Industrial development zones have failed - DA

Posted On Thursday, 26 January 2012 02:00 Published by eProp Commercial Property News
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The tabling of the new Special Economic Zones (SEZ) Bill is an admission by government that the existing Industrial Development Zones (IDZs) have failed to attract enough investment to justify the R5.3 billion spent on them, says Democratic Alliance shadow trade and industry minister Tim Harris

Tim HarrisOn Wednesday the Department of Trade & Industry briefed its Parliamentary oversight committee on the draft law aimed at stimulating industrial development zones.

The new law is to overcome key challenges faced by the IDZs that have favoured few regions. The problems included support that focused narrowly on the provision of infrastructure, planning that was done on an ad-hoc basis inadequate coordination among key government agencies and stakeholders, financing arrangements that made it impossible to do long term planning, and inadequate targeting of investments.

There were currently four such zones, namely in Richard's Bay in KwaZulu-Natal, Coega near Port Elizabeth, East London and at OR Tambo International Airport near Johannesburg.

The latter was not functional due to the inability of the government departments and state-owned companies that include Denel and the Airports Company of SA to coordinate their activities.

Earlier this month Trade & Industry Minister Rob Davies said the three operational zones had generated R11.8 billion worth of investments and had created more than 33,000 jobs in construction and employment in companies located therein.

He said that government also wanted a broader definition of special economic zones that would include scientific and technology parks and other forms of commercial activity.

The new law to be called the Special Economic Zones Policy Bill will see the creation of a board to advise the minister, and the establishment of a fund to provide a more coherent and predictable funding framework that will enable long-term planning, strengthen governance arrangements including clarification of roles and responsibilities of key stakeholders.

Harris said after the dti briefing that while he welcomed the fresh start, he was concerned that the dti appeared not to have the will to take on the National Treasury and labour movement Cosatu and provide the necessary incentives to make the zones internationally competitive.

"The draft legislation provides for the designation and funding of zones and their operators, and establishes a board to design incentives for specific SEZs. It is important that it is amended to make the board accountable to Parliament, but also that the incentives offered are strong enough to attract large-scale investment," Harris said.

He said it was disappointing that the dti Director General, Lionel October, had flatly refused to consider any reform of labour regulations in IDZs, and appeared unsure about National Treasury's willingness to consider stronger tax incentives than a "slightly better" incentive for firms operating in SEZs.

"It is imperative that our special economic zones are launched with a strong set of tax and other incentives to convince investors to set up shop here, rather than in similar zones in other markets. National Treasury's apparent concern that tax incentives can "erode the tax base" does not apply if we attract investment that would not have come here without an SEZ," Harris said.

Harris also felt it was alarming that October said that he saw infrastructure provision rather than incentives as the "driving force" behind SEZs.

"This model has been tried over the past 12 years in our IDZ experiment, and - at a cost per job of R160,000 - it has been found wanting," Harris said.

 

Last modified on Wednesday, 14 May 2014 18:58

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