Coast of Africa, as well as the recent gas finds on the East Coast of Africa.

The SEZ bill would provide a legal framework for the zones and for granting special incentives for businesses operating there such as duty free inputs. He said major areas of agreement had been reached between business‚ labour and community representatives in the National Economic Development and Labour Council. Labour wanted to have three Nedlac representatives on the 15 member SEZ boards and the department had agreed to this on condition they met the criteria in terms of qualifications and knowledge. Nine representatives would be from government and there would be three independent experts.

Business argued against municipalities having the right under the bill to propose SEZs as it said this was not their core business and they lacked the capacity for this. The department however decided to retain this clause‚ October said‚ because there were municipalities which did have this capacity and in any event the applications for SEZs would undergo rigorous evaluation.

The department also decided to go ahead with the idea of these SEZs being operated on a triple PPP basis (public private partnerships) even though labour disapproved of this on the grounds that it would be a form of private ownership. Sources: Engineering News & businessnews.howzit.msn.com

Oliver Reginald Tambo International Airport (east of Johannesburg) to become Africa's first aerotropolis

Oliver Reginald Tambo International Airport (east of Johannesburg) to become Africa’s first aerotropolis

The Gauteng Provinicial government has announced that Africa’s busiest airport, OR Tambo International Airport is set to become the location for the continent’s first aerotropolis. Work on the development of the aerotropolis, centred at OR Tambo International Airport, seeks to leverage public and private sector investment at the airport and surrounding areas. In supporting industrial development in this precinct, approval has been granted for the creation of an Industrial Development Zone (IDZ) in the area surrounding the airport. Heard this all before, but what’s different this time around?

An aerotropolis is an urban plan in which the layout, infrastructure, and economy is centered around an airport, existing as an airport city. It is similar in form and function to a traditional metropolis, which contains a central city core and its commuter-linked suburbs.The term was first proposed by New York commercial artist Nicholas DeSantis, whose drawing of a skyscraper rooftop airport in the city was presented in the November 1939 issue of Popular Science.The term was revived and substantially extended by academic and air commerce expert Dr. John D. Kasarda in 2000, based on his prior research on airport-driven economic development. Wikipedia

Jack van der Merwe, who successfully oversaw the development of the Gautrain project, has been appointed to lead the initiative of developing the aerotropolis. The proposal for the airport to become a terminal city with air, rail and road networks fuelling economic development. It is envisaged to include a commercial component, hotel, conferences, exhibitions and a residential component.

One of the key initiatives of the national government is the e-Thekwini-Free State-Gauteng freight and logistics corridor, known as the Strategic Infrastructure Project 2 (SIP2), which seeks to improve the movement of goods from the Durban port to Gauteng, and to business enterprises nationally as well as in southern Africa.

City Deep/Kazerne cargo terminals and the planned Tambo-Springs Freight and Logistics Hub are to be the focal points for the movement of goods for the export market. Phase 1 of the City Deep/Kazerne Terminal expansion and roads upgrade was underway at the continent’s largest and busiest in-land container terminal. This includes a redesign and upgrading of the roads network in and around the City Deep Terminal to provide for better flow of freight traffic and linkages with the national highways – the cost of the road works would amount to R122 million. At some point the issue of non-tariff barriers to import/export trade will need to be discussed…..and overcome.

Transnet has completed the first phase in the actual improvements of the terminal. It will be investing R900 million in upgrading the terminal. A detailed road design work, including feasibility studies and the development of a master plan, are underway for the Tambo-Springs Inland Port. Now, we’re talking…….

Gauteng  Province is to get 2 484 new modern trains as part of the Passenger Rail Agency of South Africa (PRASA) rolling stock for fleet recapitalisation and refurbishment programme.

