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A ns wer i ng Zu ma’s ‘INDUSTRIALISE SA’ CALL

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Department of Trade and Industry focus manufacturing

The Department of Trade and Industry’s Deputy DG Tumelo Chipfupa and Chief Director: Infrastructure Investment Support Unit Kaya Ngqaka explain why special economic zones are good news for South Africa, for industry and for jobs. South Africa Magazine reports.

By Ian Armitage

outh Africa needs jobs. Unemployment recently swelled to 25.2 percent, with the economy shedding 75,000 jobs in the first quarter of the year. The SA Chamber of Commerce and Industry (Sacci) said it indicated a need for “businessfriendly” regulation. According to the DTI’s Deputy DG Tumelo Chipfupa, South Africa is to use special economic zones (SEZs) to do just that and transform the country’s economic prospects. The plan is to use them to accelerate economic and employment growth. They will replace the country’s industrial development zones (IDZs). “It has been officially recognised that the IDZs have not been successful as they could have been in meeting their goals of employment creation and accelerated industrial development,” says Chipfupa. He has high hopes for SEZs. “There are a lot we a lot of things we hope to get out of them.” There are several reasons why IDZs were unsuccessful. Unlike many SEZs around the world, investors in South Africa’s IDZs receive no special incentives. And, despite initial promises that businesses in the zones would be treated expeditiously in the management of VAT and tax obligations relating to imports and exports, in practice there was little variation on the usual treatment afforded to all businesses. From their conception, the IDZs lacked a comprehensive policy framework, Chipfupa says. This has led to weaknesses in governance, planning, www.southafricamag.com

Department of Trade and Industry focus manufacturing

implementation, management and operations. A lack of inter-agency coordination has resulted in serious deficiencies. These lessons have been learned and will be reflected in the SEZs. “The top priority for South Africa’s SEZ programme will be to establish zones in which it is considerably easier to establish and run globally competitive businesses particularly labour-intensive businesses,” Chipfupa says. It will help aid President Zuma’s call to ‘Industrialise South Africa’, the multibillion rand infrastructure and investment drive

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SEZs will enable us to strengthen our manufacturing base and attract investors to the country

heralded in his State of the Nation speech. “SEZs must do more than offer an investment proposition that is marginally better than what is available outside the zone - success requires that SEZs be globally competitive. The SEZ policy and bill aim to put a governance framework in place to improve management of zones, expand range of support measures, ensure a longterm financing framework to attract long-term investment, contribute towards industrial development, establish a SEZ board to advise the minister and establish a SEZ fund to back-up incentives.”

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What we offer you The IDC assists start-up and existing businesses with a minimum funding requirement of R1 million and a maximum of R1 billion. Funding is offered across its mandated sectors under the following Strategic Business Units: • Agro-Industries • Chemicals and Allied Industries • Forestry and Wood Products • Green Industries • Healthcare • Information and Communication Technology • Media and Motion Pictures • Metal, Transport and Machinery Products • Mining and Minerals Beneficiation • Strategic High Impact Projects and Logistics • Textiles and Clothing • Tourism • Venture Capital Special funding schemes are available that address transformation and entrepreneurial development (TES); topping up equity contributions from entrepreneurs (TES & RCF); and sector-specific schemes (horticulture, forestry, clothing and textiles, hospitals). The IDC Gro-e-Scheme provides funding for projects from R1 million to R1 billion at prime less 3% for up to five years. The IDC’s business support programme addresses non-financial support to entrepreneurs. Assistance is provided with capacity building to improve project viability. If you have a project that can contribute to building South Africa’s industrial capacity and creating jobs, visit www.idc.co.za to find out how the IDC can help build your opportunity.

Chief Director: Infrastructure Investment Support Unit Kaya Ngqaka views SEZs as “an instrument of industrialisation”. “There are a number of instruments that could be used to achieve our industrial objectives and position South Africa in the global economy with a strong industrial base – SEZs are certainly one. They have worked in China and other countries, of course. SEZs will enable us to strengthen our manufacturing base and attract investors to the country. We need to make ourselves a stronger choice. The BRICS partnership is opening up opportunities, as a gateway to the continent and SEZs will help us take advantage of our position and mineral resources.” South Africa’s trade to the BRICS countries of Brazil, Russia, India and China, increased by 29 percent last year. “SEZs are tools for long-term industrial and economic development. They create an enabling and sustainable environment for foreign and domestic direct investment to thrive. And they help to build targeted industries, developing regions and building

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industrial infrastructure,” Chipfupa adds. “The aim is to promote value-added exports and export-oriented industries and to attract domestic and foreign direct investment, as well as desired foreign technologies.” Trade and industry minister Rob Davies has given his assurances that proposed legislation on SEZs will be finalised and implemented as speedily as possible and has described them as “one of a number of new instruments we have developed to create an appropriate environment for foreign direct and domestic investment as well as the development of strategic industrial capabilities”. It is an acknowledgement that SEZs won’t work on their own; they will help support the development of targeted industrial capabilities, the IPAP and New Growth Path framework, Chipfupa says. “Government is behind SEZs. They allocated R2.3 billion over the medium term of new funding for this. That speaks for itself.” He points to new schemes such as the DTI’s recently announced drive to boost

Department of Trade and Industry focus manufacturing

Government is behind SEZs. They allocated R2.3 billion over the medium term of new funding for this. That speaks for itself

competitiveness in the manufacturing sector as key also. “We have unveiled moves to boost job creation and competitiveness in manufacturing through the Manufacturing Competitiveness Enhancement Programme (MCEP).” The R5.8 billion support scheme was unveiled during February’s budget and is a three-year programme designed to boost investment in the sector and encourage a broad range of manufacturers to invest in competitivenessraising equipment and processes. Eligible companies can apply for capital investment grants and funding to improve their competitiveness. “The manufacturing sector has experienced a number of challenges,” says Chipfupa. “The result is that many are reluctant and wary about making investments. We want to support manufacturers, encourage manufacturers to make investments that are going to raise competitiveness.” Firms can begin applying for grants from June 4. “Do I think SA has a bright future? Yes I do,” Chipfupa says. “We have overcome many challenges as a nation and certainly overcome the odds. We’re very optimistic about our future.” He points to successful moves to stabilise the clothing, textiles and leather and footwear industries that had helped save further job losses as reasons for optimism. “The Clothing and Textile Competitiveness Improvement Programme not only stalled employment losses but led to a modest increase in employment. We learn a lot for schemes like it and use the thinking to make sure programmes like the SEZ are as successful as possible. South Africa has a very bright future.” To learn more about the DTI, its programmes and how your business could benefit visit www.dti.gov.za. END www.southafricamag.com

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