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Special Economic Zones Bill and Policy Outlined

July 25, 2017

Department of Trade and Industry

The trade and industry department has briefed the national assembly’s trade and industry committee on the Draft Special Economic Zones (SEZ) Bill and Policy.

Cabinet approved the SEZ bill and policy for public comment in November last year. They were published in the Government Gazette yesterday.

The department’s delegation, led by the director-general, Lionel October, stressed that public participation on the bill will take place across the country. Initial interactions with provincial governments would also occur to identify possible sites for new zones.

During the briefing, Mr October provided a definition of a SEZ.

“A special economic zone is a geographically designated area of a country set aside for specifically targeted economic activities, which are then supported through special arrangements (which may include laws) and support systems that are often different from those that apply in the rest of the country”.

Essentially, the department regards SEZs as tools for long-term industrial and economic development.

The plan is for the proposed SEZs together with the existing industrial development zones (IDZ) to put in place a sound environment for fixed investment to thrive, both local and foreign.

The current IDZs will continue to operate in tandem with the SEZs.

The policy and bill are also designed to boost regional development and create employment in areas currently lacking meaningful industrial development.

Industrial hubs would be set up in underdeveloped regions.

According to Mr October, SEZs have had mixed success in different parts of the world.

The decision to come up with a policy and bill on SEZs flows from a review of IDZs, set up in South Africa in 2000.

The key difference between SEZs and IDZs is that the latter was focused solely on exports and hence located near ports and airports whereas SEZs have a wider industrial development objective and can be located anywhere.

Mr October admitted that the IDZ programme had not been as successful as originally intended. Total investments of over R11 billion had only resulted in the creation of approximately 33 000 jobs.

Recent changes in the economic context such as the rise of the BRIC countries also necessitated a shift towards the SEZ programme.

The SEZ policy and bill aim to:

• Put a governance framework in place to improve management of zones
• Expand range of support measures
• Ensure a long-term financing framework to attract long-term investment
• Contribute towards industrial development
• Establish an SEZ board to advise the minister
• Establish an SEZ fund to back-up incentives

Mr October also pointed out that a national marketing strategy would be developed to attract foreign investment as well as local business interest.

The envisaged board would also consist of key players such as Eskom, Transnet, the trade and industry department, national treasury and the South African Revenue Service.

The board would strive to ensure that co-ordination between the public and private sectors was achieved. The three tiers of government will also have to work together.

The industrial policy action plan calls for state investment in infrastructure while supporting private sector investment. The SEZ programme will fall into line with this directive.

Mr October added that negotiations with national treasury were ongoing to determine the amount of financial support that could be provided in the form of incentives.