Review to kick-start industrial zones

The department accepted that its policy on the zones was weak and a stronger legislative framework was needed, deputy director general of enterprise development Tumelo Chipfupa said yesterday.

Institutional arrangements were also not up to scratch, while inadequate funding meant the zones were slow to develop and not very successful in attracting investors compared with international counterparts.

SA's flagship IDZ at Coega had received the bulk of government funding. Chipfupa said the idea was to draw lessons from how the IDZ programme had been administered so far, and look at ways of improving it.

One conclusion reached was the importance of a sound regulatory environment that did not make it burdensome for businesses to start up operations.

Good co-ordination needed

To achieve this, the work of the three spheres of government had to be well co-ordinated and institutional arrangements created to expedite employment, environmental impact assessments and the like.

“The institutional set-up is not optimum at present and neither does the legislative framework clearly delineate oversight responsibilities to the different spheres of government,” Chipfupa said.

The policy review would determine whether specific IDZ legislation was required.

Chipfupa said a benchmarking exercise was conducted with the regimes in Malaysia, Taiwan and the Philippines.

An analysis of the contribution made by IDZs to the economy had also been undertaken by the University of Pretoria.

Incentive structure needs examination

The whole incentive structure for IDZs would have to be looked at, but Chipfupa would not say whether this would include tax incentives; some have suggested these are vital if these zones are to be successful.

The Democratic Alliance (DA) has been pushing for IDZs to be converted into fully-fledged export-processing zones, but Chipfupa said that this was not on the cards.

DA trade and industry spokesman Kobus Marais has criticised the government's IDZ policy for having failed to deliver on the promised levels of investment and job creation. Incentives were inadequate.

In terms of DA policy, only labour-intensive, exporting industries would be allowed to operate in these zones.

They would be permitted to import machinery, equipment and raw materials duty-free, and the full repatriation of profits and capital would be allowed, to encourage foreign investment.

Zones would be exempt from “more onerous” labour laws, and new ventures would be supported by a sustained tax holiday.

Chipfupa insisted, however, that no relaxation of labour laws was on the cards.

Source: Business Day

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