Tuesday, 21 February 2012
Incentive debate erupts over SEZs
The strengthening of incentives within Special Economic Zones (SEZ) will level the playing field when it comes to competition with international zones. And Richards Bay Industrial Development Zone (IDZ) CEO, Ike Nxedlana believes the adoption of the Chinese model will be the solution to South Africa’s current IDZ funding challenges. Nxedlana spoke to the Zululand Observer after attending the first provincial public hearing session on the newly-gazetted Special Economic Zones Bill and Policy in Durban on Tuesday.
Hosted by the Department of Trade and Industry, more than 100 people attended the session, giving the public, organised labour and business an opportunity to express their views on the SEZ Bill and Policy.
The Bill aims to boost job creation and industrialisation in outlying areas and makes provision for an SEZ fund and board to regulate policy and issue operator permits.
SEZs designate a certain area for the establishment of industries to enhance a country’s global competitiveness by offering a range of incentives ranging from tax breaks to subsidies and special concessions.
Gazetted by the Minister of Trade and Industry, Dr Rob Davies last month, IDZs will not be scrapped, but will continue to exist as SEZs under
the new Bill.
Incentives
Nxedlana said the availability of private funders and tax incentives were imperative for the success of SEZs. ‘In countries like China, the government only contributes about 10% and then private funders take over,’ Nxedlana said. ‘This would be a good model to adopt in SA where international funders and business are invited to invest in a joint venture. ‘All government wants is job creation and must allocate and service land for investors,’ added Nxedlana.
However, Deputy Director-General in the Department of Trade and Industry, Tumelo Chipfupa said incentives had also contributed to the under-performance of the country’s current IDZs.
Addressing Parliament last week, he said the department did not want to create ‘tax holidays’ for investors but rather create an economically enabling environment within SEZs. ‘Because of their unsustainable nature as they were funded through incentives, some IDZs ceased to exist when incentives were removed. ‘A diversified funding model is needed for SEZs,’ said Chipfupa.
The Richards Bay IDZ obtained its operating licence in November 2009.
Tata Steel is the only investor within the local zone, which could see Pulp United located at Phase 1D in the near future.