Johannesburg - South Africa’s burgeoning industrial development zones (IDZs) could add weight to the government’s new strategy of generating five?million jobs over the next decade by growing the economy at a phenomenal 7% a year during this period.
This is the view of Ike Nxedlana, the chief executive of the Richards Bay IDZ, and industry analyst Laura Peinke. They both argue that IDZs have the potential to be growth engines if the government moves quickly to develop a clear IDZ policy, which then could be aligned with the country’s industrial strategy.
Nxedlana says four of the six industries earmarked by the state for greater attention – infrastructure, mining and mineral beneficiation, green economy and manufacturing – could be driven by the IDZs.
But he says the absence of an IDZ policy linked to an industrial policy makes it difficult for South African IDZs to compete internationally and creates the impression with foreign investors that local IDZs do not enjoy government support.
“We are nowhere near what are internationally known as export processing zones (EPZs), special economic or free trade zones found in Singapore, India, China or Nigeria,” Nxedlana says.
“For instance, these countries offer very lucrative fiscal incentives such as tax holidays and non-fiscal incentives such as ‘one-stop-shops’ aimed specifically at eliminating red tape and administrative costs.
“Also, the unpredictability of IDZ funding could have easily been addressed had we had an IDZ policy in place. We have a hit-and-miss type of approach to investors, which is not informed or driven at national level.”
South Africa has four IDZs, of which three are operational in the port cities of Richards Bay, East London and Coega near Port Elizabeth. The inland Johannesburg IDZ has yet to take off. They compete for investors with more than 600 IDZs or EPZs across the globe.
Peinke, an analyst for consulting firm Frost & Sullivan, says if the National Treasury, the trade and industry department and the economic development department could co-ordinate their efforts and craft better incentives for the IDZs, South Africa could go a long way towards making a dent in the five?million jobs creation target.
“The target is not impossible but it is going to be difficult to meet,” says Peinke.
“I think over the next five years our IDZ programme is going to be better as new incentives are implemented and the IDZ programme is aligned with the industrial policy.
“Right now the industrial policy action plan released in February does not even mention the IDZs although they were created in the first place to promote industrial development and generate export revenues.”
She adds that South Africa can only achieve the 7% growth target through an export-led industrial strategy in which the sub-Saharan African countries and emerging economies are primary targets for its exports.
Neren Rau, chief executive of the SA Chamber of Commerce and Industry, said last week the government should consider introducing different and more flexible labour laws in the IDZs to make them more attractive to investors. Rau also suggested that foreign investors setting up operations in South African IDZs must be exempted from complying with transformation and BEE policies as they do not understand these policies.
However, local IDZ operators are not sure if a dual labour law regime would work.
“Our neighbours, Zimbabwe and Namibia, have tried to adopt a dual labour system in order to accommodate investors’ demands in their EPZs but they have all failed,” says Nxedlana.
“The International Labour Organisation has warned on numerous occasions that while collective bargaining is uncommon in most EPZs, high labour turnover, absenteeism, stress, low productivity and fatigue are common characteristics of most EPZs.” Special incentives
Ayanda Ramncwana, spokesperson for the East London IDZ, says their industrial zone does not compel its tenants to comply with BEE legislation.
“We do not impose any BEE policies on our investors. However, we assist them in implementing these policies as a competitive advantage in accessing certain markets and benefits,” she says.
Senzeni Ndebele, spokesperson for the Coega IDZ, says the government must consider introducing special incentives for high-impact investments, especially labour-intensive projects that boost rural economies. She says the government must also prioritise establishing transport linkages between the IDZs and the markets that supply them with raw materials and labour.
- City Press
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