The province will be making major investments in road infrastructure in the coming financial year and these include reconstruction and upgrading of the R55 (Voortreker Road) to a dual carriageway road between Olievenhoutbosch and Pretoria West; rehabilitation of the remaining section between Main Road and Maunde Street in Atteridgeville; reconstruction and upgrading of William Nicol Drive (K46) between Fourways and Diepsloot as well as reconstruction and improvement of the remaining section of the Old Pretoria to Cullinan Road between the Chris Hani Flats and Cullinan, among others. Wow, and the toll fees?

The department has been allocated a budget of R4.77 billion for the 2013/14 financial year. Of this amount R1.4 billion has been earmarked for roads maintenance and upgrading, R1.7 billion for public transport operations and R802 million for the running cost of the Gautrain Management Agency. Source: EngineeringNews

So, all-in-all, the above together with other recent noises of incentives and benefits for foreign and local investors in SEZs, the future holds some promise and interest…..

The Port of Kingston – ripe for development

The Port of Kingston – ripe for development

The Government of Jamaica has revealed ambitious plans to turn the Caribbean island in to a global logistics hub – and high level talks have already begun with the aim of increasing volumes of sea cargo.

Projects under discussion include developing the Port of Kingston ahead of the expansion of the Panama Canal and the development of a new commodity port to be built in eastern Jamaica which will specifically handle petroleum products, coal, minerals and grain.

At the same time, there is talk of constructing an air cargo airport to help with increased volume of boxes and the construction of large scale ship repair docks to service the increasing volume of post-panamax vessels.

Dr Eric Deans, chairman of the Logistics Task Force, said a market of 800 million people, including the USA and Brazil, can be accessed readily from Jamaica. He said trade opportunities are due to “burst wide open with the expansion of the Panama Canal scheduled to be completed in 2015; the multi-billion stimulus package by Brazil for World Cup 2014 and Olympics 2016; and the growing middle class in Latin America.”

He added that a critical aspect of the global logistics hub initiative is the broadening of bilateral collaborations with Jamaica’s global partners, and encouraging private sector investment and financing through private-public partnerships (PPPs).

Talks regarding the set-up of special economic zones are already underway with local and foreign investors.

The Jamaica Ministry of Industry, Investment and Commerce, which is spearheading the initiative, says that it will help give the country a global logistics supply chain that is able to compete with the likes of Singapore, Dubai and Rotterdam.

Perhaps this initiative could spur on our local authorities to actually move on ‘logistics hubs’ here in South Africa. While the huge expansion plans for our existing harbours, railroads are pursued, it is high time that the likes of Tamboekiesfontein, for instance, and other privately initiated transit hubs are taken seriously, and in an integrated manner to benefit commerce and trade in the Southern African region.

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Lagos Free Trade Zone

Lagos Free Trade Zone

So how come FTZs, IDZs, EPZs, etc are working in other African countries and not here in South Africa? This Day Live (Nigeria) offers some of the critical success factors which delineate such zones from the normal economic operations in a country. Are we missing the boat? The extent of economic and incentive offering can vary substantially between the different economic and trade zone models – some extremely liberal while others tend to the conservative. Obviously the more liberal and free the regulations are the more stringent the ‘guarantees’ and controls need to be. However, in today’s e-commercial world, risk to revenue can more than adequately be mitigated and managed with through risk management systems. Manufacturing and logistical supply chain operations are likewise managed in automated fashion. I guess the real issue lies in governments appetite for risk and more particularly its willingness to relax tax and labour laws within such zones. Furthermore, a sound economic roadmap demonstrating backward linkages to the local economy and outward linkages to international markets must be defined. Herein lies some of the difficulties which have plagued South African attempts at such economic offerings – no specific economic (export specific) goals. Limited financial/tax incentives for investors, and poor cooperation between the various organs of state to bring about a favourable investment climate.

