PRESENTATION TO THE PROVINCIAL LED FORUM
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Table Contents
 Introduction
 Policy Alignment and catalytic Interventions
 Special Economic Zones (SEZs)
 Types of SEZs
 Foundation for SEZ success
 Export opportunities
 KZN Approach
 Comparative Advantage
 Industrial Economic Hubs
 SEZ Selection Criteria
 Richards Bay IDZ SEZ
 Dube Trade Port SEZ
 Progress Report
 Conclusion
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Introduction
 The current global economic trends dictate that it cannot be business as usual
 The developed nations economies are under siege whilst the developing
nations economies are growing steadily
 Challenges of unemployment, inequalities and poverty remain a challenge for
developing nations
 The emergence of developmental state and the “BRICS fever”
 Provincial space economy and need for alignment - Vision 2013 (reindustrialisation and decentralisation)
 Our approach needs to be innovative and creative – thinking outside the box
 The approach to growing the KZN economy firmly revolves around
infrastructure development; enterprise support; investment & trade linkages;
support to key priority sectors (manufacturing, agriculture, tourism, ICT and
green economy).
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Policy Alignment and Catalytic Interventions
Policy Targets
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Robust Implementation Critical
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New Growth Path (NGP)
National Development Plan (NDP)
SEZs Bill
IPAP2
Provincial Growth and
Development
Provincial Spatial Economic
Development Strategy
(PSEDS)
Industrial Development
Strategy (PSEDS)
Maritime Strategy
Export Strategy
Investment Strategy
KZN Tourism Master Plan
Rural Development Strategy
Human Settlement Strategy
Green Economy
Airport
Freight and Logistics
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National
Legislative and
Policy
Environment
KwaZulu-Natal
Policy and
Strategy
developments
Unemployment
Poverty
Inequality
Sustainable Economic
Growth
Catalytic Interventions
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Infrastructure Development
Special Economic Zones
Corridor Development
Small Town Rehabilitation
Industrial Economic Hubs
Aerotropolis
Enterprise Development
Green Economy
Maritime Industry
Development
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Special Economic Zone (SEZs)
 SEZs are loosely defined as “Designated areas in countries that possess special
economic regulations that are different from other areas in the same country.
Moreover, these regulations tend to contain measures that are conducive to
foreign direct investment. Conducting business in a SEZ usually means that a
company will receive tax incentives and the opportunity to pay lower tariffs”
 SEZs are a tool for government intervention into the economy
 Most critical instruments to advance government’s strategic objectives of
industrialization, regional development and job creation
 SEZs can help improve attractiveness of SA as a destination for foreign direct
investment
 SEZs are introduced to improve on the concept of IDZs which have enjoyed
mixed successes since introduced in 2000
 An IDZ is a purpose-built industrial estate linked to an international airport or
seaport which is tailored for the manufacturing and storage of goods
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Special Economic Zone (SEZs)
 IDZ’s are export oriented & only found near airports & seaports. SEZs cover
wide range of sectors that could be developed anywhere in the country
 SEZs will help stimulate industrial decentralization from the province’s main
urban centres of Durban, PMB, Richards bay
 DTI Minister indicated that IDZs will not be scrapped but will continue to
exists as SEZs under the new Bill
 SEZs scope will be beyond export industries to include a focus on research,
innovation and regional development in areas such as science parks, industrial
parks and sector development zones
 IDZs tended to favour only few regions and their financing arrangement made
it impossible to do long term planning
 To remedy this, the new Bill provides for the setting up of a SEZ fund, which is
not only intended for feasibility studies, but for incentives as well
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Special Economic Zone Types
 There are different categories of SEZ
 Sometimes countries use different names for the same concept, but the
strategic intention is more important than the name used
 Examples of SEZs
 Industrial Development Zones
 Free Ports
 Industrial Parks/Estates
 Science and Technology Parks
 Sector Development Zones
 Spatial Development Corridors
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Foundation for SEZs success
 Zones will be designed such that they include key support
