17 April 2023

South Africa’s Special Economic Zones are being used as benchmarks for economic and infrastructure development in Africa.

Currently a delegation of Ugandan members of parliament (MPs) are visiting a number of South Africa’s Special Economic Zones as part of a fact-finding mission, looking to take home many hard-earned lessons. Uganda is currently looking to set up a range of Free Zones that operate in a similar way to the SEZs.

SEZs were set up as mechanisms to attract foreign direct investment, accelerate industrialisation, and create jobs. Like South Africa’s SEZs, Uganda’s Free Zones also aim to create opportunities for export-oriented investment and create jobs. Uganda’s Free Zones are managed by Uganda Free Zones Authority.

The MPs’ visit comes on the back of an official state visit to South Africa by Ugandan President Yoweri Museveni in February 2023, where a number of bilateral agreements were signed to strengthen economic and political ties between the two countries.

Uganda is South Africa’s 15th-largest trading partner in Africa, and the second largest in East Africa.

 A Special Economic Zone

The delegation visited the Tshwane Automotive Special Economic Zone in Rosslyn, City of Tshwane, to understand why and how Africa’s first automotive city was established.

They heard that the greenlight to develop the automotive hub was given in 2016 and over the next three years a number of processes were completed – from drawing up a masterplan to consulting with the relevant stakeholders, from sourcing funding and land to presenting a comprehensive business plan – leading to the official launch of TASEZ by President Cyril Ramaphosa in November 2019.

Phase 1 of the hub, establishing and building the infrastructure of TASEZ, was completed three years later in November 2022. This phase saw the development of 91ha and some R4.2-billion spent in various investments. This phase also saw more than 1 200 permanent jobs created, with 76% going to the youth and 32% to women. In addition, more than 4 800 construction jobs were also created.

A number of significant automotive businesses now call TASEZ home, including manufacturer Ford, which began production of its newest Ranger model in November 2022.

Phase 2, from 2023 to 2025, will see TASEZ continue to grow. A further 81ha mixed-use development will be established, including a Centre of Excellence that will offer education programmes, skills development and an incubator based on industry and community needs.

The final development phase will see further expansion and a focus on sustainability.

The MPs were told that TASEZ’s long-term vision is to be the benchmark for SEZs in South Africa while contributing to the growth of the automotive sector, with the objective of being a major creator of new businesses and contributor to employment, transformation, and socio-economic development.

TASEZ operations

The automotive city is the newest of South Africa’s 10 SEZs, which were set up to support strategic industrial sectors and promote economic growth across the countries, boosting the infrastructural development of a number of diverse regions.

Besides growing their specific sectors, SEZs also offer various investment incentives through special arrangements that may include laws and systems that differ from those that apply in the rest of the country.

TASEZ’s aim is to attract automotive suppliers and automotive manufacturers, assemblers and supporting services. It provides tenants with a prime location close to an established automotive industry, links to regional and international markets, customised solutions, and support services to boost business efficiency.

The MPs heard that investors based in the TASEZ hub also have access to various incentives, including 15% corporate tax to qualifying companies; a building tax allowance where applicable; an employment tax incentive; an accelerated 12i tax allowance; and an enhanced funding strategy including the SEZ Fund, a mix of funding instruments, public private partnership arrangements, and support from other state-owned enterprises.

Community participation

As important as the investors are the communities that live on the outskirts of TASEZ. One of the central tenets of TASEZ is to boost the socio-economic development of local communities and small, medium, and micro enterprises (SMMEs).

This is being done through regular engagements and consultations. A Community Project Committee has been set up with community liaison officers representing their specific communities.

By the conclusion of their visit, the Ugandan MPs were left with a clear understanding of the complexity of the development and operations required to run successful SEZs.