SA’s Special Economic Zone programme gains ground

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The Vaal area of Gauteng, which has for years been the hub of the country’s industry, is set to be developed into a Special Economic Zone (SEZ).

Deputy Minister of Trade, Industry and Competition Fikile Majola recently announced that government is powering ahead with plans to designate the Sedibeng area into a Special Economic Zone (SEZ) that will be named the Vaal SEZ. 

Majola told the Sedibeng Investment Conference that the government, through a  partnership with the private sector, is jointly embarking on a journey to reconstruct and reshape the economy of the Sedibeng region. 

Majola said this will bring opportunities to the millions of residents across all three municipalities in Sedibeng. 

The Sedibeng District Municipality, located in the southern part of Gauteng, includes the Emfuleni, Lesedi and Midvaal local municipalities. It accounts for an estimated 33% of the national gross domestic product (GDP).

The announcement by Majola might be encouraging news to residents of the area, which has experienced a slump in its economic fortunes in recent years due to the  decline in the steel industry. It was for a long time a major employer and the backbone of the local industry.

Statistics SA noted in its Quarterly Labour Force Survey for the second quarter of this year that the number of employed persons decreased by 54 000 to 14.9-million. It said that the number of unemployed persons increased by 584 000 to 7.8-million compared to Q1: 2021. During the same period Stats SA announced that the unemployment rate had risen to 34.4%.

Majola said the DTIC is fully committed and is behind the Gauteng government’s “plan to introduce SEZs where feasible and necessary, to add momentum towards turning the Gauteng City Region into a single, multi-tier and integrated SEZ”. 

Majola said the government is positioning the Sedibeng region as a leading market for business and investments.

”Construction of factories and other supporting industrial infrastructure such as the extension of rail and road infrastructure will also create more jobs for the unemployed. We must forge ahead with the construction of the new economy that will offer new opportunities to all our people. Sharing of wealth and opportunities should be at the top of our agenda,” Majola said.

He further said all spheres of government are working closely on an economic revitalisation programme for the Vaal region, which is linked to the DTIC’s efforts to set up and anchor a revival of the industrial belt in the area through the SEZ and critical infrastructure funding for industrial parks.

“The Vaal area has traditionally been South Africa’s heavy industrial, manufacturing and engineering hub. It remains the iron and steel industrial hub for Southern Africa, albeit at a sharp decreasing rate. It is incumbent upon us to prevent the birthplace of South Africa’s industrialisation from being the rustbelt,” he said.

According to the SA Revenue Services, SEZs “are geographically designated areas set aside for specifically targeted economic activities to promote national economic growth and exports by using support measures to attract foreign and domestic investments and technology”.

According to the World Bank, China has successfully leveraged SEZs for economic transformation and the initiatives have made significant contributions to the country’s economic progress. 

“In recent years, it is estimated that they have accounted for 22% of national GDP, 46% of FDI, 60% of exports, and generated in excess of 30-million jobs. In some regions, industrial parks account for as much as 80-90% of GDP growth. SEZs and industrial parks have also spurred technology and innovation. 

“Overall in China, the contribution of technological development in agriculture stands at 55.2%, while industrial park-based contribution rates reach roughly 70%, nearly the average level for developed nations. China’s overall technology commercialisation rate is only about 10%, but industrial parks in China boast a commercialization rate of over 60%,” the World Bank notes.

The Vaal area has traditionally been the iron and steel industrial hub of Southern Africa, but it is in danger of becoming a rustbelt. (Photo: Gallo Images / Netwerk24 / Felix Dlangamandla)

South Africa has 11 designated SEZs, in Limpopo, KwaZulu-Natal, Eastern Cape, Mpumalanga, Free State and Gauteng.

Earlier this year, during a visit to the Tshwane Automotive Special Economic Zone, President Cyril Ramaphosa announced that since its inception in 2014, government’s SEZ programme has managed to attract R18.6-billion worth of private investment from 136 operational companies.

Ramaphosa said an additional 99 investment expressions of interest by companies worth R48-billion are being considered. He said the government was hoping “to get a large slice of this landed as viable projects, as we work with firms to turn ideas into commercial reality.”

Ramaphosa alluded to the experience from countries such as Malaysia, China and Singapore, saying they have managed to place their economies on sustainable industrial paths and demonstrated the potential of SEZs. “In our own experience, special economic zones have proven to be an effective tool both to enhance our productive capacity and crowd in private sector investment. This includes foreign direct investment, which often involves technology transfer from international companies. This enhances South Africa’s position within global and regional value chains,” Ramaphosa said.

The government says this is part of its efforts “to  transform the economy into a globally competitive industrial economy, built on the full potential of all citizens and regions”.  

The DTIC has announced that to complement its SEZ strategy, a package of tax incentives will be available to companies locating in certain SEZs, subject to specific criteria. 

The DTIC says the tax incentives that companies may qualify for include VAT and customs relief if located within a Customs Controlled Area (CCA), employment tax incentives, abuilding allowance and reduced corporate income tax rates. 

The World Bank advises that requirements for successful SEZs in Africa include the establishment of a legal, regulatory and institutional framework.

It states another requirement as streamlined procedures for registration, licensing, trade logistics and customs clearance to reduce costs of doing business and proper infrastructure, which includes good, reliable and affordable transport, energy, water and telecommunications services. 

Majola alluded to this when he noted that there is a need to bring government and business together to preserve and improve the manufacturing capability of the Vaal region through various government interventions.

Through this model, government aims to accelerate service delivery by providing support and resources to district municipalities. All key stakeholders will pursue industrial, infrastructure, skills development and investments through single and integrated plans per district.