platforms such as:
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Education and training facilities
Research, development and technology facilities (innovation)
Incubation facilities to support business linkages and integration
Trade facilities
Customs controlled areas
 SEZs requires skills that are beyond the public sector hence
partnerships with tertiary institutions and private sector
investors is key
 It is highly unlikely that a relaxation of labour laws will be
considered under SEZ initiative which is a norm in most
countries
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Export opportunities
 The importance of the global production network and value chains in
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international trade is unquestionable
The role of SEZs in stimulating export growth through various incentives is
important
Overall SEZs are estimated to account for more than US$200 billion in
global exports and employ directly at least 40 million workers
In KZN, we view SEZs as critical not only in export growth but job creation,
foreign exchange earnings, industrial decentralization, access to foreign
manufacturing technology and know how
SEZs provides opportunities to exporters located throughout the province –
you don’t necessarily have to be next to the sea and airport to benefit
We are not creating enclaves that are separated from the national markets
which will effectively undermine creation of effective domestic linkages – at
the same time we will guard against cannibalization of businesses outside the
SEZs or hubs
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KZN Approach
 The MEC identified 11 industrial district SEZs and submitted these to the DTI for
their review and support
 The MINMEC and DTI advised that too many SEZ in the country may not be
sustainable and indicated that only a maximum of two per province may be
established
 Furthermore, MINMEC encouraged provinces to adopt a provincial helicopter
view in identifying SEZs and provided the following guidelines to provinces
 Aligned with the national infrastructural programme;
 Should not be confined to a political geographical space such as a
district municipality;
 Should not compete with each other in the country;
 Multi-site SEZs will be considered; and
 Focus on secondary sectors not primary and tertiary sectors such as
agriculture, mining and tourism.
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KZN Approach…….cont
 To address MINMEC and DTI concerns, the workgroup convened a
province wide multi- stakeholder workshop (including district
municipalities & eThekwini Metro, DTI, the Provincial Planning
Commission, business chambers, private consultants, tertiary
institutions, Provincial SEZ workgroup members and interested
individuals) to identify provincial SEZs in line with the provided criteria.
 The stakeholder meeting resolved that whilst the districts industrial hubs
are critical to address the province’s key developmental aspirations such
as job creation and economic growth, their large extent do not conform to
the criteria set out by the DTI. However, the committee firmly believes
that the concept of regional industrial hubs remain critical to the
overall economic development in the province.
 These hubs will act as a feeder or part of the multi-site hub of the
identified provincial SEZs.
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KZN Approach……..cont
 In identifying possible Special Economic Zones for KwaZulu-Natal, two principles
have greatly informed our approach:
 Principle 1: SEZs should, as far as possible, not be directly competitive with each other (in order to
avoid a race to the bottom)
 Principle 2: SEZs should be used as a tool to enhance spatial equity in the province
 In regard to Principle 2 it was decided to be intentional about tackling spatial
equity, by identifying the industrial (SEZ-related) potential of all 11 districts in
KZN.
 However, in order to stay accordance with Principle 1, the implication is that
SEZ-related opportunities in each district should be identified around that
district’s unique comparative advantages.
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Comparative Advantage
 The theory of comparative advantage is an international trade theory but in
its simplest form can be applied in a spatial development context.
 Simply put, the theory of comparative advantage would posit that each
district has at least one area of economic activity which, relative to other
districts it has an advantage in by having a lower opportunity cost of
production.
 Efficient fiscal spending would then entail directing resources to each
district’s comparative advantage focus area.
 The process of identifying comparative advantages became a useful tool for
identifying potential SEZs and supporting industrial hubs.
