SPECIAL ECONOMIC ZONES BILL, 2013

PRESENTATION TO PORTFOLIO
COMMITTEE ON TRADE AND INDUSTRY
26 APRIL 2013
 INTRODUCTION

 Background to Special Economic Zones Bill, 2013

 Purpose of Special Economic Zones Bill, 2013

 Discussion of Special Economic Zones Bill, 2013

 Bodies consulted on Special Economic Zones Bill, 2013

 Critical steps taken so far

 BACKGROUND TO SEZ BILL, 2013 (1)

• Industrial Development Zones Programme, 1999 - an incentive

programme to establish IDZs

•
BACKGROUND
Industrial Development Zone: a type of special economic zone
providing special provisions to develop industrial growth in
particular geographical areas

• IDZ Programme has performed below expectation

• Policy review process 2006 - to review the challenges experienced

by the IDZ Programme
 BACKGROUND TO SEZ BILL, 2013 (1)
• Industrial Development Zones Programme, 2000 – as an incentive
programme to establish IDZs

• Industrial Development Zone: a type of special economic zone

• Industrial Development Zones Programme, 1999 - an incentive
providing special provisions to develop industrial growth in particular
programme to establish IDZs
geographical areas
• Industrial Development Zone: a type of special economic zone
• IDZ: 4 IDZs (Coega, East London, Richards Bay & OR Tambo IDZ)
providing special provisions to develop industrial growth in
were designated and 3 are fully functional in Coega, East London and
particular geographical areas
Richards Bay. Even though there are major achievements with the
IDZs, there were some weaknesses (weak governance, lack of IDZ
• IDZ Programme has performed below expectation
incentives, poor stakeholder coordination, lack of integrated planning,
etc) that were identified - leading to the policy review and new SEZ
• Policy review process 2006 - to review the challenges experienced
Policy.
by the IDZ Programme
• Policy review process 2008 - to review the challenges experienced
by the IDZ Programme
 BACKGROUND TO SEZ BILL, 2013 (2)

• National Development Plan (NDP),New Growth Path (“NGP”) and

National Industrial Policy Framework (“NIPF”):

• Responding to challenging global and domestic economic

conditions demands a sharper focus on new sources of
competitiveness

• Achieved through innovation and productivity, with an entrenched

base in skills, infrastructure and efficient and responsive state
action

• Boost private investment (domestic and foreign) to labour-intensive

areas, competitiveness and exports
 BACKGROUND TO SEZ BILL, 2013 (3)

• National Development Plan (NDP), New Growth Path (“NGP”) and

National Industrial Policy Framework (“NIPF”): (continues)

• Measures must be implemented to:

• enhance domestic and regional demand
• extend export promotion strategically
• strengthen South African industrial base
• promote labour-absorbing industrialisation path
 BACKGROUND TO SEZ BILL, 2013 (4)

• Draft Policy on Special Economic Zones - June 2011:

• SEZs as a mechanism to contribute towards realisation of
economic growth and development goals in NDP, NGP & NIPF
• SEZ Bill an instrument to address shortcomings of IDZ Programme
by creating formal a regulatory framework
 BACKGROUND TO SEZ BILL, 2013

• Industrial Development Zones Programme, 1999 - an incentive

programme to establish IDZs

•
NEDLAC
Industrial Development Zone: a type of special economic zone
providing special provisions to develop industrial growth in
particular geographical areas

• CONSULTATION
IDZ Programme has performed below expectation

• Policy review process 2006 - to review the challenges experienced

by the IDZ Programme
NEDLAC Consultation
 Areas of Agreement:
• General definitions and types of SEZs to be designated,
• The purpose and objectives of the Bill,
• The governance model proposed in the Bill,
• Funding mechanisms,
• Incentives,
• One Stop Shop,
• Designation of SEZs and the roles of the licensees (owners) and
operators,
• Accountability and monitoring of SEZs, and
• The development of SEZ Regulations
 NEDLAC Consultation
 Areas of Disagreement:
1) Composition of the SEZ Advisory Board:

• Bill provision: 15 Member Board made of 9 representatives of

government departments and agencies plus 6 independent experts.
• Labour proposal: 3 of the 6 independent experts must come from
NEDLAC constituencies.
• DTI view: Labour proposal can be supported provided the 3
representatives of constituencies meet the criteria.
 NEDLAC Consultation
 Areas of Disagreement:

2) Eligibility to apply for an SEZ by municipalities:

• Bill provision: Any of the tiers of government can initiate an SEZ.

• Business proposal: Municipalities are failing to provide basic and

core services, and should therefore be excluded from this provision.

