Ferial Haffajee
Here’s the dream: industrial development zones (IDZ) will bring prosperity to some of the country’s poorest areas, where new industries will fuel the renaissance of the economy as exports grow. An advanced labour relations system will solve disputes in record time as thousands of workers will be trained to service new industries.
Here’s the catch: in developing countries, export processing zones have become shorthand for sweat shops and tax holidays for rapacious foreign investors, where very little is poured back into the host economy. On top of that, South Africa lives with a legacy of bantustan economics, where companies were lured to remote areas with lavish payouts and subsidies to service apartheid’s politics of dislocation.
Either way, the IDZ is an acronym to get used to. These zones will be located in spatial development initiatives like the Maputo Corridor. The government is pinning its hopes on the two industrial strategies to provide the jobs promised in the growth, employment and redistribution strategy (Gear).
While there has been small economic growth, jobs have been shed in the formal economy. The public works programme has not provided enough sustainable work, and IDZs apparently have the capacity to create many more. Between 80 000 and 120 000 high-skill, high-wage jobs are early predictions, says the government.
Alistair Smith of the Department of Trade and Industry says zones are planned for Richards Bay, Saldanha, East London and Durban to encourage export production.
The government is punting local zones, which are quite different from their nefarious Asian counterparts. In the home brew, all existing labour and environmental laws will apply; so will all international standards to which South Africa has committed itself.
“IDZs will facilitate advanced labour relations and develop human resource capacity,” says Smith, a former unionist. Wage agreements will also apply in the zones, although the jobless are likely to accept lower pay scales. The government will help fast-track labour disputes to resolve them quickly.
The International Labour Organisation has investigated export processing zones in many countries, including Bangladesh, the Philippines, Malaysia, Mauritius, Mexico and Ireland.
“Many of those investigations revealed a troubling situation of poor conditions of life and work, with many young, mainly women workers trapped in low-wage, low-skill jobs,” says Auret van Heerden of the International Labour Organisation.
But while investors first depended on cheap labour and tax holidays, the more successful zones are those in countries with stable and clean governments, highly skilled workers and sound labour relations.
That’s the thinking behind the local IDZs. But is it a case of trying to be all things to all people?
Economist Tony Twine says “it’s important that you don’t drop any industrial and environmental industry standards”, but adds that “labour flexibility” is necessary. “Businnesses face the same regulations wherever they choose to locate to.”
But to secure support from trade unions, this is precisely what the government has had to pledge. Claire Horton, an economic researcher at the National Education Labour and Development Institute, says labour is a bit sceptical about the zones’ ability to create jobs.
There is also concern that incentives in the development zones will encourage the dislocation of the economy as local and foreign capital chase the cutting-edge facilities and duty exemptions on offer.
Horton wants the government to do more homework on the cost of tax holidays, and to investigate whether business would have invested in zone areas without the promise of incentives. Labour is also worried that duty- free imports into the zones should not bleed into the rest of economy.
Incentives do not have a happy history in South Africa. Under the old regional investment develop programme, the government gave subsidies and incentives to companies that moved to the homelands. When the hand- outs were dropped, many shut up shop, leaving vast wastelands behind them.
“They had no sanity, only a political imperative,” says Twine, adding that is why the IDZ idea is likely to run into scepticism. “The IDZs are also politically driven, but not in a nasty sense. They represent a genuine attempt to get a good thing going in areas that are barren at the moment.”