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Comparative Advantage
Economic
Drivers
Project
Scanning
of IDP
document
s
Interviews
with
Chambers
of
Commerce
District
Indicators
Comparative
Advantages
Report
Interviews
with
Districts
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Industrial Hubs
Amajuba
Ugu
Umgungundlovu
KEY SECTORS:
KEY SECTORS:
KEY SECTORS:
Metal Manufacturing
Forestry and Timber
production
Agriculture: vegetables;
chicken
Agriculture –sugar cane;
macadamia nuts
Forestry and logging
Coal Mining
Textiles and Clothing
Domestic Beach Tourism
Leather and Footwear
production
Quarrying
Public Administration
Furniture production
Collection and purification of
water
Food processing
HUBS:
Primary - Textiles & Clothing (Madadeni)
Secondary - Metal Beneficiation (Newcastle)
HUBS:
HUBS:
Primary - Perishable goods processing
Primary - Leather and Footwear SEZ)
Secondary -Furniture Manufacturing SEZ in
Harding and/or Marburg
Secondary - Agro-processing Hub (focus on
vegetables; crops and dairy)
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Industrial Hubs
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Industrial Hubs
Ilembe
Ethekwini
Uthungulu
KEY SECTORS:
KEY SECTORS:
KEY SECTORS:
Agriculture – sugar cane
Chemical Manufacturing
Forestry and logging
Agro-processing
Transport and logistics
Wood products manufacturing
Wood processing
Automotive manufacture
Plastics and packaging
Air transport
Coal Mining
Property development and real
estate
Electronics
Beach resort tourism
Event tourism
HUBS:
Primary - Renewable Energy Hub
Secondary - Agri export hub
Mineral mining
Finance and insurance
HUBS:
Metal manufacturing
Non-metallic manufacturing
HUBS:
Primary - Automotive
Primary - Renewable Energy and Agri-processing
SEZ at Dube
Primary - Richards Bay IDZ to become an SEZ
(heavy industry)
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Industrial Hubs
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SEZ Selection Criteria
 In identifying potential SEZs for the province from the comparative
advantages and industrial hubs of the districts, it was necessary to
establish a set of guiding criteria.
1. Is it aligned with National and Provincial Policies?
2. Does it promote spatial equity and reduce geographical
inequalities?
3. Is it in a labour intensive sector?
4. Is it accommodated in the infrastructural planning of the
province?
5. Is it in a sector in which the province has a comparative
advantage?
6. Will it be globally competitive?
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KZN implementation Model
of SEZs and Feeder District
Industrial Hubs
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Proposed SEZs and Feeder Industrial
Hub
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Richards Bay IDZ SEZ
Location
Located at the current Richards Bay IDZ, but including new parcels of land in the nearby Nseleni
Area on the inland side of the N2
Rationale:
Sunk investment in IDZ
50-year master plan
Location near the largest and deepest Port in the country
High concentration of existing heavy manufacturing industries
Focus industries:
Metal processing; machinery manufacturing; minerals beneficiation
Feeder Industrial Hubs and Backward Linkages
Newcastle: Steel Manufacturing
Vryheid; Dundee; Newcastle: Mineral extraction and beneficiation
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Dube Trade Port SEZ
Location
Located in and around the Dube Trade Port in the north of eThekwini and the south of
iLembe.
Rationale:
Access to an international airport providing businessmen with connectivity to the rest of the country and the
world.
The ability of Dube Trade Port to facilitate the export of perishable agricultural products.
The concentration of Food and Beverage processing in eThekwini and in the neighbouring iLembe district.
The ‘Green’ momentum generated by the hosting of COP17
Focus industries:
Agro-processing and green technology development.
Feeder Industrial Hubs and Backward Linkages
Hibiscus Coast: Agro-products
Isithebe Industrial Estate: Biofuel and packaging
Dundee and Zululand: Meat and hide processing
Mkhuze: Agricultural mechanization
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Functional Architecture
Policy Framework
Industrial
Economic
Hubs
(2 DTI Type
SEZs)
ROAD
MAP
Specialised
Technical
Teams
(districts)
District Co-ordinating Forums
(Govt, business, Unions and
community )
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IEH PROJECT MANAGERS
Key Milestone
Progress
Appointment of the Project  The Project Managers for the following IEH were
Specialists Teams for IEH
appointed with effect from the 01 February 2013:
 Clothing and textile in Amajuba (Dr Padalkar);
 Electronics in UThukela (Mr Masilela);
 Renewable Energy in iLembe (Mr Ntsoane);
 Perishables in uGu (Mr Govender)
 Wood Processing in Sisonke (Mr Dobson)
 Leather Processing in UMgungundlovu (Mr Saflae)
 The Finance Specialist (Mr McDonalds) servicing
Renewable and Leather Industrial Hubs has been
appointed
 The sector specialist for uGu IEH has been recommended
to the HOD
 The sector specialist for uThukela IEH has been
recommended to the HOD
THE ADVISORY TEAM
Key Milestone
Progress
Future Actions