• The dti’s view: Not all municipalities are failing to provide basic
services. In addition, designation is only after a rigorous process of
evaluation.
 NEDLAC Consultation
 Areas of Disagreement:
3) Private ownership of SEZs:

• Bill provision: No private ownership of SEZs but PPPs are

encouraged.

• Business proposal: Global trends show a shift from public ownership

to private ownership of SEZs.

• DTI view: Collaboration between the public and private sectors

through PPPs seem to be the ideal route for South Africa.
 NEDLAC Consultation
 Areas of Disagreement:

4) Private Public Partnership provision:

• Bill provision: Development of an SEZ can be done through PPP

arrangements.

• Labour proposal: PPPs are a disguised form of private ownership of

SEZs.

• The dti’s view: PPPs are a form of joint ownership, and in SA are
supported through a rigorous legislative framework.
 NEDLAC Consultation
 Areas of Disagreement:
5) Consultation with NEDLAC on the SEZ Regulations and Guidelines:

• Bill provision: Trade and Industry Minister empowered to make

regulations and guidelines to support the planning, development and
management of SEZs.

• Business and Labour proposal: Regulations and guidelines must be

discussed at NEDLAC prior to finalisation.

• The dti’s view: Regulations are developed through public

consultations and can be consulted on, but not guidelines.
 BACKGROUND TO SEZ BILL, 2013

• Industrial Development Zones Programme, 1999 - an incentive

programme to establish IDZs

•
PROGRESS WITH
Industrial Development Zone: a type of special economic zone
providing special provisions to develop industrial growth in
particular geographical areas

• CURRENT IDZs
IDZ Programme has performed below expectation

• Policy review process 2006 - to review the challenges experienced

by the IDZ Programme
Progress with Existing IDZs
Progress with Existing IDZs
the dti Funding Transferred to IDZ Operators
2002/03 - 2012/13
CONSTRUC
VALUE OF FUNDING TOTAL
NO. OF DIRECT TION &
IDZ INVESTMENT TRANSFERS BY EMPLOYM
INVESTORS EMPLOYMENT INDIRECT
(R'000) the dti (R'000) ENT
JOBS
R'000
COEGA 20 1 131 750 4 364 680 3 778 37 156 40 934
ELIDZ 21 1 082 700 1 394 983 1 179 6 379 7 558
RBIDZ 1 650 000 331 123 126 54 180
TOTAL 42 2 864 450 6 090 786 5 169 43 589 48 758
Progress with Existing IDZs
 Designation of Saldanha Bay IDZ
 New IDZ:
1) The application for designation of the Saldanha Bay IDZ was received by the
dti and the Manufacturing Development Board (MDB) recommended for the 60
day Public Consultative Process, which was concluded on the 18th January
2013.
2) The general public response was positive and very supportive of the IDZ
initiative at Saldanha Bay and the West Coast.
3) One out of two portions of land has been secured and the applicant is working
towards securing the rest of the IDZ earmarked pieces of land with the relevant
landlord. Once this process has been finalised, the Minister of Trade and
Industry will be able to designate the IDZ and issue an Operator Permit.
4) The anchor industry will be Oil and Gas services, which is estimated to attract
foreign direct investments approximately R9.3bn and create over 11,000 jobs.
IDZs in Picture

Coega IDZ East London IDZ

 SEZ BILL, 2013

• Industrial Development Zones Programme, 1999 - an incentive

programme to establish IDZs

•
THE SEZ BILL
Industrial Development Zone: a type of special economic zone
providing special provisions to develop industrial growth in
particular geographical areas

• IDZ Programme has performed below expectation

• Policy review process 2006 - to review the challenges experienced

by the IDZ Programme
 PURPOSE OF SPECIAL ECONOMIC ZONES BILL, 2013

The Bill seeks to:

• provide for the designation, promotion, development, operation and
management of Special Economic Zones;

• provide for the establishment of the Special Economic Zones

Advisory Board;

• empower the Minister to establish the Special Economic Zones

Fund;

• regulate the application, issuing, suspension, withdrawal and

transfer of Special Economic Zones operator permits; and

• provide for functions of Special Economic Zones operators.