Free Trade Zones (FTZs) are at the crux of the growth attributed to emerging markets. All the BRIC nations have used the FTZs as a buffer to economic meltdown particularly in the wake of the most recent financial and economic crises. The “great recession” of 2007 – 2009 saw the BRIC nations growing at the rates of 7% to 13%. Consequently, the importance of FTZs as well as maximizing opportunities therein cannot be over-emphasized. The literature defining FTZs vary, but they all have the following characteristics in common:

  • A clearly delimited and enclosed area of a national customs territory, often at an advantageous geographical location, with an infrastructure suited to the conduct of trade and industrial operations and subject to the principle of customs and fiscal segregation.
  • A clearly delineated industrial estate, which constitutes a free trade enclave in the customs and trade regime of a country, and where foreign manufacturing firms, mainly producing for export, benefit from a certain number of fiscal and financial incentives.
  • Industrial zones with special incentives set up to attract foreign investors, in which imported materials undergo some degree of processing before being re-exported.
  • Fulfilling their roles in having a positive effect on the host economy, regulators look at FTZs from a nationalist perspective. Inevitably, they seek the following benefits:
    • Creating jobs and income: one of the foremost reasons for the establishment of FTZs is the creation of employment.
    • Generating foreign exchange earnings and attracting foreign direct investment (FDI): measures designed to influence the size, location, or industry of a FDI investment project by affecting its relative cost or by altering the risks attached to it through inducements that are not available to comparable domestic investors are incentives to promoting FDI. Implicit in this statement lies the definition of FTZ. Other traits that are recognizable when discussing FDI’s include specially negotiated fiscal derogations, grants and soft loans, free land, job training, employment and infrastructure subsidies, product enhancement, R&D support and ad hoc exceptions and derogations from regulations. In addition to FDI, by promoting non-traditional exports, increased export earnings tend to have a positive impact on the exchange rate.
    • Transfer of technology: trans-national corporations (TNCs) are a dominant source of innovation and direct investment by them is a major mode of international technology transfer, possibly contributing to local innovative activities in host countries. It is a government’s primary obligation to its citizenry to provide attractive technology, innovative capacities and mastering, upgrading, and diffusing them throughout the domestic economy. Nevertheless, through national policies, international treaty making, market-friendly approaches, a host country gravitates from providing an enabling environment to stronger pro-innovation regimes that perpetually encourage technology transfer.

FTZs can be both publicly (i.e. government) and or privately owned and managed. Governments own the more traditional older zones, which tend to focus more on policy goals that are primarily socio-economic. They emphasize industry diversification, attracting FDI, job creation and the like. Privately-owned FTZs have the advantage of eliminating government bureaucracy, are more flexible, and are better prepared to deal with technological changes. The global trend towards privatization has made privately-run zones more popular and a number are highly successful. The role of government in the case of privately-run zones is to provide a competitive legal framework with attractive incentive packages that meet the World Trade Organization (WTO) requirements.

FTZ Operations in Nigeria

FTZs were established in 1991 in order to diversify Nigeria’s export activity that had been dominated by the hydrocarbon sector. By 2011, there were nine operational zones; ten under construction; and three in the planning stages. The governing legislation includes the Nigeria Export Processing Zones Act (NEPZA) and the Oil and Gas Export Free Zone Act (OGEFZA). Zones may be managed by public or private entities or a combination of both under supervision of the Authority. For the full article go to – This Day Live

Saldanha Bay IDZ?

November 25, 2012 — Leave a comment

Its difficult not to be cynical…..after several failed and half-baked attempts at IDZs whats different about this one? Have the labour and tax issues changed?

A 60 day public consultation period for the designation of an Industrial Development Zone (IDZ) in Saldanha Bay has begun. Members of the public can make use of this opportunity to voice their opinions on the proposed vision for Saldanha Bay as presented in the Application for IDZ Designation and Operator Permit for the Saldanha Bay IDZ document gazetted earlier last week. View the document here!

Collaboration between government, citizens and business is necessary to build a Western Cape that is a better place to invest, to do business, get a job and earn a living, for everyone. Saldanha Bay has long been acknowledged as an important resource for the sustainable growth and development of the West Coast region, and indeed, the whole of the Western Cape.

