1. INDUSTRIAL ECONOMIC HUBS & SPECIAL ECONOMIC ZONES 30 April 2013
PRESENTATION TO THE PROVINCIAL LED FORUM

2. 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

3. 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 (re- industrialisation 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).

4. Policy Alignment and Catalytic Interventions
New Growth Path (NGP)
National Development Plan (NDP)
SEZs Bill
IPAP2
Policy Targets
National Legislative and Policy Environment
KwaZulu-Natal Policy and Strategy developments
Unemployment
Poverty
Inequality
Sustainable Economic Growth
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
Catalytic Interventions
Infrastructure Development
Special Economic Zones
Corridor Development
Small Town Rehabilitation
Industrial Economic Hubs
Aerotropolis
Enterprise Development
Green Economy
Maritime Industry Development
Robust Implementation Critical

5. 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

6. 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

7. 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

8. Foundation for SEZs success
Zones will be designed such that they include key support platforms such as:
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

9. Export opportunities
The importance of the global production network and value chains in 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

10. 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.

11. 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.

12. 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.

13. 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.

14. Comparative Advantage
Comparative Advantages Report
Economic Drivers Project
District Indicators
Interviews with Districts
Interviews with Chambers of Commerce
Scanning of IDP documents

15. Industrial Hubs Amajuba Ugu Umgungundlovu HUBS: KEY SECTORS:
Metal Manufacturing
Coal Mining
Textiles and Clothing
HUBS:
Primary - Textiles & Clothing (Madadeni)
Secondary - Metal Beneficiation (Newcastle)
Ugu
Forestry and Timber production
Agriculture –sugar cane; macadamia nuts
Domestic Beach Tourism
Quarrying
Furniture production
Food processing
Primary - Perishable goods processing
Secondary -Furniture Manufacturing SEZ in Harding and/or Marburg
Umgungundlovu
Agriculture: vegetables; chicken
Forestry and logging
Leather and Footwear production
Public Administration
Collection and purification of water
Primary - Leather and Footwear SEZ)
Secondary - Agro-processing Hub (focus on vegetables; crops and dairy)

16. Industrial Hubs

17. Industrial Hubs Ilembe Ethekwini Uthungulu Forestry and logging
KEY SECTORS:
Agriculture – sugar cane
Agro-processing
Wood processing
Plastics and packaging
Property development and real estate
Beach resort tourism
HUBS:
Primary - Renewable Energy Hub
Secondary - Agri export hub
Ethekwini
Chemical Manufacturing
Transport and logistics
Automotive manufacture
Air transport
Electronics
Finance and insurance
Event tourism
Primary - Automotive
Primary - Renewable Energy and Agri-processing SEZ at Dube
Uthungulu
Forestry and logging
Wood products manufacturing
Coal Mining
Mineral mining
Metal manufacturing
Non-metallic manufacturing
Primary - Richards Bay IDZ to become an SEZ (heavy industry)

18. Industrial Hubs

19. 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.
Is it aligned with National and Provincial Policies?
Does it promote spatial equity and reduce geographical inequalities?
Is it in a labour intensive sector?
Is it accommodated in the infrastructural planning of the province?
Is it in a sector in which the province has a comparative advantage?
Will it be globally competitive?

20. KZN implementation Model of SEZs and Feeder District Industrial Hubs

21. Proposed SEZs and Feeder Industrial Hub

22. Richards Bay IDZ SEZ Location Rationale: Focus industries:
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

23. Dube Trade Port SEZ Location Rationale: Focus industries:
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

24. Functional Architecture
Policy Framework
Specialised Technical Teams
(districts)
Industrial Economic Hubs
(2 DTI Type SEZs)
ROAD MAP
District Co-ordinating Forums
(Govt, business, Unions and community )

25. Industrial Economic Hubs Progress Report

26. IEH PROJECT MANAGERS Key Milestone Progress
Appointment of the Project Specialists Teams for IEH
The Project Managers for the following IEH were 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

27. THE ADVISORY TEAM Key Milestone Progress Future Actions
Appointment of the Advisory Team
The following Advisory Team Members were appointed with effect from the 01 February 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 Standard Framework for the hubs
The draft Standard Framework for the IEH has been drafted and will be presented to the HOD and the department on the 15 April 2013
The final draft is due at the end of April 2013
District Stakeholder Engagements
UGu Stakeholder Engagement took place on the 26 March 2013
The rest of the other industrial hubs are planned for April/May 2013
All district stakeholder engagements will be finalized in May 2013

28. THE FEASIBILITY STUDIES
Key Milestone
Progress
Future Actions
Feasibility Studies
The draft feasibility studies for the following IEH have been submitted:
Clothing and textile in Amajuba;
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 final draft feasibility studies are due in May 2013
IEH Launch
The Department is planning to launch the IEH initiative in May 2013

29. Roles and Responsibilities
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.

30. Roles and Responsibilities
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 above-mentioned 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

31. Roles and Responsibilities
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
Identify and establish value chain linkages between industrial hubs and the designated Special Economic Zones for the province

32. Roles and Responsibilities
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.

33. CONCLUSION The IEH is to launched in all districts at by May 2013;
The IEH is a three year project – (Feasibility – 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, agriculture- agro, transport – logistics, emerging industries)
Need to harmonize and synergize our various initiatives and programmes

34. THE END!!! THANK YOU!! Contact Details: Mr Sihle Mkhize
General Manager: Economic Planning
Department of Economic Development & Tourism

35. THE END!!!