 DEFINITION OF SPECIAL ECONOMIC ZONES

Section 1 – Definitions

• Defines terms used in the Bill

• Special Economic Zone:

• is an economic development tool to promote economic growth and

export

• uses support measures to attract targeted domestic and foreign

direct investment
 OBJECTS OF SPECIAL ECONOMIC ZONES BILL

Section 2 – Objects of Act

• Determination of SEZ Policy and Strategy

• Establishment of SEZ Advisory Board and SEZ Fund

• Designation, promotion, development, operation and management of

SEZs

• Regulatory measures and incentives for SEZs to attract domestic and

foreign direct investment

• Establishment single point of contact or one-stop shop to deliver

government services
 PURPOSE OF SPECIAL ECONOMIC ZONES (1)
Section 4 – Purpose of SEZs

• Purposes include
• facilitating creation of an industrial complex with strategic economic
advantage for targeted investments and industries in
manufacturing sector and tradeable services;
• developing infrastructure to support development of targeted
industrial activities;
• attracting foreign and domestic direct investment;
• providing location for establishment of targeted investment;
• enabling beneficiation of mineral and natural resources
 PURPOSE OF SPECIAL ECONOMIC ZONES (2)

Section 4 – Purpose of SEZs (continues)

• Purposes include:

• taking advantage of existing industrial and technological capacity,

promoting integration with local industry and increasing value
added production;

• promoting regional development;

• creating decent work and other economic social benefits and

promoting skills and technology transfer.
 SPECIAL ECONOMIC ZONES POLICY AND STRATEGY

Section 5 – Special Economic Zones policy

• Minister may determine policy for designation, promotion, development,

operation and management of SEZs, after consultation with Board

• Minister may review policy when necessary

Section 6 – Special Economic Zones strategy

• Minister must determine SEZ strategy, after consultation with Board

• Minister may review policy when necessary

• Strategy must address designation of SEZs that best support industrialisation

and economic growth strategies
 SPECIAL ECONOMIC ZONES ADVISORY BOARD (1)

Section 7: Establishment of SEZ Advisory Board

• Establishes SEZ Advisory Board

• Advisory Board consists of not more than 15 members representing:

• government, organised labour, organised business, civil society

and independent persons on the basis of their knowledge and
expertise relevant to SEZs
 SPECIAL ECONOMIC ZONES ADVISORY BOARD (2)

Section 11: Functions of Board include: (continues)

• advising Minister on policy and strategy re SEZs

• considering applications for designation as SEZ & recommending to

Minister re issue of SEZ licence

• considering applications for SEZ operator permits and transfers and

recommending to Minister

• liaising with SEZ licensees and operators on implementation of SEZ

strategic plans
 SPECIAL ECONOMIC ZONES ADVISORY BOARD (3)

Section 11: Functions of Board include: (continues)

• recommending to Minister re approval of operator’s decision to locate new

investor in SEZ

• advising Minister on initiatives to market SEZs;

• assess and review the success of SEZs in achieving purpose of the

establishment of SEZs;

• conducting investigations on any matter arising from application of Act; and

• performing other functions consistent with the Act as Minister may determine
 SPECIAL ECONOMIC ZONES ADVISORY BOARD (4)

Section 17: Secretariat of Board

• Director-General must:

• establish dedicated secretariat in Department to support and

facilitate functions of Board

• provide required human resources, financial and other resources

 FINANCING & SUPPORT MEASURES

Section 20 - SEZ Fund

• Minister with concurrence of Minister of Finance may establish SEZ Fund to

support the promotion and development of SEZs;
• SEZ Fund may be established from money voted by Parliament as part of
appropriation of DTI
Section 21: Support measures

• Minister may determine and implement support measures, including incentive

schemes for operators and businesses operating in SEZs;

• Minister may design and administer support measures or other support

programmes to support development and operation of SEZs
 DESIGNATION OF SEZs (1)

Section 22 - Application for designation

• National, provincial government municipality, public entity, municipal
entity or public-private partnership, acting alone or jointly, may apply
for designation of a specified area as an SEZ;

• Applicant must demonstrate that the designation will further

government’s industrial development objectives;

• Application must be in prescribed form and manner

 DESIGNATION OF SEZs (2)

Section 22 - Application for designation (continues)

Applicant must:
• have sufficient access to financial resources and expertise
• submit comprehensive feasibility study
• indicate extent of ownership or control of area
• If PPP – indicate ownership structure
 DESIGNATION OF SEZs (3)

Section 23 - Designation of SEZs

• Minister designates geographically defined area, on recommendation

of Board, with or without conditions

• Minister may initiate application to designate in pursuance of national

interests
 DESIGNATION OF SEZs (4)

Section 23 - Designation of SEZs (continues)

• Minister may determine different categories of SEZs including:

• a free port;

• a free trade zone;

• an industrial development zone; or

• a sector development zone.

 DESIGNATION OF SEZs (5)

Section 23 - Designation of SEZs (continues)

• Minister may prescribe guidelines for each category of SEZ and

conditions that may be imposed on SEZs;

• Minister may prescribe types of service and business located in SEZs.

