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Create an 'export processing zone' in Mandela Bay - think tank

Apr 07 2016 17:37
Ahmed Areff, News24
 china trade

(AP Photo)

Johannesburg - A think tank has proposed the creation of an "export processing zone" (EPZ) in the Nelson Mandela Bay municipality to create more job opportunities and improve South Africa's economic growth. 

The Centre for Development and Enterprise (CDE), in one of its "Growth Agenda" series of reports, extols the potential benefits of having one of these zones in the country. 

An EPZ is a specific type of free trade zone set up in developing countries.  

The CDE began its report with a look at how China had become the centre of global manufacturing. It said that, with rising wages in that country, some firms had looked to other places to base their existing operations or new factories. 

"At present, most of these relocated jobs are destined for Asian countries including Vietnam, Bangladesh and India, although some African countries, notably Ethiopia, are starting to attract some manufacturing firms," the report said. 

"Even a tiny share of these jobs would be enormously beneficial to South Africa. The first major benefit would be the new jobs created. These are labour intensive (unskilled and semi-skilled) activities that South Africa desperately needs, and which its present growth path fails to deliver. 

"The second benefit would be the increase in exports, which would enhance economic growth and hence indirectly have a further positive impact on employment."

Firms that move to the EPZ would enjoy "duty-free imports, rapid customs and export clearance formalities".

They would also be allowed to set their own labour and working conditions. 

Two possible restrictions for firms in the EPZ would be that 100% of their output would have to be exported, and only new firms or new activities would be permitted there. 

It said at an estimated wage of $105 a month, firms involved in "clothing-related activities" in the EPZ would be competitive with EPZs in other places, where garment factories had similar wages, like Cambodia or the Philippines. 

"Firms relocating from China to Vietnam or Laos and other countries in Asia for the most part employ workers who are recent arrivals to the city. Education levels are very low and workers have no training or experience of factory work.

"By contrast, firms in the EPZ in Port Elizabeth could draw on a very large pool of people who are long urbanised, who have higher levels of education and who, most critically, have training in and experience of factory work."

The report looked at arguments against the EPZ, with the main one being that the zone would offer very low wages "that are not at levels we should have in South Africa where we should aim for 'decent jobs'".

One of the points the CDE used to counter this was that "there is a substantial cohort of work-seekers who would strongly prefer to accept low-wage work rather than remain unemployed". 

It said that, while wages would be low at the outset, over time they would increase. 

The CDE also said that since the output of the EPZ would be for the export market, firms in the area would not be competing with workers employed elsewhere in South Africa. 



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