All indicators show that an Industrial Development Zone in Saldanha Bay would be to the benefit of the Western Cape, South Africa and the African continent as a whole in creating a functional, self-sustaining industry that contributes to economic development and sustainable employment. The Saldanha Bay Feasibility Study published in October 2011, found that there was sufficient non-environmentally sensitive land upon which an IDZ development could take place.

After a process of consolidation into an attainable business plan focussing on the Oil & Gas and Marine Repair Cluster, the socio-economic impacts were found to be that after 20 years, an IDZ in Saldanha Bay developed around these industries, would generate a minimum annual return of R11 billion for the economy and create over 25 000 sustainable jobs nationally.

The total contribution to GDP for the IDZ is expected to amount to R3.4 billion in the first year, increasing to nearly R6 billion in the second year. In the third year the contribution is expected to be slightly lower at R5.5 billion due to a decrease in capital spend, but then increasing by the twentieth year with a total annual contribution to GDP amounting to R11 billion.

Total direct and indirect jobs in the Western Cape are expected to amount to 4 492 in the first year, 8 094 in the second year, 7 274 in the third year, 10 132 in the fourth year and 14 922 in the fifth year. From the seventh year around 14 700 direct and indirect jobs would be sustained in the province as a result of the IDZ.

Saldanha Bay is an ideal location for the development of an Oil & Gas and Marine Repair Cluster. The Port of Saldanha Bay is also competitively located between the oil and gas developments on the West Coast of Africa, as well as the recent gas finds on the East Coast of Africa. South Africa is a significant industrial economy in the sub Saharan region and is logistically well connected to the region. It is therefore a natural location for providing repair and maintenance services, warehousing and logistics and professional/technical services where proximity to end location is an advantage. Source: Western Cape Minister of Finance, Economic Development & Tourism

Special Missing Zones

October 28, 2012 — 1 Comment

Since the publication of the draft bill, there has been much comment on the advantages and disadvantages of the new Special Economic Zones (SEZ) policy and process in the country. Given the renewed emphasis in economic policy debates on industrial policy and regional integration in the wider Southern Africa context, the article “Special Missing Zones in South Africa’s Policy on Special Economic Zones“, published by Tralac, serves to add to the debate by introducing some hitherto neglected aspects pertinent to the debate on the subject.

A good companion to this article (and perhaps essential prior reading) is the CDE’s “Lessons for South Africa from international evidence and local experience” which I posted on 31 May 2012 (see link under related articles below). There has essentially been little movement on the subject, yet it is clear that South Africa is losing lucrative opportunities in the global warehousing and distribution business to its neighbours. Unless government acknowledges that it has to involve business in the creation of such SEZ’s, the white elephant syndrome which befell IDZs will no doubt plague the latest programme.

 

News from Angola

June 17, 2012 — Leave a comment
SEZ for Cunene Province

The government of Cunene province in southern Angola, has chosen the border town of Calueque, in Ombadja municipality, to set up the province’s Special Economic Zone (ZEE), the province’s governor, António Didalelwa said in Ondjiva speaking to Angolan news agency Angop. At the end of a meeting of the provincial government, the governor said that Calueque had been chosen due to its potential to drive agri-livestock activities based on the Cunene River’s hyrodgraphic basin and the Calueque hydroelectric facility. Its proximity to Namibia, its conditions in terms of available electricity and water, as well as access roads make it possible to set up economic and administrative facilities in order to drive production and job creation. The entities that attended the provincial government meeting concluded that the existing conditions at the new ZEE would attract investments and drive production by installing factories, retail and services areas. This follows last year’s fomalisation of the Luanda-Bengo Special Economic Zone (SEZ) between the towns of Viana and Cacuaco in Luanda province and the towns of Icolo-e-Bengo, Dande, Ambriz and Namboangongo in Bengo province. Watch a short video on the Luanda-Bengo ZEE here! Source: Macauhub.com.

