The proposed special economic zones (SEZ) legislation, which is currently out for public comment, has highlighted some of the key weaknesses of industrial development zones (IDZs), the Department of Trade and Industry (DTI) said this week, as it confirmed that four companies that set up operations in the IDZs have closed down since 2001.

In a written response to a Parliamentary question posed by the Democratic Alliance, the DTI said that South Africa’s three operational IDZs have attracted investments worth R11.8-billion, creating 33 236 jobs since 2002/3.

Twelve investors set up operations in the Coega IDZ, near Port Elizabeth in the Eastern Cape, worth a combined investment value of R9.65-billion. These companies created 27 412 jobs since 2002/3.

The East London IZD (ELIDZ) has 23 investors, which created 5 524 jobs through investments worth R1.5-billion.

One company set up in the Richards Bay IDZ in KwaZulu-Natal, creating 300 jobs through an investment of R650-million.

Although this pointed to expensive jobs, DTI Enterprise Organisation special projects chief director Kaya Ngqaka told Engineering News Online that a wide range of factors must be considered when referring to the performance of IDZs.

“The economic sectors differ in terms of being labour or capital intensive and the cost per job therefore varies. Further, as more jobs are created as a result of more investors locating in an IDZ, the cost per job declines.”

Three of the four companies that closed down were in the ELIDZ, namely Wavelengths 150 trading as Sea-Tek, Carcoustics SA and ZZZ Distributors.

Sea-Tek focused on land-based propagation of abalone and was liquidated in 2010, owing to cash flow problems and permit compliance issues. Carcoustics SA is an automotive heat shield-producing company that closed operations in 2010, as the mother company was consolidating its operations in Europe. Sanitary ware distributor ZZZ Distributors closed its operation in December last year, owing todiminishing trading volumes and distances to clients.

In the Coega IDZ, aqua mariculture company SeaArk started its pilot project in shrimp production in 2007; however, the project could not proceed owing to a lack of funding.

“The SEZs is about industrial development and building industrial capabilities that will invariably lead to sustainable investment and job creation, thereby assisting in lowering the cost of job creation and the number of companies closing down,” Ngqaka
said.

The DTI said that over R2-billion has been spent on the three operational IDZ in the 2009/10 and 2010/11 financial years.

Other IDZs in the making were the OR Tambo IDZ next to the international airport in Kempton Park and the proposed Saldanha Bay IDZs, in the Western Cape.

Meanwhile, DTI director-general Lionel October said at the SEZ Bill public hearings held in Pretoria on Monday, that labour laws would not be relaxed in the new arrangements for accelerating industrial development through SEZs.

“Government needs full support from organised labour and business for the proposed SEZs to work effectively. It is not in our best interest to deregulate labour laws to attract foreign direct investment and exploit our workers,” October urged.

He added that government needed a regulated labour market to remain competitive and raise living standards for workers.

“The SEZs model shifts away from competing on the basis of cheap labour to competing on the basis of the quality of services and support measures provided in the zones and their host regions.

“Our challenge is therefore to develop a comprehensive package of support measures that will be adequate to attract desired investments and assist the country to master the preferred industrial capabilities,” October stated.