Special Economic Zones will only work if the DTI stands up to National Treasury and Cosatu
The tabling of the new Special Economic Zones (SEZ) Bill is an opportune admission by government that the existing Industrial Development Zones (IDZs) have failed to attract enough investment to justify the R5,3bn we have so far spent on them.
While we welcome the fresh start, we are concerned that the Department of Trade and Industry (DTI) appears not to have the will to take on the National Treasury and Cosatu and provide the necessary incentives to make our 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.
In this regard it is disappointing that the Director General (DG) of the DTI, Mr Lionel October, has flatly refused to consider any reform of labour regulations in SEZs, and appears unsure about National Treasury's willingness to consider stronger tax incentives than a "slightly better" 12i incentive for firms operating in SEZs.
It is imperative that our SEZs 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.
Alarmingly, the DG has also said that he sees 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.
It is time to try a bold new approach and provide an internationally competitive set of incentives to those investors willing to set up new plants and employ South African workers.
Statement issued by Tim Harris MP, DA Shadow Minister of Trade and Industry, January 25 2012
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