Tag Archive | trade & industry parliamentary committee

DTI to form multi-billion rand incentives fund

The Minister of Trade and Industry has released the Special Economic Zones (SEZ) Bill for public comment. The SEZ Bill is expected to be tabled in Parliament later this year and Minister of trade and Industry Rob Davies says that in his view it is one of the most important developments of 2012 in order to achieve the objectives of the country’s economic planning programme.

DTI has now briefed the parliamentary trade and industry committee on the concepts behind the proposed legislation. According to the minister, the main objectives of the SEZ bill are:

• for the designation, development, promotion, operation and management of SEZs

• for the establishment of the SEZ board

• to regulate the application and issuing of SEZ operator permits • for the establishment of the SEZ fund

• decentralisation in the economy-broaden location of industrial development

Whilst claiming, as did the minister, that “the country now has a really effective plan to offer the investment community”, Lionel October, DTI’s director general, admitted the exact amount of finance at his department’s disposal to fund new special economic zones (SEZs) in South Africa still remains to be negotiated, although the matter has been agreed to in principle at cabinet level.

Nevertheless, he countered questioning at a parliamentary trade and industry committee presentation on this subject ,by saying that “Whilst we still have to fight a significant battle with Treasury on the size of a multi-billion rand incentives fund, it was significant that the DTI now has a proposal along the lines offered in China, Brazil and India”. (BRICS)

This plan, he said, will be supported by a Bill shortly to be introduced to Parliament and which would provide “the necessary predictability to such financing.”

October said the main problem in the past was that the present IDZs were not driven by incentives.   Only one development had taken place at Richards Bay, for example, he noted.  “Although any business plan must make economic sense as a first priority, we have learnt that any growth plan, as in BRICs countries, must be attached to incentives. “In the past, we were de-incentivising many potential areas just because they did not have a port, for example”.

In the new proposals, said October, the country would move away from very long plans and do what the Chinese have done successfully and focus on five-year plans.  He added that the competitive factor, where IDZs competed with each other, had to be stopped and that a “joint marketing proposal approach” had to be adopted for the whole country.

“This was the purpose of dividing the country into SEZs”, he said, and to build a national team to market the country’s proposals.

In terms of the new Bill, there were to be different categories of SEZs, such as industrial development zones, industrial parks or estates, science and technology parks, spatial development corridors and sector development zones.   October quoted successful examples of SEZs in Shanghai, Oman and Malaysia.

Problems had been encountered, October said, with the previous concept of the smaller IDZs over the past few years and the idea had not worked particularly well. Main problems had been that previously designated areas favoured those with international airport or seaports and penalized other areas for not having such.

The DTI’s contribution into the four areas of Richards Bay, East London, Coega and OR Tambo and Saldanha for forty projects had been 5.3bn or an approximate 5.7% return.

Lionel October emphasised that the IDZ programme had not been incentive driven. There had also been too much emphasis on infrastructure, whilst other issues such as logistics, marketing and skills supply had been on the back-burner.

The IDZ programme had “lacked a unique value proposition”, he said, and too many messages were going out to the investment community. There needed to be a single strategy and message from one place, said October.

He noted that now, with the promise from Treasury in October’s medium term budget that R10bn would be put aside for investment purposes, the new plan, supported by legislation, had become an exciting prospect and the new national regulatory environment would not only give the host zone but the whole region total involvement and the added ability to put in place longer term planning for an entire area.

The new Bill also provided for five parties to be involved in the process; namely, the DTI, Treasury, all three tiers of government, Eskom and Transnet, all parties being involved on a SEZ board set up by the new Bill. Other important parastatals could be added if relevant, October said.

MPs commented that no such plan would work unless government parastatals were on board to help plan infrastructure needed.

When asked by an ANC MP why labour was not represented in the planning structures, Lionel October responded frankly by saying that such a planning process could not be subjected to the issue of collective labour bargaining at that stage of the investment process, although the supply of skilled labour was a major issue.

He detailed the financing instruments as a fund to be established by the minister of trade and industry in consultation with the ministry of finance and development finance institutions (DFIs), which would play a major role in the development of a particular SEZ, liaising on marketing, capacity development, skills strategies, infrastructure, business incubation, environmental protection, technology and R&D and, finally, quality and productivity.

He would not talk on the subject of specific incentive numbers, saying that incentives had always been granted in the past but that in the future any incentives and incentive programmes would be the subject of far more focus with proper funding to make more things possible.

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