Appointment of The following Advisory Team Members were
the Advisory
appointed with effect from the 01 February
Team
2013:
 Project Manager (Mr Mkhwanazi)
 Finance Specialist (Ms Langeni);
 ICT Specialist (Mr Dlamini);
 Economist (Dr Mnyande)
 Legal (Mr Mulango)
The role and
responsibilities of the
advisory team is indicated
below
Development of The draft Standard Framework for the IEH has
the Standard
been drafted and will be presented to the HOD
Framework for and the department on the 15 April 2013
the hubs
The final draft is due at
the end of April 2013
District
Stakeholder
Engagements
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UGu Stakeholder Engagement took place on All district stakeholder
the 26 March 2013
engagements will be
The rest of the other industrial hubs are
finalized in May 2013
planned for April/May 2013
THE FEASIBILITY STUDIES
Key Milestone
Progress
Feasibility Studies 
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IEH Launch
Future Actions
The draft feasibility studies for the
The final draft feasibility
following IEH have been submitted:
studies are due in May
Clothing and textile in Amajuba;
2013
Electronics in UThukela;
Renewable Energy in ILembe;
Perishables in UGu
Wood Processing in Sisonke
Leather Processing in UMgungundlovu
Comments are currently being provided to
Project managers regarding their draft
feasibility studies
Economic Planning is currently developing
a standard format for the feasibility studies
to ensure uniformity
The Department is planning to launch the IEH
initiative in May 2013
Project Sponsor and Incubator
The HOD is the Chief Incubator and Sponsor for the IEH initiative. The budget
for the project is currently within the Office of the HOD.
Project Manager
Sihle Mkhize is the acting project manager for the IEH initiative. The full-time
project manager is currently being procured through the normal SCM
processes.
Project Administrator
Ms Fikile Nxumalo is the Project Administrator for the IEH initiative.
Advisory Team
The advisory team’s prime role is to advise the HOD (and the department) on
the establishment, operationalization and management of the Industrial
Economics Hubs in the province. This advice will entail inter alia the following:
• Providing a standard common framework to guide the establishment and
roll-out of the hubs
• Assessing the deliverables of the district project specialist teams to
assess if they are in line with the projects key goals and abovementioned framework. For example, is the finance model in the feasibility
study sound and completed according to acceptable standards, is the
policy and legislative framework analysis accurate, is the market analysis
sound?
• Advise on the value chain linkages of the Industrial Economics hubs and
the SEZs
• Provision of on-going advice and guidance to the HOD/department
Specialist Project Teams
The multi-disciplinary project specialist team’s role and responsibilities are to
support the establishment and operationalization of the IEH. The key objectives
of the specialist project teams are to:
• Develop a comprehensive Strategy and Framework for each industrial with a
detailed institutional and implementation plan
• Undertake a feasibility study and business plan for each industrial hub which
will include:
 A detailed industrial capacity assessment for each hub which will
include:
the comparative advantage of the area, the size and capacity
of each
industrial zone, indicate the industrial and business mix for
each zone,
condition of existing infrastructure, linkages with other
zones within and
outside the province
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Identify and establish value chain linkages between industrial hubs and
the designated Special Economic Zones for the province
Specialist Project Teams (continued)
• Provide cutting edge research and development expertise for each industrial
hub
• Facilitate and manage the actual operationalization of each industrial hub
which will include:
 Identification and securing of industrial hub anchor investors and
 operators
 Identifying, leveraging and securing of funding for industrial hubs
Packaging of incentive schemes for industrial hub locators
Securing of sites (land and buildings)
 Provide necessary infrastructure including services (water, electricity,
 roads)
 Effective planning, management, monitoring and evaluation for each
industrial hub.
CONCLUSION
 The IEH is to launched in all districts at by May
2013;
 The IEH is a three year project – (Feasibility - 2013
– Operationalization);
 The IEH is not a silver bullet to solve all our
problems – other key initiatives to continue
 KZN opportunities to sustain higher growth path still
remains – (manufacturing, tourism, agricultureagro, transport – logistics, emerging industries)
 Need to harmonize and synergize our various
initiatives and programmes
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THE END!!!
THANK YOU!!
Contact Details:
Mr Sihle Mkhize
General Manager: Economic Planning
Department of Economic Development & Tourism
MkhizeSi@kznded.gov.za
033-2642607
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THE END!!!
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