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South Africa began to establish Industrial Development Zones (IDZs) in 2000. The stated goal of these enclaves – established at Coega, East London, Richards Bay, and OR Tambo International Airport outside Johannesburg – was to encourage export industries and attract foreign direct investment.
This was to be achieved by creating investor- friendly environments situated close to international ports and airports that would be characterized by less red tape and better infrastructure.
A review by the Department of Trade and Industry (DTI) summarises the situation today. From 2002 to 2010, a total of 40 investors were attracted into the three IDZs that are actually operational – Coega, East London and Richards Bay – and have spent about R 11,8 billion. The DTI has itself spent about R5,3 billion on the programme. In total some 33 000 jobs have been created, most of which were short-term construction jobs.
No one involved believes that this performance represents success. South Africa’s IDZs are a form of Special Economic Zones (SEZs), a broad international concept denoting demarcated geographic areas where rules governing investment, employment, customs, taxation, planning, etc. differ from those prevailing in the rest of the country. Various types of zones have evolved to meet a range of objectives in specific economic contexts.
Successful SEZs have been widely used as instruments for attracting foreign direct investment, creating large numbers of jobs, developing and diversifying exports, and experimenting with new policies.
The result of a thourough review was that the IDZs did not offer potential investors a unique value proposition. Government expectations for the new programme are high, and it has already been earmarked for funding in this year’s budget. In his 2012 budget speech, the Minister of Finance, Pravin Gordhan, allocated R2,3 billion for industrial development and Special Economic Zones, in the process describing SEZs as ‘levers of economic change’.