 GOVERNANCE AND MANAGEMENT OF SEZ (1)

Section 24: Governance & management

• National or provincial government or public entity : establish SEZ as business

enterprise in terms of PFMA

• Municipality or municipal entity: establish SEZ as municipal entity in terms of

MFMA

• PPP: establish SEZ as a company

• Licensee must appoint SEZ Board which is responsible for efficient governance
and management of business of SEZ

• SEZ Board must & comply with PFMA, MFMA or Treasury Regulations,
whichever is applicable
 GOVERNANCE AND MANAGEMENT OF SEZ (2)

Section 25: Strategic plan of SEZ

• Each SEZ licensee to develop strategic plan within SEZ Strategy

framework to achieve mandate, perform functions & comply with
conditions prescribed

• Plan reviewed annually and submitted to Minister

 GOVERNANCE AND MANAGEMENT OF SEZ (3)

Section 26 : Business & financial plan

• Licensee must submit business and financial plan to Minister annually

for approval

• Business and financial plan

• contains projection of revenue & expenditure for following year
• covers projected affairs of SEZ for 3 years
 TAKING OVER ADMINISTRATION OF SEZ

Section 28: Taking over administration of SEZs

•Minister may, after consultation with board and licensee, appoint

administrator to take over administration or perform function of SEZ if:

• SEZ fails to comply with conditions prescribed by Minister;

• SEZ fails or is unable to perform its functions; or
• there is mismanagement of SEZ finances.
 SUSPENSION OR WITHDRAWAL OF DESIGNATION (1)

Section 29: Suspension or withdrawal of designation

• Minister may, on recommendation of Board, suspend or withdraw

designation of area as SEZ which does not further government
industrial development objectives;

• Minister may re-designate an area whose designation has been

withdrawn;
 SUSPENSION OR WITHDRAWAL OF DESIGNATION (2)

Section 29: Suspension or withdrawal of designation (continues)

• Lawful activities of any business located in SEZ is not affected by

suspension / withdrawal provided the business :
• has entered into agreement with SEZ operator; or
• is situated in the custom controlled area of the SEZ and has been
authorised by any registration or licence issued in terms of the
Customs and Excise Act, 1964
 SEZ OPERATOR (1)

Section 30: SEZ operator

•Licensee must appoint an operator to develop, operate and/or manage the

SEZ on its behalf

•When appointing an operator, licensee must follow a fair, equitable,

transparent, competitive and cost-efficient procurement process
 SEZ OPERATOR (2)

Section 31: Application for SEZ operator permit

• Only holder of SEZ operator permit may operate, develop and/or

manage SEZ

• Person appointed by licensee must apply to Minister for SEZ operator

permit in prescribed form and manner

• Minister, on considering recommendation of Board may issue permit

 SEZ OPERATOR PERMIT (1)

Section 32: Requirements for application for SEZ operator permit

• Applicant for operator permit must:

• be appointed by licensee to develop, operate and/or manage SEZ;

• be company registered in SA;

• have sufficient capital and expertise to develop, operate and

manage SEZ; and

• comply with other criteria and requirements that Minister may

prescribe.
 SEZ OPERATOR PERMIT (2)

Section 33: SEZ operator permit

• Before issuing permit Minister must be satisfied that agreement

between licensee and operator adequately provides for duties, terms
and conditions for development, operation and management of SEZ;
and

• Minister must determine duration of permit.

 FUNCTIONS OF SEZ OPERATOR (1)

Section 34: Functions of SEZ operator

• implement strategic plan for SEZ

• make improvements to the SEZ site and its facilities according to the
plans approved by the Minister and other relevant authorities

• provide or facilitate provision of infrastructure and other services

required for SEZ

• provide adequate demarcation of SEZ from any applicable customs

territory and suitable provision for movement of conveyances, vessels
or goods

• provide adequate security for all facilities of SEZ

 FUNCTIONS OF SEZ OPERATOR (2)

Section 34: Functions of SEZ operator (continues)

•adopt rules and regulations for businesses within SEZ to promote safe and
efficient operation

•maintain adequate and proper accounts and other records in relation to its
business and report to Minister and other relevant authorities

•promote the SEZ as a foreign and domestic direct investment destination,

in consultation with the Board

•ensure that business in SEZ are approved in terms of section 37 and

achieves purpose of SEZ
 FUNCTIONS OF SEZ OPERATOR (3)

Section 34: Functions of SEZ operator (continues)

• apply to Minister for finance and support measures;

