Doubts over economic zones Bill

A Special Economic Zones (SEZ) Bill was gazetted for public comment this week by the department of trade and industry, but critics say it offers little detail or structure and it is not clear what the government’s policy actually is.

The SEZs are meant to replace the widely criticised industrial development zones (IDZs), which the department acknowledged at a press briefing this week had problems.

“It was felt that more could have been achieved,” said Rob Davies, the minister of trade and industry. The special economic zones, he said, were motivated by the desire to address these challenges “urgently”.

In a review process, the department found that the IDZ programme, which focuses on export goods, had several shortcomings, including a weak policy and legislative framework, poor institutional and governance arrangements, funding mechanisms that did not meet the financial resource needs of the IDZs, a lack of programme definition and strategic direction, and poor co-ordination and integration.

The Bill details how a board will be structured and “advise the minister on policy and strategy to promote, develop, operate and manage special economic zones”.
It says the minister must determine policy and strategy for these zones after considering the advice of the board. The minister must also establish a special fund, with the approval of the minister of finance, and make regulations for it.

The Bill says only the government or a public-private partnership can apply for an area to be designated as an SEZ. It says only the minister can determine and implement incentives, but gives no indication what kind of encouragement could be on the table.

But at the media briefing Davies said that incentives such as tax breaks were being considered.

Tim Harris, the Democratic Alliance’s spokesperson on trade and industry, praised the framework as “well-designed industrial policy”.

He said the new Bill was a positive step, especially because “it is an admission by the minister that the IDZs are not good enough and don’t make us internationally competitive enough”.

But a major problem with the Bill, Harris said, was that it prescribed nothing and left almost everything in the hands of a board. Tax breaks needed serious consideration as the focus on infrastructure provision for the IDZs had not appealed to investors, he said.

Another bone of contention is labour reform, such as relaxing wage requirements to ensure a higher employment rate.

Harris said the department was avoiding the issue. Other incentives might attract investment but the SEZs would then never offer a meaningful solution in themselves to the unemployment problem.

But a source said that the department had made it clear that it did not want industrial policy to go in the direction of wage relaxation. Instead it wanted to push for better-paid, capital and skills-intensive jobs.

With so much yet to be outlined, it is feared the SEZs may just be a tweaked version of the existing, flawed IDZ model.

Lisa Steyn

Lisa Steyn

Lisa Steyn is a business reporter at the Mail & Guardian. She holds a master's degree in journalism and media studies from Wits University. Her areas of interest range from energy and mining to financial services and telecommunication. When she is not poring over annual reports, Lisa can usually be found pottering about the kitchen. Read more from Lisa Steyn

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