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he proposed Special Economic Zones were an improvement on the current Industrial Development Zones, says Western Cape Provincial Government special projects manager Herman Jonker.

he proposed Special Economic Zones (SEZ) were an improvement on the current Industrial Development Zones (IDZ), says Western Cape Provincial Government special projects manager Herman Jonker.

"We are busy with formulating our response to the proposed SEZ legislation, but our preliminary view is that SEZs are better than IDZs as the former have a more integrated and longer term view, so that should ensure better co-ordination between the three tiers of government. In the work that I do in terms of promoting economic growth and therefore job creation, we already have good interaction between us and our partners, but this should raise it to the next level as there are more incentives available," he told I-Net Bridge/BusinessLIVE.

The purpose of the SEZ legislation is to provide for an effective mechanism for the development, operation and management of SEZs in order to promote accelerated industrial development and industrial decentralisation.

Finance Mister Pravin Gordhan said in his Budget speech last week that a draft policy framework and legislation have been published for SEZs.

Interested parties have until the middle of March to comment on the proposed legislation.

"Given the current global economic context, there is understandable caution in the business sector about investment and future growth prospects. Many firms have accumulated large cash balances instead of investing them or distributing to shareholders. The time has come to confront uncertainty - from government's side, we are committed to an environment that will encourage business investment; from the side of business, we seek investment for the long term, enhanced competitiveness and training commitments," Gordhan said.

Amongst the incentives on offer would be a reduction in the corporate income tax rate and support for employment and training expenses.

The SA government is hoping the new policy will create the framework for the development of new industrial nodes outside of the traditional industrial heartlands of Gauteng, the Western Cape and KwaZulu-Natal, while improving the performance of the existing IDZs.

Under the proposed legislation, municipal and provincial authorities, or even public-private partnerships, are empowered to approach government with plans to develop SEZs, where such concentration of industrial infrastructure could improve prospects for investment, growth and job creation over a sustainable period.

The proposed law also aims to improve the funding, governance and operational performance of the four existing IDZs, as well any future SEZs. A SEZ board has been proposed to oversee zone designation and permitting, as well as to manage a dedicated fund that will be established to create a funding pool for the new SEZs.

A key difference from the prevailing IDZ model is the fact that future SEZs can be set up in areas that are not directly associated with a port or airport, as is the case with the Coega, East London and Richards Bay IDZs, as well as the OR Tambo International Airport IDZ.

A feasibility study into establishing a SEZ at Saldanha Bay, in the Western Cape, could mean that it becomes the first SEZ designated under the new legislation. The Saldanha Bay SEZ would seek to attract green industries, oil and gas services investors, aquaculture projects, as well as a possible mineral sand beneficiation investment.

SA introduced IDZs on December 2000 through the Manufacturing Development Act. The purpose of IDZs was to assist in the creation of industrial complexes that have strategic economic advantage.

SA's major trading partners in Europe, the US, Latin America, India and China have used special trade zones as a policy instrument to attract investment, stimulate exports and create employment for decades. China has a large number of different trade zones that can be categorised into special economic zones, enterprise zones and industrial or commercial free zones.

The earliest SEZs in China were set up in the 1970s and 1980s in Shenzhen, Zhuhai, Shantou and Xiamen to attract foreign direct investment.

"The SEZ legislation will allow us to expand our cluster-based development model. Both of the economic models are based on geographical agglomeration so that you achieve critical mass. The boat building industry in the Western Cape and the Cape Silicon Valley initiative, which is called the Cape Information Technology Initiative (CITI), are examples of what clustering can achieve," Jonker told BusinessLIVE.

CITI is a non-profit organisation established way back in 1998 to develop and support the information and communications technology (ICT) cluster in the Western Cape.

In 2010, it expanded its focus to include the ICT-related needs of industries in the Western Cape such as insurance, asset management, and online retailing. Amazon for instance has its SA office in the same building complex as I-Net Bridge's Cape office.

CITi's CapaCITi 1000 programme is a series of industry-demand driven initiatives over a five year period, designed to ensure that Western Cape based software and IT services companies, as well as other ICT-dependant industry verticals, have the right ICT skills, of the right quality, at the right time and at a competitive price, in order to grow revenue, be competitive and meet market demand.