• facilitate a single point of contact or one stop shop that delivers the
required government services to businesses operating in SEZ in order
to provide simplified procedures for the development, and operation of
the Special Economic Zone and for setting up and conducting business
in the SEZ.
 SUSPENSION OR WITHDRAWAL OF PERMIT (1)

Section 35: Suspension or withdrawal of SEZ operator permit

• Minister may suspend or withdraw permit if operator:

• fails to comply with terms & conditions of permit;
• contravenes Act or any law of the Republic;
• contravenes of fails to comply with customs & excise rules and
procedures; or
• on request from operator.
 SUSPENSION OR WITHDRAWAL OF PERMIT (2)

Section 35: Suspension or withdrawal of SEZ permit (continues)

• Before suspending or withdrawing permit Minister must:

• inform operator of intention to suspend or withdraw permit; and

• allow operator to make representations.

• Minster may make regulations on procedure to suspend or withdraw

 TRANSER OF SEZ OPERATOR PERMIT

Section 36: Transfer of SEZ operator permit

• Operator may transfer permit to another person if person:

• applies to Minister; and

• satisfies requirements for operator permit

• Transferee must in application stipulate any changes to the original

development, business and operating plan;

• New operator must comply with all the obligations in terms of Act and
has all the rights and obligations in terms of operator permit.
 GENERAL PROVISIONS

Section 38: Transitional provisions

• IDZ designation remains in force and regarded as SEZ designation

• IDZ operator permit remains in force for 5 years and must thereafter be
converted to SEZ operator permit

• Applications in terms of IDZ Regulations to be dealt with in terms of

SEZ Act

Section 39: Guidelines

• Minister to issue guidelines after consultation with SEZ Board

 GENERAL PROVISIONS

Section 40: Regulations

• Minister may make regulations after consultation with SEZ Board

 PROCESS FOLLOWED

• August 2011 MIN-MEC approved the draft SEZ Bill and Policy for
submission before Cabinet

• December 2011 Cabinet approved public consultation on the draft SEZ

Bill;

• January 2012 draft SEZ Bill published in Government Gazette for

public comment;

• March 2012 draft SEZ Bill presented before Economic and

Employment cluster for comments and inputs;

• July 2012 draft SEZ Bill discussed at Nedlac and process at Nedlac
finalised on 13 July 2012
 PROCESS FOLLOWED

• Draft SEZ Bill submitted to State Law Advisors;

• February 2013 draft SEZ Bill certified by State Law Advisors;

• March 2013 Cabinet approved introduction of SEZ Bill into Parliament;

• Special Economic Zones Bill, 2013 published in Government Gazette

of 1 March 2013
 BODIES CONSULTED

The Department has consulted with:

• provincial departments responsible for economic development
under the auspices of MIN-MEC;

• various national government departments including National

Treasury, SARS, Department of Home Affairs and the Economic
Development Department;

• existing Industrial Development Zones; and

• municipalities represented by the South African Local Government

Association (“SALGA”) at meetings of MIN-MEC

• Eskom, National Planning Commission, DBSA

 CONCLUSION

• Next steps on legislative path

• Bill serve before the National Assembly and National Council of

Provinces in terms of section 76 of the Constitution

• This includes public hearing and debates on the Bill before

Parliamentary Portfolio Committee including

• Further amendments and finalising SEZ Bill following

Parliamentary process

• Drafting Regulations
 SEZ BILL, 2013

• Industrial Development Zones Programme, 1999 - an incentive

programme to establish IDZs

•
CRITICAL STEPS
Industrial Development Zone: a type of special economic zone
providing special provisions to develop industrial growth in
particular geographical areas

• TAKEN SO FAR
IDZ Programme has performed below expectation

• Policy review process 2006 - to review the challenges experienced

by the IDZ Programme
Special Economic Zones Planning
Province and Region Proposal
1. Eastern Cape Wild Coast: agro-processing and
tourism
2. Free State Harrismith: agro-processing, logistics

3. Gauteng NASREC: ICT

4. KwaZulu-Natal Dube Trade Port: agro-processing
5. Limpopo Tubatse: PGMs
6. Limpopo Musina: petro-chemicals, agro-
processing and logistics
7. Mpumalanga Nkomati: agro-processing
8. Northern Cape Upington: Solar Corridor
9. North West Rustenburg: Platinum Hub
10. Western Cape Atlantis: Renewable Energy
 Work Programme for SEZ Planning
 Determining the long-term economic feasibility of the proposals of all
proposed SEZs

 Development and implementation of Investment and Marketing Plans

of 4 SEZs whose planning work has significantly advanced: ICT, Solar
Corridor, and Platinum Hubs

 Capacity Building Programme

THANK YOU