Infrastructure vital for SEZs to flourish

30 January 2023

All the promise held by Special Economic Zones will come to naught if they don’t have all the hard, and soft, infrastructure that they need. However, South Africa’s unique situation in terms of how we have responded to power outages presents an opportunity for private sector to fill this need, writes Andile Sangweni, executive for infrastructure at the Tshwane Automotive Special Economic Zone.

When one considers infrastructure, our minds automatically jump to thoughts of water, electricity, roads, drains, rail, and internet. These are all vital when it comes to setting up any area to be developed, such as a housing complex or a specially zoned industrial park. In fact, the plethora of cars on our roads bear testimony to how vital it is to plan when establishing new business or living areas.

These are, indeed, vitally important. The stark reality of just how necessary they have been brought home all too often this year with innumerable power outages, as Eskom battles to keep the lights on amid failing equipment. Water, too, is an essential and we are being made aware of how much we need it as the threat of taps running dry looms large amid a persistent lack of rainfall over the past six years and a large backlog of infrastructure maintenance. In fact, easily 40% of our water is lost to leaks – the equivalent of R10 billion a year. When it rains, our storm drains can’t handle the influx of water and roads flood. Transnet has also been under the whip, with a recent strike causing companies such as Sasol to declare a force majeure as they could not transport goods from port to port. While that strike has ended, it shows just how much our economy relies on infrastructure.

Skills development
At the same time, we need what one may consider soft infrastructure. Skills and knowledge, networking opportunities, as well as shared experiences, too, are needed for SEZs to provide a contribution to the economy and create jobs while also rebuilding South Africa’s manufacturing sector. This may seem a bit of a chicken and egg situation. However, skills will follow infrastructure once a zone is ready to sign its first tenant.

With an anchor company in place, others in the supply chain will see the benefit of working in close proximity with either clients or suppliers and will establish facilities. This concept is at the core of an SEZ’s purpose. It eliminates geographical boundaries while also offering attractive tax rates, 15%, to companies that set up business in these regions. This has a snowballing effect, with one company’s establishment being an encouragement to other businesses. In turn, a community will be established to house workers, which will be followed by healthcare facilities, schools, and malls – all of which will exist to service the SEZ.

In this way, local economies are grown, and jobs created. The softer infrastructure of schools, police stations, hospitals and even libraries benefit all who live and work in and around the zone.

SEZs offer great economic benefits to those countries that establish them correctly. Locally, we have 11 designated SEZs across Limpopo, KwaZulu-Natal, Eastern Cape, Mpumalanga, Free State, and Gauteng. These areas are attractive to international investors, such as car makers, and increase exports, develop skills, reduce the logistical burden on our roads and railways, and enhance our country’s industrial capabilities. This is in keeping with the spirit of the Special Economic Zones Act, which states that SEZs must result in the creation of decent work and other economic and social benefits, which includes increasing economic participation of smaller companies as well as transferring skills and technology.

The trick, however, will be when it comes to enabling more industrial zones as South Africa is battling to maintain the infrastructure it has, let a long develop further areas of land. Here, the private sector can play an important part, just as it has with helping South African communities and businesses survive loadshedding. We are seeing increased interest from businesses small and large and people in renewable energy: solar panels and batteries to power homes, for example.

Government cannot solve our socio-economic dilemmas alone, it needs each of us to play our part, and we all can. From hawkers who direct traffic when the lights are out to initiatives such as Discovery Insure, in partnership with Dial direct and the City of Johannesburg, with their Pothole Patrol. These teams literally go around filling holes in the road that are reported to it through an app. Then there are the OUTsurance points people, a more organised method to keep vehicles flowing when there is no power.

There are many examples of South Africans standing shoulder to shoulder to help build this wonderful country, and develop it into what it can be, allowing for equitable growth for all. Providing infrastructure for SEZs should be no different, public private partnerships can be used to significant effect here as well, which will lead to immense benefits for our country as a whole.