Johannesburg – Draft legislation on special economic zones
is duplicating the mistakes made in respect of Coega, the East London zone,
Richards Bay and the OR Tambo zone, believes a think tank that includes
The draft legislation that Trade & Industry Minister Dr
Rob Davies wants to submit to parliament misses an opportunity to rectify the
mistakes made in respect of the country’s previous four zones, says Jean-Paul
Gauthier, one of the world’s foremost experts on special economic zones.
Special economic zones are globally regarded as a powerful
stimulant for a country’s export capacity and an experimental terrain for economic
development and growth. China’s development, for instance, began in the 1980s
with many such zones being created on its east coast.
Today there are some 3 000 such zones in developing
The main reason for Gauthier’s criticism is that government
officials will still drive the zones and the draft legislation automatically
assumes support from the private sector.
The fact that government is unable to stimulate
private-sector interest in its zones has totally discredited the approach of
government exclusively regulating, developing and operating the zones, said
Gauthier during a round table conference which included 42 local and
international experts. He is deputy secretary general of the World Economic
Processing Zones Association.
Another reason for the failures is that the zones offer no competitive advantage and their
business environments in no way differ from those elsewhere in the economy.
On a list of nine advantages encountered in special zones in
other parts of the world, only two are relevant in South Africa: conditional
exemption from import duty and zero VAT rating.
Special economic zones must be special. What the zones offer
depends on what they are intended for, says the report put together for the
round table conference.
A participant in this meeting, Simphiwe Kondlo, the chief
executive of the East London zone, issued a warning against government
marketing the zones in terms of the new legislation as true special economic
The zones offer investors nothing, he said. They are no
different from ordinary private industrial parks because there are absolutely
no incentives from government, said Kondlo at the meeting.
The only advantage of the East London zone is that it is
right beside Mercedes-Benz’s assembly plant and Mercedes has asked its
suppliers to move there.
Government has already spent R5.3bn on Coega, East London
and ¬Richards Bay. In so doing it drew R11.3bn worth of investment and created
33 000 jobs, but these were mainly short-term positions in the building
None of those involved consider it a success, declares the
Claude Baissac, secretary-general of the World Economic
Processing Zones Association, reckons some zones in South Africa should focus
on labour-intensive industries for low-skilled workers – such as textiles and
footwear – and on other industries in which medium skills are used.
Labour regulation was discussed in depth. Nedbank chief
economist Dennis Dykes said that it was not that labour was too expensive, but
that there were too many concerns deterring investors.
But high public service wages compared with those in the
private sector are distorting the labour market for small businesses.
The international experts pointed out that wages in such
zones are often higher than in the rest of the country because productivity in
the zones is usually higher.
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