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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
• 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
BACKGROUND TO SEZ BILL, 2013 (1)
• Industrial Development Zones Programme, 1999 - an incentive
programme to establish IDZs
• 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
• Industrial Development Zones Programme, 2000 – as an incentive
programme to establish IDZs
• Industrial Development Zone: a type of special economic zone
providing special provisions to develop industrial growth in particular
geographical areas
• IDZ: 4 IDZs (Coega, East London, Richards Bay & OR Tambo IDZ)
were designated and 3 are fully functional in Coega, East London and
Richards Bay. Even though there are major achievements with the
IDZs, there were some weaknesses (weak governance, lack of IDZ
incentives, poor stakeholder coordination, lack of integrated planning,
etc) that were identified - leading to the policy review and new SEZ
Policy.
• 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
• 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
NEDLAC
CONSULTATION
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
• 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
PROGRESS WITH
CURRENT IDZs
Progress with Existing IDZs
IDZNO. OF
INVESTORS
VALUE OF
INVESTMENT
(R'000)
FUNDING
TRANSFERS BY
the dti (R'000)
DIRECT
EMPLOYMENT
CONSTRUC
TION &
INDIRECT
JOBS
TOTAL
EMPLOYM
ENT
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
the dti Funding Transferred to IDZ Operators
2002/03 - 2012/13
R'000
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.
SEZ BILL, 2013
• Industrial Development Zones Programme, 1999 - an incentive
programme to establish IDZs
• 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
THE SEZ BILL
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
• 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
CRITICAL STEPS
TAKEN SO FAR
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