Government SEZ Bill will support economic growth and opportunities

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

SACU’s Choice – ‘Common policy or irrelevance’

imagesCA31PQJGThe Minister of Trade and Industry, Dr Rob Davies briefed the Parliamentary Portfolio Committee on Trade and Industry regarding the progress on the implementation of the five-point plan in Cape Town. This is a work programme which was approved by the 2nd Southern Africa Customs Union (SACU) Summit convened by President Zuma in 2011 premised on the following pillars;

  1. Work programme on cross-border industrial development;
  2. Trade facilitation;
  3. Development of SACU institutions;
  4. Unified engagement in trade negotiations and
  5. The review of the revenue sharing arrangement.

The five-point plan emerged from realization by SACU Member States of a need to move SACU beyond an arrangement held together only by the common external tariffs and the revenue sharing arrangement to an integration project that promotes real economy development in the region.

Minister Davies noted that progress on the implementation of pillars of the five- point plan is uneven. SACU has registered good progress on trade facilitation and there is greater unity of purpose in negotiations with third parties (Economic Partnership Agreement (EPA), SACU-India and Tripartite Free Trade Area).

However, there is limited progress on the review of the revenue sharing arrangement and hence lack of adequate financial support for the implementation of cross-border industrial and infrastructure development projects. The SACU revenue pool is raised by South Africa from customs and excise duties. Mr Davies told MPs that in 2013-14 the total disbursement from the revenue pool would be about R70bn of which the BLNS countries would receive about R48bn. There is also lack of progress on the development of SACU institutions as a result of divergences in policy perspectives and priorities of Member States.

Enabling provisions provide for the establishment of National Bodies and a SACU Tariff Board. The SACU Tariff Board will make recommendations to Council on tariffs and trade remedies. Davies added that, until these institutions are established, functions are delegated to the International Trade Administration Commission (ITAC) in SA.

The minister warned that the lack of agreed policies would hinder effective decision-making on regional integration and industrialisation, which had made little progress since the 2011 summit convened by President Jacob Zuma. South Africa believes SACU needs to move “firmly towards a deeper development and integration”.

Minister Davies said SACU risked becoming “increasingly irrelevant” as an institution if it did not develop beyond operating a common external tariff, and a “highly redistributive” revenue-sharing arrangement. The lack of progress in developing new SACU institutions was primarily due to policy and priority differences among members. “Against this background South Africa needs to reassess how best to advance development and integration in SACU.”

Among the disagreements on tariff setting between South Africa and its neighbours highlighted by Mr Davies, was that South Africa saw tariffs as a tool of industrial policy while they regarded them as a means of raising revenue. For example, the other Sacu members wanted to include the revenue “lost” on import tariff rebates offered by South Africa into the revenue pool.

The pool provides these countries with a major source of their national budget. Rebates were seen as revenue foregone for which additional compensation should be sought. South Africa, on the other hand, argues that the rebates (for example on automotive imports) are part of its total tariff package and serve to attract investment and boost imports and therefore, contribute to expanding the revenue pool, not diminishing it.

He emphasised the development of a common approach on trade and industrial policy as the prerequisite for establishing effective SACU institutions in future.

He highlighted that a discussion on appropriate decision-making procedures on sensitive trade and industry matters that takes into account SACU-wide impacts is required. Source: The Department of Trade & Industry, and BD Live.

Mafikeng IDZ fails!

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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SA auto industry to gain from 2013 policy shift

Trade remedies are by their very nature complex and most often ill-thought-out. This is said not so much from an entity whom gains to benefit from such an incentive scheme but more from an administrative and compliance perspective. These schemes require more than your average customs and trade consultant; someone who in fact not only knows  customs and trade law very well, but the motor industry as well. Similarly, on the side of the administrating authority an equally adept and experienced team is required to audit this process. I would like to believe that every attempt has been made to ensure that clear legal and procedural guidelines are in the offing, compared to the current MIDP process. On the other side of the coin, exactly how will the local community benefit from the ‘auto cartel’s’ new fortune? Based on SARS recent publication of its Compliance Programme it is noted that the tobacco and textile industries are singled out for scrutiny. Has the motor industry been purposely overlooked?

The SA motor industry stands to benefit from the introduction of a new programme next year, which will affect firm-level strategies, according to Standard Bank research analyst, Shireen Darmalingam. The Automotive Production Development Programme (APDP) aims to raise volumes to 1.2 million vehicles produced per annum by 2020, and to diversify and deepen the components supply chain. The new programme replaces the Motor Industry Development Programme (MIDP), which has been in existence since 1995. The soon-to-be phased out programme centred, among other things, on encouraging motor vehicle and component exports by allowing duty-free imports or reduced import tariffs, depending on the level of local content of exports.

Darmalingam said the replacement of the MIDP should not be viewed as a failure but rather as a point from which to move on and encourage further development of the SA motor industry. She said the APDP would offer the local automotive industry a sense of certainty through to 2020, which should encourage further growth.

“Whether the APDP will benefit certain industries more than others is still a contested question. Indeed, it appears that some benefits may be in favour of larger firms. Nonetheless, all firms are in line to benefit from the new APDP programme.” She said there was a concern that multinational companies were choosing to source leather products from suppliers closer to the major markets. She added that there was a further concern that the APDP, which aimed to provide a production incentive rather than an export incentive, might impact negatively on export-orientated component companies such as those in the leather sector.
However, she said sectors that supplied the aftermarket should benefit from the shift in policy, from MIDP to APDP, due to be implemented from January next year. Source: Business Live