The South African government is hoping its new Special Economic Zones (SEZs) Bill and policy will create the framework for the development of new industrial nodes outside of the traditional industrial heartlands of Gauteng, the Western Cape and KwaZulu-Natal, while improving the performance of the existing Industrial Development Zones (IDZs).

Trade and Industry Minister Dr Rob Davies, who released the documents for public comment on Monday, says the draft legislative framework has been crafted in an effort to “broaden” the scope and composition of dedicated industrial areas and to support industrial decentralisation, where the economic development case could be proven.

Under the proposed law, municipal and provincial authorities, or even public-private partnerships, are empowered to approach government with plans to develop SEZs, where such concentration of industrial infrastructure could improve prospects for investment, growth and job creation over a sustainable period.

The proposed law also aims to improve the funding, governance and operational performance of the four existing IDZs, as well any future SEZs. In fact, an SEZ board has been proposed to oversee zone designation and permitting, as well as to manage a dedicated fund that will be established to create a funding pool for the new SEZs, as well as support some of the possible future incentives. No value was attributed to the fund, which would probably be capitalised through the Budget.

Details surrounding the possible future incentives packages to be deployed have also not been outlined, but Davies hints to a possibility of allowing packages to vary across SEZs, depending on the composition and needs of the companies likely to invest in the zone. These could vary from science and mixed industrial parks, through to sector-specific hubs, including agroprocessing and mineral beneficiation nodes.

Government, he adds, is considering a number of new incentive packages to support foreign and domestic industrial investment. In addition, the National Treasury recently gazetted an increase in the tax benefits available under the 12i tax incentive scheme for investors in IDZs and Finance Minister Pravin Gordhan is expected to elaborate on a new R25-billion economic support package in his February Budget.

A key deviation from the prevailing IDZ model is the fact that future SEZs can be set up in areas that are not directly associated with a port or airport, as is the case with the Coega, East London and Richards Bay IDZs, as well as the nonoperational OR Tambo International Airport IDZ.

“The SEZs programme is one of the most critical instruments that can be used to advance government’s strategic objectives of industrialisation, regional development and job creation. Moreover, the programme can assist in improving the attractiveness of South Africa as a destination for foreign direct investment,” Davies avers.

SALDANHA BAY IDZ?

It is possible that the proposed Saldanha Bay IDZ, in the Western Cape, which is currently the subject of a feasibility study, could be the first zone designated under the new Act.

But Davies says that it is also possible that the IDZ will receive an operating permit under the existing legislation should it be deemed necessary to move ahead before the new law is finalised.

The proposed legislation will be presented to lawmakers during the course of 2012 and the Department of Trade and Industry (DTI) is hopeful that the Bill will become law before year-end.

The feasibility study for the Saldanha Bay hub, meanwhile, should be completed by mid-year and director-general Lionel October says it could emerge as a model for cooperation between local, provincial and national government.

Should it be designated, the Saldanha IDZ will seek to attract green industries, oil and gas services investors, aquaculture projects, as well as a possible mineral sand beneficiation investment.

“We are quite far advanced and, by June this year, all feasibility study work will be completed and the team then will submit to the Minister an application for IDZ status,” October reports, indicating that the focus currently was on the long-term economic viability of such a development.

The DTI is also engaging with provincial authorities in the Limpopo, North West and Free State provinces on new zones, many of which would serve domestic and regional markets.

Feasibility studies will be initiated once high-potential prospective SEZs have been identified with the provincial governments. “We will be completing that process with the provinces in the next month or so,” October concludes.