When government announced its ambitious industrial development zones (IDZs) investment programme in 2000, some economists hailed it as an elixir for SA's fledgling economy.
Three years later, only one of the four designated free-trade zones is open for business.
The programme is one of the incentive schemes approved by cabinet to provide funds for the establishment or upgrade of infrastructure such as bulk storage, electricity supply lines and telecommunications that would encourage large investment projects in the country. T
hese zones will allow duty-free imports and zero rate on Vat for locally produced goods, and will offer a number of investment incentives, including no restriction on foreign equity ownership and repatriation of profit, no social service tax and low corporate tax rates. IDZs acting director Antoinette Baepi says the concept is aimed at helping economic growth and job creation through export-orientated manufacturing investments.
The East London industrial development zone (ELIDZ) was the first to be approved in 1999 and its infrastructure is by far the best developed of the four demarcated areas. It is the only IDZ up and running.
ELIDZ has already received commitments from 15 foreign investors in the car manufacturing, timber, pharmaceutical and textile industries, and has awarded its first contract, worth R80m, to a local company for the construction of a bulk storage facility. The project is expected to create 40 000 jobs during the first 10 years and generate about R2bn in annual income from tenants.
"We have identified automotive, timber, pharmaceutical and textiles as focus sectors for the zone. We have also appointed Omega Investment Research, a locally based international company to market us abroad," says ELIDZ business manager Brenda Mabaso-Simelane. She says the IDZs will provide a one-stop shop for all regulatory, licensing and local government liaison, making it a streamlined and hassle-free place to do business.
"The one-stop shop will reduce red tape and provide services, including customs & excise advice, legal, financial and logistical services, skills training and human resource services," she says. Funding for infrastructure improvements, including bulk storage, office parks, roads and the extension of the East London port, will be borne jointly by the national and Eastern Cape governments.
The Port Elizabeth industrial development zone, commonly known as the Coega project, is at the first phase of infrastructure development after receiving a capital injection of R58m from government in 2001.
"When the Coega project was approved in 2001, it was nothing but 11 000 ha of open land. The development of infrastructure will take between four and five years to complete. It will be done in phases and investors will be invited as each phase is completed," says Baepi.
Feasibility studies are still being conducted for the Richards Bay and the Johannesburg international airport development zones in KwaZulu Natal and Gauteng respectively. Though the concept of free-trade zones may sound attractive to potential investors, the labour movement remains concerned about their potential to create sweatshops.
Cosatu and the International Labour Resource & Information Group (Ilrig) argue that export-orientated industrial development could result in Southern African countries competing with each other by lowering taxes and relaxing labour laws.
Such a policy, they say, risks keeping the economies of African countries underdeveloped by encouraging exports of raw materials to industrialised nations for beneficiation.
Mabaso-Simelane, however, says local labour law will not be compromised within the IDZs. "We won't allow companies known for their sweatshop practices into these zones. Both local and international investors will be screened before being accepted."
She says the free-trade zones have positive implications for employment and social development. Expanded production levels to meet new or increased domestic and export market demand can lead directly to increased job creation.
Substantial employment opportunities should also materialise during the initial development stage in the construction of both public and private infrastructure, with more jobs created over time as sector linkages materialise and production increases.