Customs Modernisation

The Programme to Expand and Modernise Customs Services (PEMA) in Angola, which began in 2002 and officially ended Monday 21 May, cost US$315.5 million, Angolan weekly newspaper Expansão reported. The newspaper added that in a 10-year period the PEMA had led to US$17.7 billion going to the State’s coffers and thus the cost of the programme was just 1.8 percent of the revenues that it had made possible.

During the ceremony to mark the end of a partnership with Crown Agents, a UK company that specialises in modernising public services, the assistant director general of the National Customs Service, Maria da Conceição Matos, said that whilst the programme was being implemented customs revenues had increased steadily and significantly. Matos said that the Programme for Expansion and Modernisation of Customs Services had reformed the institution structurally across the whole of Angola, based on international best practices for the customs sector.Source: Macauhub.com.

A bold paradigm shift in South Africa’s economic policy is required to ensure the success of the country’s new special economic zones (SEZs) programme, according to Centre for Development and Enterprise (CDE) executive director Ann Bernstein.At the launch of the new CDE report on SEZs, she explained that South Africa’s current economy favoured skill and capital-intensive industry, which was not making the cut in terms of job creation.

“South Africa needs to create the right kind of environment for the emergence of businesses that can employ large numbers of unskilled people. That is what we should use the SEZs to do.“This will require bold leadership and engagement with the difficult choices on labour costs and flexibility that must be made. The alternative is to waste resources and energy yet again on a policy that fails,” Bernstein urged.

The report, titled ‘Special Economic Zones: Lessons for South Africa from international evidence and local experience’ suggested that South Africa should establish at least two large SEZs that were focused on low-skill, labour-intensive industries such as the clothing and textile sectors and enable them to compete globally. “Without reform, the only way South African companies can compete with Chinese, Vietnamese and Indian companies is by mechanisation, which results in fewer people being employed, and a greater reliance on skills,” Bernstein pointed out. “International evidence shows that the most successful SEZs were public–private partnerships,” Bernstein noted. Further, the report showed, as recognised by government, that South Africa’s industrial development zones (IDZs) that include Coega, East London and Richards Bay, had largely failed to boost economic growth, create jobs, promote industrialisation or accelerate exports.

Bernstein attributed this to the lack of a clear definition for what these zones should entail, as well as a strategy for attracting investors. “The IDZs are basically just industrial parks – it’s no wonder they have not been successful in attracting new investors and creating jobs.” Although the Department of Trade and Industry (DTI) had spent R5.3-billion on developing these zones, the vast majority of the 33 000 jobs created were short-term construction jobs, with only 5 000 permanent jobs created.

Bernstein said countries such as China, Costa Rica, Mauritius and Latin America countries could be viewed as benchmarks for South Africa in terms of IDZs. Rising costs in Asia, especially China, where labour-intensive firms were looking for new regional locations, were creating opportunities for IDZs in South Africa. The CDE argued that South Africa should seize the opportunity to compete for a sizable portion of the jobs that could sprout from this.

“A bold new SEZ strategy could become a platform for new companies and new investors that use unskilled labour rather than machines,” Bernstein indicated. “South Africa’s new SEZ programme needs to be a presidential priority. The DTI needs to be fully supported by all other departments of government. Unless the whole of government gets behind the effort, we’re not going to see the kind of investor uptake that would actually make a difference,” CDE research and programme director Antony Altbeker said. Trade and Industry Minister Rob Davies is set to table the draft SEZ Bill in Parliament later this year, while Finance Minister Pravin Gordhan announced that R2.3-billion would be allocated to the establishment of SEZs were in the 2012/13 Budget.

However, the CDE’s report warned that the Bill provided no clarity about what would differentiate SEZs from industrial parks, its envisaged governance arrangements for SEZs was confusing and said the role of the private sector was unclear. Source: Engineering News

A state-owned enterprise, the Mafikeng Industrial Development Zone (MIDZ), once mooted as an industrialisation solution and economic booster for the province, has been dissolved. The failure of the industrial development zone was confirmed at the weekend following a review by the provincial government of state-owned enterprises in the North West. Established in 2000, the development zone was said to have the potential to industrialise the North West, starting in Mafikeng with a staggering R7bn turnover, once the entity was operational.

