Important

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. Opportunities 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.

Special Economic Zones fill a vital role in our economy, giving tax-incentivised infrastructure facilities to a particular sector vertical that allows them to network, build relationships, grow scale and – ultimately – bolster the local economy, writes Tshwane Automotive Special Economic Zone CEO Dr Bheka Zulu. That South Africa’s economy is in the doldrums is nothing new, as it is expected to grow a mere 2.1% this year, dropping drastically from the 4.9% recorded in 2021. Over the next three years, Statistics South Africa anticipates gains of, on average, 1.8%. These rates are not nearly enough to help the country grow jobs and create opportunities for small, micro, and medium enterprises to be the driving force that they can be and bolster the South African economy so that it is equitable and helps close the gap between those who have, and those who are floundering in poverty. This is where the Special Economic Zones (SEZs) come in, as they offer an attractive proposition for a business to establish itself in an area that will see the local community benefit from its investment through the creation of jobs for the surrounding communities. At the same time, the hubs are a virtuous cycle because they enable one company to build a relationship with another, thus creating a chain of network and upskilling opportunities that lead to more business development. Locally, we are blessed with a legislative framework that allows those who operate in the SEZs to benefit from a reduced corporate tax rate of 15%, in addition to a 10% allowance when it comes to the cost of new buildings owned by company that quality. In addition, the tax rebate also applies to improvements to buildings. Growth zones The United Nations Conference on Trade and Development (UNCTAD), in its 2019 report on SEZs, reminds us that such zones, also known as freeports, date back many centuries to a time when traders used to move cargo from ships to sell items inland or re-export with next to no local authority involvement. These have since been replaced with modern establishments, generally located next to seaports or hubs or – in our case – close to one of the automotive production hubs in South Africa. The modern version started appearing in the 60s and really took off in the 80s. SEZs have proven to, over time, be a safe port for businesses, adapting and changing as the environment shifted. In fact, UNCTAD points out that the 2008/2009 global financial crisis, which brough many economies to their knees, hardly resulted in a dip for the zones. COVID-19 and the resultant lockdowns to curb the spread of the virus have also proven to be a catalyst for internal production as the world continues to reel from the shortage of items that typically get transported to countries across the ocean, such as electronic chips and timber. The report states that there are currently nearly 5,400 SEZs, about a fifth of which were established in the past five years, with another 500 to come in the next few years. In South Africa, there are 11 designated SEZs, in Limpopo, KwaZulu-Natal, Eastern Cape, Mpumalanga, Free State, and Gauteng. These zones pull in international investment as, for example, auto manufacturers see the benefit of being in a region that allow them to have a close geographical link to other companies in its supply chain. They also increase exports, help develop skills, reduce the logistical burden on the roads and railways, and enhance our country’s industrial capabilities. This is in keeping with the spirit of the Special Economic Zone Act, which states that the 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. Industrial development is a natural, and positive, consequence of SEZs as other companies move closer to where the action, so to say, is happening. This results in other developments, such as housing and shopping malls, which requires infrastructure in form of water pipes and electricity. Given our unique power situation, this – as well as housing needs – presents an opportunity for the private sector to invest in housing projects run off solar power: a truly brilliant solution to the electricity challenge, while also helping meet the United Nations’ Sustainable Development Goal of Net Zero by 2050. SEZs represents a fantastic opportunity for equitable growth across the country, and we remain committed to ensuring that the Tshwane Automotive Special Economic Zone continues to be an attractive destination for not only vehicle manufactures, but also those who operate in vertical and horizontal sectors, supplying parts and other items to international companies who make cars, bakkies, and trucks. It does this by providing state-of-the-art facilities to connect all in the value chain to each other, seamlessly. Together, we can reach our vision of creating thousands of job opportunities and bringing more people into the employment fold. Growth zones The United Nations Conference on Trade and Development (UNCTAD), in its 2019 report on SEZs, reminds us that such zones, also known as freeports, date back many centuries to a time when traders used to move cargo from ships to sell items inland or re-export with next to no local authority involvement. These have since been replaced with modern establishments, generally located next to seaports or hubs or – in our case – close to one of the automotive production hubs in South Africa. The modern version started appearing in the 60s and really took off in the 80s. CEO of the TASEZ, Dr Bheka Zulu SEZs have proven to, over time, be a safe port for businesses, adapting and changing as the environment shifted. In fact, UNCTAD points out that the 2008/2009 global financial crisis, which brough many economies to their knees, hardly resulted in a dip for the zones. COVID-19 and the resultant lockdowns to curb the spread of the virus have also proven to be a catalyst for