However, it got off to a rocky start and has for the past several years been dormant despite having millions of rands pumped into its coffers. But it turned into a white elephant.Provincial government spokesperson Lesiba Kgwele said: “The decisive resolve to wind down the development zone was taken because the organisation was technically insolvent as its liabilities had exceeded its assets.”

He pointed out that an administrator had been appointed and former MIDZ CEO Tebogo Kebotlhale’s contract had recently been terminated. After the appointment of a caretaker administrator on January 18, the contract of its former CEO, who had been on suspension from April 2011, was terminated on February 29. The provincial government had noted that besides the completion of the first phase of the development amounting to R126m, the entity has not achieved any of its strategic intents.The entity was intended to design, build, operate and manage a world-class industrial development zone from the Mafikeng Airport. It was supposed to establish viable investment opportunities and recruit potential public and private investors, but the entity failed.

As part of the winding down process, assets belonging to the zone, irregular payments, verification of past salary adjustments and overpayments to staff are to be recovered. For instance, a bio-diesel project started on the outskirts of Mafikeng was a huge flop as the jatropha plants never left the nursery and the site currently resembles a wasteland.

Democratic Alliance provincial leader Chris Hattingh said the MIDZ was a waste from its inception. “The entity should never have been started and should have been closed at least six years ago. It received millions for nothing and has only succeeded in downgrading a Grade 7 airport to Grade 1 standards, making it equal to a farm airstrip,” he said. Source: The New Age

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Dubai Airport Free ZonefDi Magazine’s first global ranking of economic zones has awarded Shanghai Waigaoqiao Free Trade Zone the title of Global Free Zone of the Future 2010/11.

Shanghai Waigaoqiao Free Trade Zone (WFTZ), the largest free-trade zone in China, has been recognized by fDi Magazine as the ‘Global Free Zone of the Future 2010/11’. This is in part due to the large number of companies that have set up operations in Shanghai WFTZ; more than 9000 companies – accounting for one-third of all foreign companies moving into Shanghai – have set up in this zone. Shanghai WFTZ also came top in the categories of ‘Best Facilities’ and ‘Best Port Zone’.

Economic zones based in the United Arab Emirates dominated the Free Zones of the Future 2010/11 ranking, with seven of the top 25 zones coming from the UAE. Not only did Dubai Airport Free Zone rank as second overall, it also ranked second in the ‘Best FDI Promotion Strategy’ and ‘Best Transportation’ categories.

The top three in the ‘Best Economic Potential’ category was led by the city of San Luis Potosi in Mexico, followed closely by Industrial Estates in Thailand and the Jebel Ali Free Zone in the UAE. Clark Freeport in the Philippines, Togo Export Processing Zone, and Chittagong Export Processing Zone in Bangladesh were the top three in the ‘Best Cost Effectiveness’ category.

fDi Magazine’s rankings, which took more than four months to compile, ranked eight UAE zones in the ‘Best Transportation’ top 10, with Jebel Ali Free Zone and Dubai Airport Free Zone taking the top two positions and Dubai Media City and Dubai Knowledge Village ranking joint in third position. Dubai Media City, Dubai Airport Free Zone and Dubai Knowledge Village also claimed the top positions in the ‘Best FDI Promotion Strategy’ category.

The independent judging panel scored Dubai Knowledge Village, Dubai Media City and Ajman Free Zone (UAE) as the top three zones in ‘Best Incentives’.

South Carolina Foreign Trade Zones 21 & 38, topped the ‘Best Airport Zone’ category, followed by Aqaba Special Economic Zone (Jordan), Tanger Free Zone (Morocco), El Paso FTZ 68 (US) and Bahrain International Airport. Source: FDIntelligence.com